Professor’s Comments August 29, 2013
Posted by professor at August 29th, 2013
The Dow rose 48 points, closing at 14,824. Volume was moderate on the rally, coming in at 97 percent of its 10 day average. There were 26 new highs and 71 new lows.
A cloud will remain over the markets for the next few days as the US and its allies continue to plan a military strike against Syria. The ships and missiles are in place, and now it appears the only thing preventing their launch is the weapons inspectors. They’re still in Syria. Yesterday, the UN secretary-general said time was needed to investigate allegations that the Syria had used chemical weapons against civilians. According to the present schedule which is widely published, the inspectors finish their task on Friday. Then once the inspection is complete, they’ll need to get out of Syria, (hopefully they’ll be released and not be made ‘guests’ like Saddam did in Iraq) analyze the data, and report their findings to the UN. So the ‘cloud’ over the markets will likely continue into the weekend or next week.
I ran the Professor last night and he confirmed the above. He only had 9 stocks highlighted, which is his way of saying not much is happening. Remember, we’re looking for him to highlight 50 or more stocks to signal the start of a rally. Actually, because the next wave up should be Wave 3 up in the five wave sequence, I would expect to see more than 80-90 stocks being highlighted. It should start with a Bang!
The VIX closed back below its Upper Bollinger Band last night, generating another VIX Buy signal. So now we have three of these signals on the Board. This is a very unusual event, so IF you see the market starting to rally, please pay attention.
In Class last night, we talked about several stocks with really nice patterns. Most of these stocks have been trading sideways for the past month as the market corrected down. In other words, these are very strong stocks. Strong stocks correct sideways. They tend to stay on the Dean’s List during corrections. And because of this, when the market starts to turn positive, they usually lead the way up. If you get a chance today, you might want to take a look at a few, like SLB, BIDU, GILD, and JCI.
You might also want to keep an eye on the German DAX, which is trading at 8,183 this morning. The DAX has fallen over 200 points in the past few sessions. If it starts to break below 8,000, it will tell me that another set of problems are coming into play. Germany and Europe are heavily dependent on mid-east oil, which has been rising steadily as tensions in Syria increase. If crude oil starts to push above 107 -110, it will impact European markets negatively. And as the attached chart for the DAX shows, the index has not done well in the past once a trend line is broken.
At this point, I’m not entirely certain what will happen to US markets IF the DAX starts to fall. Usually the Dow follows the DAX. But now that the US produces about 80 percent of its own oil, an oil crunch in Europe might be a boon for the US.
Same for Bonds. Last night in Class, I talked about how bonds had fallen from the 145-147 level to near 130. I had been projecting a decline to the 125-126 level, and when the long Bond approached 130, I started to manage my money, taking profit in TBT. Here’s the deal: The chart pattern in Bonds suggests that once they complete this leg down, they could rise to the 150 level. Yeah, I know that almost everybody in the world is saying that interest rates will be rising in the future, and that Bond prices will fall. But again, the chart doesn’t suggest this. One of the things that could cause Bond prices to rise is a major decline in equity prices in Europe. Money could leave European equities and flow into US Bonds. This is exactly what happened two years ago, when US Bonds were downgraded from a AAA rating to AA. Everyone was saying Sell Bonds! Everyone except the Dean. He had TMF at the very top of his List! And in the two months that followed, TMF doubled, rising from 39 to 80! Those AA rated US Bonds looked pretty good to European investors when their Bonds were being rated B- or lower. They couldn’t buy them fast enough. So take anything you hear about rising interest rates with a grain of salt. If the DAX starts to break down, it could have an impact on a lot of things. Things you might not expect.
Anyhow, all I’m doing for the next few days is watching. If the market start to rally, I’ll run The Professor and post the results. But right now, with only 9 stocks being highlighted, he’s still sleeping.
That’s what I’m doing,
Market Signals for
DMI (DIA) NEG
DMI (QQQ) NEG
COACH (DIA) NEG
COACH (QQQ) NEG
DEANs LIST NEG
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Category: Professor's Comments