Professor’s Comments April 3, 3014

Posted by OMS  at April 3rd, 2014

The Dow rose 40 points, closing at 16,573.  It was interesting to watch how the Dow finally reached the December high of 16,588 before pulling back. Volume was low on the rally, coming in at 93 percent of its 10 day average.  There were 189 new highs and only 1 new low.

Tomorrow is the first Friday of the month and with it comes another jobs report.  From the look of things during yesterday’s trading, it looked like reaching 16,588 was a forgone conclusion, but now the question is how much more does this market have left in it.

My guess is that the markets will continue to push higher, probably toward or slightly above 17,000. Maybe 17,200-17,300.  I used the words ‘push higher’ because I still don’t see a massive overall rally in the works.  At least not yet.

The Dean’s List is long at the moment, but if you look closely, it’s still not very strong.  Once you get past the top two spots on the List, all I see are a lot of stocks and ETFs ranked 2,1, and 0.  One or two negative trading days could cut the List in half.

Also, QID, the Inverse ETF for the NASDAQ is sill on the List.  Like I’ve been saying, it’s hard for me to picture a robust rally getting started without technology participating.

Right now, the SPX is trading near 1890.  A favorable jobs report tomorrow could push the index above 1900.  At that point, a lot of the seasoned traders will start to have a rough time breathing in the thin air.  The charts are telling me that the S&P will likely top near the 1930 level.  But once we get above 1900, it’s not going to be a robust push anymore.  It will start to feel more like walking on thin ice.

While the Dean’s List remains positive, the cockpit indicators are still mixed.  The rally in the Dow we have seen to this point has taken place with very selective participation.  If you owned a lot of NASDAQ stocks, you are probably thinking…what rally? On the other hand, if you have been following the Dean, and played the energy game, you probably have a big smile on your face about now.

I’ve been getting a lot of emails from students the past few days telling me how much fun they’ve been having with Gulfport, HAL and others.  But nobody has been talking much about having fun with BIDU or the biotechs, like BIIB or AMGN.   It’s a stock pickers market now, and I expect this will continue as we continue to ‘push’ higher. 

There was another ‘small change’ in the A-D oscillator last night, so we need to be on the lookout for a Big Move within the next 1-2 days.  With the jobs report scheduled for release at 8:30 tomorrow morning, I expect the Big Move will take pace tomorrow. 

As a group, the Pharmaceuticals had the biggest change in strength yesterday.  The sector has developed a very nice Hockey Stick pattern, however most of the stocks I looked at in this sector still have negative indicators.  If Abbot Labs (ABT), Bristol Myers (BMY), and Mylan (MYL) can turn Green during the next few days, I will become very interested.  But meanwhile, I’ll stick with the equipment makers, like Styker (SYK) and Medtronic (MDT) which have similar patterns, but much stronger indictors, particularly the P-volume.  You might notice that IXJ and IYH, the two Healthcare ETFs I put into the data base a few days ago have still not appeared on the Dean’s List.  So the Dean is telling us that while the medical equipment markers are strong, the rest of the industry is not.  This will be something to watch in the day’s ahead, because IF these ETFs start to appear, it will likely mean that Big Pharma has decided to join the rally.  That’s when I’ll start looking at ABT, BMY and MYL.

BTW, I really believe that you should pay attention to the P-volume now.  For the past few weeks, this is the indicator that has been giving me the most information.   If we start to move above 16,588 tomorrow, and you feel like you want to put additional money to work for the final ride up, please make sure that your stock has a healthy P-volume.  I’m starting to see far too many stocks and sectors with declining P-volume.  A quick look a the weak and diverging P-volume on the tracking indexes for the S&P 500 (SPY) and NASDAQ 100 (QQQ), will show you what I mean.  It’s one of the reasons that I anticipate the ‘push’ toward 17,000 will be less than robust.  However IF you’re in the right sectors, you can still be a very happy camper.

Waiting for the jobs report.

That’s what I’m doing,

h

BTW, I will be traveling to St.Petersberg tomorrow for a visit with my son’s family. Since I will be on the beach, or at hockey and baseball games most of the time, I probably won’t have time to answer any emails. Instead of posting Comments tomorrow morning, I would really like to see how the market reacts to the jobs report. IF I see something developing, I’ll post a short Comment after the market opens. Otherwise, I’ll probably use tomorrow to analize the data and then discuss it in my WSR.

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

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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