Professor’s Comments February 11, 2016

Posted by OMS  at February 11th, 2016

The Dow fell 100 points, closing at 15,915.  Volume was moderate, coming in at 91 percent of its 10-day average.  There were 47 new highs and 174 new lows

There were two changes to the cockpit indicators last night.  The Coach (Money Flow) indicator on NASDAQ’s QQQ turned negative which means that the next major wave down has started in that index.  However, the Hi-Lo indicator, which measures NYSE data, turned slightly positive. In doing so it turned The Tide back to neutral. So the cockpit remains on mixed signals.

Yesterday’s choppy trading still appeared to be corrective, so it’s likely that at least the Dow is still in some type of wave 2 pattern.  As long as that index remains above 15,804, the odds still suggest that yesterday’s decline as part of wave ‘c’ up in an a-b-c sequence for Major Wave 2 up. 

But after Fed Chair Yellen’s comments yesterday about negative interest rates, it’s likely that the markets will bet wondering about what they’re doing, and the volatility that we have been seeing for the past few weeks will continue.

Think about it.  Less than 2-months ago, the Fed was raising interest rates, telling everyone that the economy was strong and recovering.  Yesterday Yellen was talking about the possibility of using negative interest rates to stimulate more lending.  Negative interest rates!  Is she kidding?  Folks this is a last ditch effort.  It’s insane.

First of all, by even talking about negative interest rates, it tells investors that the economy is NOT strong and recovering. It’s extremely weak!  I have been seeing this in just about every indicator I use to measure the economy, including real job and wage growth. I say ‘real’ job growth because the government lies to you when it tells you that unemployment is at 4.9 percent. Remember, the government changed the way they calculate the unemployment number. Now they don’t count people that are so discouraged because they can’t find work that they have stopped looking for a job. If they counted these people, unemployment would be a LOT higher. If they used the same method they used back in 1994, unemployment would be at 24 percent. You can’t stop counting people who stop looking for work just to make the numbers look good. But that’s what Washington does. They lie! They change the rules. They actually believe that by telling Americans that unemployment is at 4.9 percent, it’s going to make them feel good about the economy. Like they don’t know. Trust me, they know. Just ask all those unemployed oilfield workers in Houston or North Dakota about the 4.9 percent number. And after yesterday, it appears that even the Fed doesn’t believe the government’s numbers. They see the real GDP growth numbers, which are now trending toward a recession. That’s why they’re talking about negative interest rates and stimulation again. It’s a panic move. And it comes after they have already created a mountain of debt which didn’t do anything to help the average American.

Does Yellen really believe that by going to negative interest rates with the Member Banks, it will force banks to lend more money to people so they can buy houses and cars?  Hey, if you don’t have a job, are you really going to go out and buy a new house?  

My Dad used to say, ‘If you don’t know something, keep quiet. You only look stupid.  When you open your mouth, you remove all doubt”.  As far as I’m concerned, all doubt about the Fed’s ability to regulate the economy was removed yesterday.  By talking about negative interest rates, it will only create uncertainty which will impact the markets negatively. Ms. Yellen could learn a lot from my Dad. He’d tell her to either keep quiet or go home.

Anyhow, it’s likely that the market will see some rough sledding today as it contemplates Ms. Yellen’s comments.  IF the market opens down substantially today, I will be looking to scalp a possible bonce back rally.

I received an email from Lee K. yesterday after he saw one of the new Weekly Honor Roll shorts tank.  He said, “The Honor Roll nailed the short in AIZ. Already down over 10 points from the open.” 

Remember, scalping Honor Roll stocks is one of the primary things we do when the market is in a corrective wave.  This is why I broke out the Summation Index and put it on the cockpit as a separate indicator, even though it is part of The Tide.  My research shows that when the Summation Index turns negative, scalping Honor Roll shorts can be a very effective strategy.  And now that I have added Weekly shorts to the mix by using the Emeritus algorithm on a larger data base, it gives traders with a longer time horizon a few stocks that they can consider holding for longer time periods. 

Remember, these Weekly signals are based on weekly data, so it could take some time before the stock starts to move.  One of the inputs to the algorithm is Weekly Money Flow.  In most cases when the Weekly Money Flow turns negative, the stock will experience tough times over the next few weeks (months).  On the other hand, there’s always stocks like AIZ, where the move is immediate.  You never know.

Scalping.

That’s what I’m doing,

h

Market Signals for

02-11-2016

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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