Professor’s Comments April 13, 2017
Posted by OMS at April 13th, 2017
The Dow fell 59 points, closing at 20,592. Volume was moderate, coming in at 101 percent of its 10-day average. There were 81 new highs and 15 new lows.
Yesterday’s decline didn’t change the cockpit indicators much. The VTI continues to decline and now has a reading of 40.9, so its still NOT signaling a trend. It still appears that stocks are working their way through the wavers of a small triangle for wave ‘b’ up. Once this wave completes, wave ‘c’ of ‘Major Wave ‘D’ should take the Dow to the 20,000 level or below. Then once Major Wave ‘D’ down completes, a Major Wave ‘E’ rally should begin. This rally will likely last into late summer, taking the Dow sharply higher, possibly to the 22,500 level. With mixed indicators on the cockpit, I’m still trading somewhat cautiously. Last night, the 2-period RSI showed an EXTREMELY oversold reading of 3.3. So, with the VTI showing No Trend, I took a few bucks off the table. I hated to do this knowing that wave ‘c’ down could have started with yesterday’s decline, and I would likely have to re-establish those short positions today. But ya gotta do what ya gotta do. Trading a market with No Trend in place is like this. But when you scalp trade, you have to be happy with the profits you get, not wit those you might have made. Missing a few trading profits along the way is the price you pay to ensure that you don’t give all those profits back the next day. It’s tough! If the VTI continues to head down and moves below 30, I’ll start holding some of the inverse index ETFs I’m trading. But right now, with the VTI still showing No Trend, I’m still scalping. All I’m doing is watching the 2-period RSI on the short-term bars, buying inverse index ETFs whenever the RSI is overbought and selling them when it becomes oversold. The strategy has been a winner since the Dow touched 20,888 on 5 April. As long as the VTI on the Dow remains below 50, I’ll continue to scalp trade the market with a negative bias. As the VTI continues to decline, the only thing I’ll do differently will be to hold my positions IF the indicator enters the Trend Mode. BTW, the VTI on the SPY and RUT is also heading down with readings near 44. The VTI on the NASDAQ 100 (QQQ) just moved out of the Up Trend Mode and now has a reading of 62.6. This tells me the NASDAQ (QQQ) is a lot stronger than its sister indexes. But while the NASDAQ is no longer trending, it is still not showing a negative bias. So if you’re trading the market to the downside, it’s probably best to focus on the Dow and RUT for now. Gold had another nice day. GLD rose 0.83 cents to 122.02. The VTI on GLD is now solidly in the UpTrend Mode with a reading of 80.5. The VTI on GDX rose to 72.5 as the ETF rose 0.21 cents to 24.57. So I’m holding gold as it starts to trend, and scalp trading the Dow and RUT. BTW, now that gold has entered the Trend Mode, I will start using my Rifle Trading techniques on pullbacks. This is where I watch the 2-period RSI for oversold conditions on the Daily chart and then use the PT indicators on the hourly charts as a trigger. I’ll continue to hold my basic gold position as long as the PT indicators remain positive, but add to and trade additional shares based on the 2-period RSI. It’s a fun way to trade. That’s what I’m doing, h The markets will be closed tomorrow, 14 April, in observance of Good Friday. My next report will be the WSR. Market Signals for 04-13-2017
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