Weekend Strategy Review February 10, 2019

Posted by OMS  at February 10th, 2019

Good morning.  I’m going to keep the WSR short this morning.  For some strange reason I had a problem with my eyes when I woke up Friday.  Getting the Comments out on Friday was a heroic effort!  I was in pain.  So, I went to an eye Doctor and got some prescription eye drops.  So this morning, while my eyes are on the mend, they still hurt when I look at the light from a computer screen. I’m typing this WSR with dark glasses on.

Anyhow, not much changed after yesterday’s session. After being down about 200 points for most of the day, the Dow rallied into the close and finished down 63 points at 25,106. It was up 46 points for the week. The NASDAQ was up 10 points on Friday and up 34 points for the week.

Most of the cockpit indicators remain positive.  The Tide and Dean’s List remain positive.  However, the volume portion of my VTI-volume indicator turned negative on the Dow which turned its Timing Signal Neutral.  So, the initial signs of a change in direction are starting to appear.

The biggest change was in the Sector ratio.  It fell from 13-11 Positive on Thursday to 12-12 Neutral. Earlier in the week it was 19-5 Positive.  So now, the number of sectors moving up equals those moving down.  When I glance at the Sector Ratio and see the numbers decreasing, for some strange reason I can actually feel the change that’s taking place in the market.  For me it’s a lot more than watching an indicator.  It’s more like sensing the momentum change in a tug-of-war where I can feel which side is winning.

Students should note that concurrent with the 12-12 Sector Ratio, the CCI on the DIA and QQQ has now moved out of the Trend Mode.  So, the Up Trend is over.  In other words, there is no longer any reason for me to be holding long positions.  I never like to put my money at risk unless I see a trend in place, or I believe that one is about to start.  Right now, by dropping below 100, the CCI is telling me the recent Up Trend is over.

BTW, just because the Up Trend is over doesn’t mean that I’m gonna go 100 percent short now.  No.  I need to see (there’s that word again) the Timing Signals turn negative.  And that hasn’t happened yet.  Be patient.

After yesterday’s session, the Strong List continued to be led by Household Products, Semiconductors, Real Estate, Technology, and Computers.  The Weakest Sectors were Energy, Autos, Food Drug, Foods and Telecoms.  If/When the markets start to head down in earnest, many of the defensive sectors currently on the Weak List should begin to move to the Strong List. 

This weekend, students should become familiar with the strategy I outlined in my recent PT Class, especially the process on how I use the Flow Chart to find stocks and ETFs to trade.  If I’m right and the market starts to turn negative next week, this simple strategy will help you identify the stocks and inverse index ETFs to trade.  You’ll be able to see which sectors are moving up or down, where the strength (or weakness) is and then select stocks and ETFs to take advantage of that strength or weakness.  You’ll be able to do this yourself!  You won’t have to listen to the clueless commentators on CNBC and FOX Business News. 

Again, for review…The Flow Chart starts with the Market Timing Signals. Once these timing signals turn negative, l look for confirmation from the Sectors.  I want to see more and more sectors moving down.  I get this from the Sector Ratio.  Remember, once the market starts dropping, the Sector Ratio should fall to 8-16 Negative or lower.  At 8-16 Negative, it means that twice as many sectors are moving down than moving up.  This is where the downside momentum begins to accelerate. When this starts to happen, I check to see which sectors are moving to the top of the Weak List.  These Weak Sectors are where I’ll look for stocks to short or inverse ETFs to Buy.  In other words, the strength of the Sectors will tell me which stocks to short or which inverse index ETFs to buy from the Dean’s List and Member’s Watch List.

Like I said, learn the process.  The time to do this is NOW, while the market is in transition.  Learn the process NOW, because once the market begins to decline, you don’t want to be frozen like a deer in the headlights.  Things will start to develop at a fast pace, and you’ll need to have a plan in place for what you want to do.  So, take some time this weekend and develop your plan.

That’s what I’m doing.

Have a great weekend.

h

BTW, since I started typing this WSR, my eyes are feeling a lot better.  This is something that always happens when I’m around or talking with my students. You make me feel great!   

Market Signals for

02-11-2019

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All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.