Professor’s Comments August 27, 2014
Posted by OMS at August 27th, 2014
The Dow rose 29 points, closing at 17,107. Volume was moderate, coming in at 93 percent of its 10 day average. There were 195 new highs and only 13 new lows.
Not much changed with yesterday’s weak rally. The Dow did establish a new intraday high of 17,153.8 but couldn’t hold it into the close. It still appears that wave ‘b’ of the a-b-c pattern is nearing completion.
The market is currently being supported by the Bullish bias from end-of-month / pre-Holiday trading. Once this period is over, I would expect wave ‘c’ down to begin.
With several energy stocks that I watch getting a pop yesterday, I ran the Dean’s List during the day to see if DIG would appear on the List. It did, along with PXE, but DIG did not stay on the List when the market closed. This tells me that the energy ETFs are just lurking below the surface.
But there’s still a small problem with energy stocks like HAL and SLB right now. Even though they have pulled back to develop nice Hockey Stick patterns, the PT indicators are still Red. The P-volume on HAL is also very Red, and until it turns positive I have to consider any upside pop, like the one we saw yesterday, as suspect.
Here’s the deal: IF I’m correct about wave ‘b’ ending in a few days, then stocks like Halliburton (HAL) and Schlumberger (SLB) will have to start fighting the Tide. I’m not saying that they won’t be able to do this; all I’m saying is that it will be difficult. I don’t want to fight the Tide, I want to ride with it.
My counter trend trade in TWM, the inverse Russell 2000 ETF, is a good example of what happens when you try to fight the Tide. Yeah, I’m still holding my small position, because the P-volume is still positive. I’m just following the rules. But as we have seen during the past week, it’s just a lot easier to hold long positions when the Tide is coming in.
So IF the Tide starts to change direction as we move into September, I will likely favor short positions or inverse ETFs instead of long positions in energy.
The Dean’s List remains positive with very low RS ratings. Its telling me to be careful now. All those ETFs with RS ratings of 1 and zero could drop off the List with one big down day. And with a ‘relatively’ small change reading from the A-D still on the board, that big down day could be just around the corner.
All I’m doing now is waiting. I have to tell you that I am becoming very interested in DXD, the inverse 2:1 leveraged ETF for the Dow. DXD has been falling for the past 2 weeks as the market rallied. But the P-volume has not fallen off in proportion to the drop in price. This divergence between price and volume is something to note as DXD is a big favorite of institutional investors. At the end of the day, it’s usually the Big Boys who are on the right side of most major market moves.
DXD is currently showing a classic TLB Pattern. If the MACD and DMI turn positive on the Daily Charts and it appears on the Dean’s List, I’m a buyer.
That’s what I’m doing,
h
Market Signals for 08-27-2014 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
BREADTH | POS |
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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Category: Professor's Comments