Professor’s Comments December 3, 2014
Posted by OMS at December 3rd, 2014
The Dow rose 103 points, closing at 17,880. Volume was moderate, coming in at 110 percent of its 10-day average. There were 121 new highs and 124 new lows.
Once again you should note that even though the Dow made a new intraday high yesterday, the number of new lows exceeded the new highs. This is an extremely unusual condition for a market making new highs and should be viewed as a Red Flag warning.
The Up-Down oscillator, which is one of the four indicators that make up The Tide, turned from slightly negative to slightly positive as a result of yesterday’s rally. This caused me to turn the cockpit light for The Tide from Red to Yellow. If the market declines today, it will likely turn the Up-Down oscillator back to negative.
With the market either at or near the top of Major Topping Patterns, the Tide looking like it is in the process of turning negative, and a Red Flag warning from the high number of new lows, this is NOT the time to be getting aggressive to the long side. This is a time when you should be evaluating your long positions and protecting yourself.
The Dean’s List and PT indicators are still positive. However last night, TWM and RWM, the two inverse ETFs for the Russell 2K, appeared on the Dean’s List.
Yesterday I mentioned that the Russell was the weakest of the four major indexes and that its inverse ETFs should be among the first to appear on the Dean’s List if the market starts to change direction. Well, they’re there now. So all I’m doing now is watching for the PT indicators on the daily chart of TWM to turn Green. If they do, I’m a buyer.
Two things I find very interesting about TWM now on its Daily Chart are its narrow Bollinger Bands and the positively diverging P-volume.
The Band pattern since mid-October looks like one big tube of toothpaste. IF the indicators turn Green now, the ‘Band Squeeze’ will likely push the ETF higher and the ride up could be a lot of fun. However IF the indictors turn Red, this is NOT something I would want to be holding with those tight Bands. Remember from Class, tight Bollinger Bands usually lead to a Big Move. They are something we always look for when we trade. We just need to make sure that we are on the right side of the move. Pay strict attention to the PT indicators when you see tight Bands.
If you look at the P-volume, you will see that it is almost as high now as it was in mid-October when the ETF was 10 points higher. That’s significant positive divergence!
So when I notice things like this, and see TWM re-appear on the Dean’s List, I become very interested.
The 60 min bars on TWM turned positive last Friday. Yesterday’s pullback caused the PT indicators on the 60s to turn Yellow. IF the 60s turn positive today, I will be looking to buy a few shares as a ‘trial’ position. This position will be based on the short term Hockey Stick pattern that has formed on the 60s. My target will be near the 46 level. Yesterday TWM closed at 42.66.
It should also be noted that all of the gold related issues dropped off the Dean’s List yesterday. This is not unusual when stocks are pulling back during a short term wave 2 pattern. But now that the pullback has occurred causing a small ‘Blade’ to form, gold shares will need to rally in the days ahead. If this happens, it will be very positive for gold in the intermediate term.
The thing I’m looking for with my shares of GDX is a ‘Rope Jump’. From its current close at 19.2, I’m only looking for one of two things to happen. Either the ‘Jump’ occurs which would be very positive for gold, or the PT indicators turn negative. If the latter happens, I’m out.
That’s what I’m doing,
h
Market Signals for 12-03-2014 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
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.
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Category: Professor's Comments