Professor’s Comments December 22, 2013

Posted by professor  at December 22nd, 2013

Last October, I mentioned that I was keeping an eye on Europe.  I gave a few numbers for the FTSE and the DAX, and said that as long as those indexes remained above them, the US markets would be all right.

And as we have seen during the past few months, the European markets have stayed above my numbers, which paved the way for the US markets to rally.

But I’m starting to see signs that Europe could be changing in the weeks ahead.  The European markets are starting to look toppy.  While the DAX continues to remain strong, making new highs along with the Dow, London’s FTSE isn’t.

The FTSE reached its high in October, and has been having a tough time of it ever since.

Right now, all of the indicators on EWU, the ETF I use to track the FTSE, are negative.  I take this as an initial warning, even though most of the other European ETFs are still positive. Another reason I’m watching Europe now is because of the patterns.  If the patterns are broken, it’s a looong way down.  Also, most of the European ETFs are now showing significant negative divergences in P-volume.

So what to do?  Well here’s an easy way to keep track of Europe without spending a lot of extra effort.

During the next few weeks, while you’re checking the Dean’s List to see if DIA, QQQ and SPY are still on the List, make sure that EWG is there too.  EWG is the German ETF that tracks the DAX.  If EWG falls off the List, like EWU did in early November, Europe could be in trouble.  Big Trouble.  And this would not be good news for US markets.

Several other European ETFs, like EWQ (France), EWD (Sweden) and EUFN (European Financials), are currently on the Dean’s List.  You could watch these too, but I’m mainly going to focus on the DAX   The DAX is Europe’s strongest market.  If the DAX starts to falter, I will look to short the FTSE, now one Europe’s weaker markets. 

Also, you might want to look at FXP, the Ultra Short China ETF.. The ETF recently turned Green after a TLB Pattern. The ETF has the highest RS Rating (3) on the Dean’s List. A TRADE could see a Rope Jump. Remember, the ETF is still in a downtrend, so don’t fall in love.

A few more stocks that I’m watching from the MWL:

– Lennar (LEN). Recently highlighted by Emeritus. With three home builders on the MWL, I’m looking for a MA cross.

– Gulfport Energy (GPOR) Nice pattern. Needs a MACD turn..

– Marathon Pete (MPC) :>) has had a chance to rest. If oil starts a slow rally, this refiner could see mid to upper 90s based on wave 1’s 10 point stick.

-Total SA (TOT): nice HS Pattern with positive P-volume divergence. The management team is not as good as MPC’s with only a 12.75% ROE vs almost 20% ROE for Marathon. But TOT is a more diversified company than MPC. If you’re looking at energy stocks for the longer term, remember my charts are projecting much higher crude prices. This favors diversified energy companies vs pure refiners. Just watch the indicators.

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
FAQ

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