Weekend Strategy Review July 15, 2018

Posted by OMS  at July 15th, 2018

The Dow was up 95 points on Friday, closing at 25,019.  It was up 563 points for the week.  The tech heavy NASDAQ was only up 2 points on Friday, but up 137 points for the week.  The NASDAQ rested on Friday; the Dow didn’t. Two different indexes, two different patterns.  Both should continue to trade higher in the weeks ahead.

One of the reasons I say this is because my VTI-volume indicator on the Dow is very close to generating a Buy Signal.  The same indicator for the NASDAQ is already on a Buy Signal.  It’s not only on a Buy, the VTI on the NASDAQ is in the Trend Mode.  So further upside is likely.  The large triangle pattern on the Dow that has been developing since 26 January suggests a price target above the 26,617 level, with 28,000 possible if the final wave has a ‘through over’.

Since The Professor algorithm confirmed the start of the current rally on 6 July by highlighting over 50 stocks, the Dow is now up 563 points.  In the past, whenever The Professor highlighted 50 stocks as longs, the Dow rallied a minimum of 750 points.  Several times the rally was good for 1,000 Dow points or more.  So, looking at the pattern, the indicators and The Professor, it appears that things are right on track for a re-test of the January highs at 26,616.  I’m still looking for Wave 3 up of the 5-wave sequence to finish near the 26,000 level.  After that, it will be problematic as to how Wave 4 of the sequence develops, but we’ll worry about this later.  Right now, I’m still watching the VTI-volume indicator on the Dow to see IF it enters the Trend Mode.  Currently it’s only at 60.2.  It needs to move above 70 to Trend.

BTW, students should pay attention to this indicator AND the 35-period CCI to see IF the market starts to trend.  As of Friday’s close, the CCI on the Dow is still only showing a reading of 61.6, so it too is NOT in the Trend Mode.  And as long as the market is not trending (even though its up over 500 Dow points), there is always a possibility of a pullback.  In the case of the Dow, with its recent ‘Rope Jump’ the pullback would likely be Wave 2 of Major Wave 5 up.  Again, IF the pullback occurs, I would view it as a Buying opportunity.

OK, so from an overall Strategy perspective, it appears that the markets are going higher.  And even though the Dow was up significantly this week, the fact that it’s still not trending suggests that it has not started its impulsive wave (Wave 3) up.  This is one of the reasons why I’m still looking for stocks to buy.

On Friday, I mentioned two stocks in the computer sector.  Computers have moved into the top 5 sectors on the Strong List.  Also, from a historical perspective, computers are one of the sectors that tend to lead the market higher.  Foe weeks, I’ve been saying that I don’t know how the Dow can reach 26,617 without the aggressive sectors, like Computers, Pharma Bio, Technology, Semiconductors, Cap Equipment, and the Financials on the Strong Sector List.  Now the Computers and PharmaBio are at the top of the List.  The others are on the Strong List, but still near the bottom.  Once they start to move up on the List, the Dow will start rolling.  Students should continue to watch the Strong Sector List for these changes.

But for now, with Computers leading the List, I want to buy a few stocks that are computer related.  BTW, the Computer Sector is a rather large sector that includes several diverse groups. Some of these groups make hardware (HPQ), a few make software (MSFT), and even more are involved in data processing (ADP and PAYX) and the internet (GOOG and YAHOO).  So, the choice is large when it comes to Computers.

But I don’t want just any stock in the Computer Sector.  I want stocks with a pattern. This is the reason I highlighted NCR and HPW on Friday.  If you look at the attached 60-minute chart of NCR, you’ll see why I’m interested.  The stock has a well-defined Hockey Stick Pattern that projects higher prices.  The pattern is also part of a large Cup and Handle Pattern…which also projects higher prices.  

Same for HPQ.  BTW, the Cup and Handle Pattern on HPQ started in March 2018, with the Handle forming in early June.  I don’t expect a big move in HPQ, but it should easily test and exceed the March high of 24.75.

Anyhow, with positive indicator on the cockpit, all I’m doing now is using the Strong Sector List to help choose stocks and ETFs from the Member’s Watch List and Dean’s List.  As long as the indicators and the Sector Ratio remain positive, I believe this strategy will optimize my gains as the market continues to move higher.  Students should pay attention to the Strong Sector List and stay in stocks in the strongest sectors.

The Sector Ratio increased to 18-6 on Friday.  PharmaBio and Computers lead the Strong List, followed by Consumer Produces, Energy and FoodDrugs.  Semiconductors, Technology, Cap Equipment, and Financials remain on the Strong List, but are still near the bottom. These sectors should start to move up on the List in the weeks ahead, replacing defensive issues, like Food Drugs, as the market moves higher.  Seeing these issues at the top of the Strong List would be a good indication that Wave 3 of Major Wave 5 up is underway.

Gold and the miners fell slightly on Friday.  My combination VTI-volume indicator for GLD and SLV remains on a Sell Signal.  I’m still waiting for my VTI-volume indictor to turn positive before buying any of the metals.

That’s what I’m doing,

h

Market Signals for

07-16-2018

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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.