Professor’s Comments December 10, 2015
Posted by OMS at December 10th, 2015
The Dow rose 200 points early, then fell over 360 points before rallying into the close to finish down 76 points at 17,492. Volume was heavy, coming in at 117 percent of its 10-day average. There were 27 new highs and 168 new lows
Yesterday’s volatile trading appeared to be the completion of wave ‘e’ down within the Bullish Wedge Pattern..
If this analysis is correct, stocks MUST start to move higher from current levels. If they don’t, and the market starts to break down, it’s likely that the Five Waves to a Top (FWT) Scenario has truncated and that the Ending Diagonal Pattern will start to come into play.
All of the waves for the Bullish Wedge, which is wave 4 of the FWT scenario, are now in place. In other words, it’s now or never for the primary scenario.
The market is oversold now with no trend in place. The past three days have produced A-D oscillator readings of -138, -174 and 183. The 35-period CCI is only showing a reading of -63.6. My custom trend indicators are also showing no trend. So with oversold conditions and no trend in place, I have to expect a rally. The key will be to see if any rally can turn the indicators.
There was a small change in the A-D oscillator yesterday, so we need to be on the lookout for a Big Move within the next 1-2 days. The Big Move would fit either scenario currently on the Board. The move could be up or down.
So IF stocks start out higher today, I will be looking to establish a few ‘trial’ positions in the positive index ETFs. I can’t go hog wild in my purchases because both the Dean’s List and The Tide are negative. Any positions established MUST be kept small.
But now that the Dow has tested the 3 December low and rallied off that low, there is a good chance that the next leg higher could be starting.
Here’s the thing: With the Dow near the 17,500 level and appearing to be completing a Bullish Wedge for wave 4, I can establish a ‘trial’ position in DDM with a high reward-risk ratio.
The wedge pattern (IF it’s a wedge) supports a move to the 18,350+ level. So if I buy the DDMs with the Dow near 17,500 and place a mental stop at 17,400, it would give me a reward-risk ratio of about 8:1. I’ll take those odds every day.
The only fly in the ointment is the indicators. Just about every indicator on the cockpit is negative. So any trade to the positive side now MUST be kept small.
If I’m right and the market starts to move higher causing The Tide and the Dean’s List to turn positive in the days ahead, I will add to my ‘trial’ position.
On the other hand, if the Dow starts to break below 17,400, I’ll start looking for a few inverse ETFs to trade.
Like I said above, it’s now or never for the primary scenario.
Watching.
That’s what I’m doing,
h
Market Signals for
12-10-2015
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | NEG |
THE TIDE | NEG |
SUM IND | NEG |
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.
Category: Professor's Comments