Weekend Strategy Review August 26, 2018

Posted by OMS  at August 26th, 2018

The markets had another nice week, with the NASDAQ, SPX and Russell 2K making new all-time highs.  The Dow did not.  The large cap industrials are still about 800 points off their January highs.  This inter-market divergence is something that will need to be watched in the weeks ahead as the final waves of Major Wave 5 up continue to play out.

The Dow finished up 133 points on Friday, closing at 25,790.  It was up 121 points for the week.  The tech heavy NASDAQ was up 68 points on Friday, after its VTI-volume indicator generated a Buy Signal.  It was up 130 points for the week.  Nice!  The SPX was up 18 points on Friday, and up 25 points for the week. 

OK, so now that the SPX, NASDAQ, and Russell 2K  have made new all-time highs, we need to start being careful again.  Remember, these indexes are not in the same pattern as the Dow.  The Dow is in an Ending Diagonal where the SPX, NASDAQ, and RUT are in rising channels.  And usually, when a stock (or index) in a rising channel pattern touches the upper trend-line of the pattern, it has a tendency to pull back.  Late August – early September is usually NOT a good month for equities, and with several European country ETFs on Weekly VTI-volume Sell Signals, this selling could start to impact U.S. equities.  BTW, Weekly Sell Signals from the VTI-volume indicator are NEVER a good thing, and right now, I’m seeing them on the country ETFs of Germany, France, Sweden, Spain, UK, Japan, Hong Kong, and Australia.  All this selling will eventually start to impact U.S. markets.

But not now.  Right now, the VTI-volume indicators for all U.S. major indexes are positive.  As long as this indicator remains positive, the U.S. markets should be OK.

The Sector Ratio stayed at 15-9 positive on Friday. The Strong List continues to be led by FoodDrugs, Telecoms, Transportation, Household Products, and PharmaBio.   The Food Sector dropped off the Strong List after its DTS of -88 on Thursday.  The Sector also generated a Weekly VTI-volume Sell Signal on Friday, so be careful if you own food stocks.  The sector also has EXTREMELY narrow bands, which tells me it could be heading a lot lower.

The Weak Sector List was led by Material, Autos, Semiconductors, Computers, and Service.  Semiconductor stocks popped on Friday after posting a large increase in Delta Trend Score (+110) on Thursday.  It pay$ to watch for these large increases in DTS as Intel (INTC) and Micron (MU) were up 0.68 cents and 1.00, respectively.

But the Big News on Friday was gold.  GLD finally generated a VTI-volume Buy Signal on the Daily Charts.  I had a feeling the signal was coming after the ETF generated a Buy Signal on its 60 minute chart earlier in the week.  That’s why I established a few ‘trial’ positions in several gold stocks and ETFs.  This paid off big on Friday, as stocks like Royal Gold (RGLD) were up over 3 points intraday.  BTW, many of the individual gold stocks, like Royal, are still NOT on VTI-volume Buy Signals. But now that the underlying metal is on a Buy, students should watch for these ‘aggressive’ stocks to start their moves.

The reason I’m interested in gold now is because of its longer-term pattern.  Gold appears to be completing Major Wave 2 of a 3-3-5 flat pattern.  If I’m correct about this, gold could be ready to enter Major Wave 3 up.  The pattern could last for years and take gold and mining stocks significantly higher.  Gold (GLD) was a nice place to be during the 07-08 market crash, rising from 64 to over 100 in early 2008.  It did even better in the years after 2008, as the ETF rose to over 184 by mid-2011.  The ETF easily outperformed the S&P 500 during this same period.  So, keep an open mind about gold.  Especially now that GLD has generated its first Buy Signal in months.  BTW, the last signal generated by the VTI-volume indicator on GLD was the Sell Signal on 23 April.  Back then GLD was trading at 125.62.  Recently the ETF traded as low as 111.35.  But now, the signal is back on a Buy.

I’m now looking to buy gold aggressively.  But I’d still like to see the Materials Sector drop off the Weak Sector List before becoming too aggressive.  With the Sector still on the Weak List, there’s always the possibility that the Buy Signal can whip-saw and turn negative again.  So, like I said, use caution with your purchases.  But remember…If gold is really starting its Major Wave 3 up, there’s no need to rush.  So what if you don’t catch it at its bottom.  If gold (the metal) is going to set new all time highs in Wave 3 up, does it really matter if you pay a few points more for the purchase?

BTW, the only mining stock on the Member’s Watch List now is Anglogold (AU).  I own a few shares.  GLD is also on the MWL. So, with the VTI-volume indicator on GLD now on a Buy, I’ll be watching for other mining stocks and ETFs to appear on the List.  When they do, I’ll add to my positions.

Have a great weekend.

That’s what I’m doing.

h

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08-27-2018

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08-27-2018

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