Professor’s Comments August 27, 2015

Posted by OMS  at August 27th, 2015

The Dow rose 619 points, closing at 16,285.   Volume was heavy, coming in at 129 percent of its 10-day average.  There were only 2 new highs and 243 new lows. 

Yesterday’s rally was part or all of final leg of the wave 4 triangle that I talked about in yesterday’s Comments I said: “The rally should move the Dow back above the 16,000 level, possibly near or slightly above 16,313.”   Yesterday’s high was 16,303.  So it appears that the missing leg I was expecting to complete the wave 4 retracement triangle is now nearing completion.

OK, so what now?

Yesterday’s rally off EXTREMELY oversold conditions was very strong, but it did not change any of my key indicators. The Dean’s List, Tide, and both Money Flow indicators remain negative.  However the A-D oscillator continues to remain oversold at –150.  So it’s likely that the Dow will extend its rally a few more points today, to further relieve the oversold conditions of the A-D oscillator before wave 5 down begins.

I started buying a few Put Options on both the SPY and DIA late yesterday using the 16 October contract. The SPY had a 150 strike price.  If the Dow continues to rally today, I will be looking to add to these positions.  Now that the Dow is above 16,300, I believe the next decline should be starting within the next few days.

I will be using the Money Flow and Trend indicators on the 15 minute chart as my trigger.  When both turn negative, I will start re-buying inverse ETFs from the Dean’s List.  My target for the Dow on the next move down remains below 15,000.

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
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