Professor’s Comments December 31, 2014

Posted by OMS  at December 31st, 2014

The Dow fell 55 points, closing at 17,983. Volume was low on the decline, coming in at 71 percent of its 10 day average.  There were 139 new highs and 46 new lows.

Once again, not much changed after yesterday’s trading action.  And even though the Dow fell 55 points, the light volume was not enough to turn any of my indicators negative. 

The divergences in P-volume, Volume Accumulation Percent and Money Flow continue.  Because of this, I still believe that it is too late to be buying stocks and too early to start getting short.

The rally since 17 December has been accomplished on very little volume.  It will be interesting to see what happens when traders come back in early January and see these weak volume numbers.  Right now, because of the Bullish seasonality bias, the momentum is still to the upside.  However all of the momentum indicators that have pushed the market higher are starting to wane.  Once they start to roll-over, and the momentum shifts to the downside, all of those divergences in volume and money flow will start to come into play.

This has not happened yet and until the momentum indicators actually turn negative, I’m keeping my upside target for the Dow near 18,300.  Again, this target is based on an a-b-c scenario for wave 5 up.  If the current rally is not final wave ‘c’ up  and is in fact wave 3 of 5 up, then the target for the Dow is significantly higher.

The thing I’ll be watching during the next few days is the fast MACD on the Dow. The fast MACD is my primary momentum indicator.  I set it for 10-20-0 vs. a standard setting of 12-25-9. The attached chart clearly shows how the fast MACD is diverging with price.  As the price has been moving higher, the momentum has NOT kept pace.  It is much lower now than it was back in early November, and even lower than when the Dow made its 5 December high. If this indicator starts to roll over now, it will be my signal that the momentum has started to shift to the downside.

The Dean’s List, Tide, and cockpit indicators remain positive.  As long as these indicators remain positive, the odds continue to favor higher prices.

The markets will be closed tomorrow for the New Year Holiday.

This will be my last Update until this weekend when I’ll post the WSR.

I wish you a happy, healthy, and prosperous New Year.

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

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.