Professor’s Comments – A few observations 12/11/2020

Posted by OMS  at December 11th, 2020

The ST Volume indicator on DIA has turned negative and the CCI has moved out of the Trend Zone. In last week’s training session, I gave you several examples of what can happen when this occurred in the past. It was usually a signal to begin exiting large cap stocks. Remember, I see no reason to hold stocks when the Trend is over, especially with a negative volume indicator.

The levels on the Dow I’m watching now are yesterday’s low of 29,877 and the area near 29,600. A break of 29,600 would eliminate all the Bullish scenarios I have on the Board.

Also, several gold miners have moved to the top of the Member’s Short List.  (This is the new List that I told you I would start talking about once there was a change in signals. ) This weakening in gold stocks is occurring at a time when the wave mapping suggests that gold and mining stocks could be getting ready to start their next wave down.  The pattern suggest gold could decline toward the 1,700 level in wave 3 down of Wave ‘C’ down.   Then once wave 3 down completes, gold will likely bounce back up to 1,750 -1,800 in wave 4 up before dropping to the 1,650 level to complete Wave ‘C’ down.  The chart also suggests that once Wave ‘C’ down completes, there should be a Major, sustained rally in gold.  The rally could take the metal to the 2,500 -2,700 level by late 2021.  If this scenario unfolds as I expect, the current decline could set up a major buying opportunity for gold in the months ahead.  Not now.  Right now, gold and mining stocks look more like a short.

The reason I say this is because 5 of the top 6 stocks on the Member’s Short List are gold or silver mining related. The stocks are ABX, SA, AU, PAAS, and WPM.   GDX, a gold ETF, is in the #8 position.  I mention this today because we all saw what happened to energy when several energy stocks occupied the top spots on the Member’s Watch List. 

Another thing I noticed is that several defense related stocks are beginning to move up on the Member’s Short List.  This could be related to the change in administration.  The Democrats, especially the Obama administration of which Biden was a part, never made defense spending a priority.  Stocks like LMT, MCD, and NOC are now on the MSL about mid-pack.  If they start moving up and get closer to the top, I’ll let you know.

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Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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