Weekend Strategy Review March 10, 2019

Posted by OMS  at March 10th, 2019

The markets fell hard after the open on Friday but recovered most of their losses by the close.  The Dow finished down 23 points at 25,252.  It was down 576 points for the week.  The NASDAQ was down 13 points on Friday and down 187 points for the week.

Friday’s decline did not produce any changes to the market timing indicators for equities.  The Dow and Russell 2K remain on Sell Signals while the SPX (SPY) and NASDAQ (QQQ) remain Neutral.

From a pattern perspective, it appears the markets are entering a corrective Wave 2 down.  This correction could see the Dow decline to about the 24,500 level in a series of three waves. Friday’s decline appeared to be part of Wave ‘a’ down within the three wave sequence.

As I mentioned in Friday’s Comments, the key to the future direction of the markets will be in how the next decline takes place. IF the Dow declines to about 24,500 and holds, the odds for a rally toward 30,000 would increase significantly.  From 24,500+/-, the Dow would likely begin a Wave 3 up rally taking it above the 3 October high of 26,952.  After that corrective Wave 4 down and final Wave 5 up should see the Dow trading near or above the 30,000 level.  All this assumes that 24,500 holds.  If it doesn’t, all Bullish bets are off.  

IF 24,500 doesn’t hold, the Dow will likely continue to fall to about the 23,000 level.  After that there would be a series of retracement moves that once complete, would see the Dow falling to about 21,000, with 20,000 possible.  So, as I’ve been saying, seeing how the current decline unfolds will be critical for determining the future direction of the market.  It will be the key to determining if we’re still in a Bull Market, or IF an ugly Bear is starting.

Of course, all this is still several weeks away.  So, let’s not get ahead of ourselves.  Right now, we need to focus on what’s happening with the current indicators.  And for now, they’re still mixed.

There was a small change in the A-D oscillator on Friday, so we need to be on the lookout for a Big Move within the next 1-2 trading days.

The Tide remains negative while the Dean’s List is neutral. The NASDAQ’s Q’s are the lone holdout.

The Sector Ratio changed slightly falling to 22-2 positive.  The Strong List continues to be led by Household Products, Retail, Semiconductors, Technology, and Real Estate.  The two Weak Sector were FoodDrugs and Autos.   While Friday’s decline didn’t do much to change the Sector Ratio, it did reduce the RS Ratings of 6 Sectors to the point where one good down day could put them on the Weak List. 

Gold and most mining stocks rose on Friday.  GLD finished 1.33 points higher at 122.84.  GLD remains on a Sell Signal.  I’m still waiting for a signal change before adding gold to the Model Portfolio.

Crude Oil (UCO) fell 0.28 cents on Friday, closing at 19.  The decline appeared to be related to news that at least nine tankers delivered 3.19 million barrels of Russian oil and oil products to American ports during the week between 23 February and 1 March.  Hmmm?  My first reaction was ‘Why are we buying Crude Oil from the Russians?’  It appears to be related to “the US market adapting to the loss of Venezuelan oil”.  Doesn’t make sense to me.  I though our government was trying to discourage trade with Russia.  Anyhow, Friday’s decline cause UCO to move to a Neutral Signal.

Model Portfolio:  The Model remains 25 percent invested in Crude Oil (UCO), 25 percent invested in DXD and holds 1,000 shares of TZA, a 3X leveraged ETF for the Russell 2K.  The remainder of the theoretical $100,000 portfolio, about 39%, remains in cash.

So far, the newly created Model is showing a gain of $597.25, without commissions.  For the week, the Model is up 0.48 percent while the broadly based SPX was down 1.3 percent.  The results of the Model Portfolio should not be used to project future performance.  The Model is being shown for educational purposed only.

Have a great weekend.

That’s what I’m doing,

h

Market Signals for

03-11-2019

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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.