Professor’s Comments December 1, 2016
Posted by OMS at December 1st, 2016
The markets were mixed yesterday. The Dow rose over 100 points early, but gave up all but two of those points to close at 19,124. During the early rally, the Dow reached its theoretical high of 19,225. The NASDAQ and SPX closed down 56 and 6 points respectively. Some of the high-flying technology stocks, like Amazon, continued to fall. AMZN lost another 11.95 points after being highlighted by Emeritus as a short for the Honor Roll. Volume was heavy, coming in at 142 percent of its 10-day average. There were 205 new highs and 54 new lows.
The OPEC ministers announced that they would cut crude oil production by 1.2 Million barrels per day. The announcement sent crude oil prices sharply higher, with stocks like Schlumberger (SLB) gaining over 4 points.
Yesterday’s decline in the NASADAQ caused QID to appear on the Dean’s List, turning the List neutral. The decline also caused the Money Flow indicators on the DIA and QQQ to turn negative. However, both The Tide and the VTI on the Dow remain positive. The VTI on the NASDAQ and SPY has turned negative.
So, now that the Dow has reached its theoretical target of 19,200+ and seeing it pull back to close almost unchanged, there is a possibility that the top is in. Seeing the Dow pullback after an exceptionally heavy volume day is never something you want to see if you’re Bullish. The ‘Hanging Man’ candlestick pattern this type of intraday trading produces is often seen at market tops. So IF the top is in, the VTI on the Dow and The Tide should start to turn negative in the next few days.
For now, I want to see the VTI on the Dow turn negative before I do anything else. Now that I have a small ‘trial’ position on the SPY with a few Puts, I’m just waiting. Remember, the VTI is a very sensitive indicator. It turned positive on 7 November, the day before the election, to signal the start of the current rally. The Dow was trading at 18,260 back then, so the VTI signal was good for a gain of almost 1,000 Dow points. This is the reason I want to see the VTI turn negative.
Also, for me to become aggressive with inverse index ETFs from the Dean’s List, I need to see The Tide turn negative. Currently, all four of the breadth indicators that make up The Tide are still positive, so I must wait…even though QID has appeared on the Dean’s List. It’s just what I do. BTW, The Tide turned positive on 9 November, the day AFTER the election, producing a gain of 635 Dow points. The Tide, which requires four indicators to turn, tends to lag the much faster VTI.
So, to be sure that the overall market is heading down I need to see all the VTIs on the Dow, NASDAQ, and SPY turn negative. Once this happens, I would expect The Tide to turn negative within a day or so. Knowing the relationship between The Tide and the much faster VTI should help me establish my short positions for the coming decline.
IF I see the VTI on the Dow turn negative during the day today, I’ll post the change.
Also, IF my short-term trading indicators on the NASDAQ turn negative, I’ll likely buy a trial position in the QID, which is the only inverse index ETF on the Dean’s List, now that the VTI on the NASDAQ is negative. Yesterday I bought a small trading position in Cerner Corp, CERN, after it appeared on the Honor Roll as a short. The stock popped higher at the open giving me a nice entry point. CERN finished the day flat (up 0.01), but the pattern and indicators continue to suggest lower prices. BTW, the VTI on AMZN, another stock recently highlighted for the Honor Roll continues to head down. My near-tern target for AMZN remains at 200-day moving average support near the 722 level. Yesterday AMZN closed at 750.57, down 11.95 points. With high-flying tech stocks like AMZM, NFLX, and others now showing negative VTIs and lower targets, it’s one of the reasons I’m looking at buying a few shares of QID.
Gold, mining stocks, and Bonds continue to search for a bottom. The VTI on GLD continues to head down. The VTI turned down on 7 November with the ETF trading at 122. UUP, the ETF for the U.S. Dollar, remains on the Dean’s List. Once equities start to decline, I believe we’ll see gold, mining stocks, and Bonds rally as money starts to move out of equities and into these other investments.
BTW, I have started to scalp trade TMF yesterday. It’s been a while since I traded this volatile 3X Bond ETF. I just wanted to get used to trading it again. If the equity markets start to head down, this could be a nice trading vehicle as investors start to move money out of stocks. The VTI on TMF has turned positive, but the Money Flow indicators are still not where I would like them to be. It’s still early, so I’m only scalping, catching 0.20-0.25 cent moves.
That’s what I’m doing,
h
Market Signals for
12-01-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
SUM IND | POS |
VTI | POS-T |
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