Professor’s Comments April 8, 2014

Posted by OMS  at April 8th, 2014

The Dow fell another 167 points yesterday, closing at 16,246.  Volume was slightly higher than normal, coming in at 113 percent of its 10 day average.  There were 27 new highs and 21 new lows.

Even though stocks have had a tough two days, not much has changed with the patterns.  All yesterday’s decline did was test the lower trend lines of the consolidation wedge patterns that have been forming for weeks.  Once the indexes have a chance to test these lower trend lines, probably during the next week, I would expect the next rally leg to begin.

The Dean’s List turned negative last night, but even though all of the positive index ETFs have fallen off the List and replaced by the inverse index ETFs, the List is still not all that negative.  There are still too many domestic and foreign ETFs on the List for me to start getting negative.

Also, when I checked in with The Professor last night, he only had 15 shorts to go with his 8 longs.  So he does not see a new down trend developing yet.  Same for the PT indicators.  Even though the DMI and P-volume are negative, the MACD is still positive.  So with 2 of the 3 indicators negative, we have mixed signals.  Mixed signals are not a sell signal.

One thing I did note last night was that many of the stocks and ETFs that I am trading and watching now have oversold 2-period RSIs.  All of these stocks are sill in Uptrends, with the 50 above the 200.  So If the market starts to stabilize in the next day or so, I will start looking at the shorter term bars for Rifle Trades.

Gold has also been having a tough time of it during the past two weeks.  It appears that the next wave down in its decline toward 1150 is underway.  Royal Gold, RGLD, has fallen from a high near 73 to a low near 62 .  Since making its low on 27 March, the stock has moved sideways, forming a Blade near the 65 level.  This ‘Blade’ looks to be nearing completion, but could use one more small rally to the 66+ area.  If this happens, I will look to short the stock for a move near 55.

All I’m doing today is watching.  I want to see the markets stabilize and hold near current levels.  With a decline of over 325 Dow points the past two days, it’s unrealistic to expect any type of rally to begin before traders see the 1840-1845 level on the SPX hold for at least 1-2 days.  If it does, I would expect traders to come back into the market pushing the SPX above the 1900 level on the next rally leg.

Watching.

That’s what I’m doing,

h

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

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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.