Professor’s Comments February 13, 2014

Posted by OMS  at February 13th, 2014

The Dow fell 31 points, closing at 15,964.  Volume was light again, coming in at 86 percent of its 10 day average.  There were 113 new highs and only 19 new lows.

The Professor remained quiet yesterday.  He finished the day with only 22 longs and 2 shorts. So even though the Dow rallied back to retrace 50 percent of the decline since 31 December, he doesn’t see any reason for it to push past 16,000.  At least not yet.

Yesterday’s low volume was a sign that the market was tired.  It needs a rest.  In all likely hood it will probably take a day or so to consolidate before moving higher. This consolidation should stay between 15,900 and 16,000 on the Dow and 1810 and 1820 on the SPX.  Moves significantly below these levels would be cause for concern.

Once the consolidation period is complete, the Dow should try to push beyond 16,000 and could get as high as 16,200 -16,300.  The SPX should move toward 1830 -1840.

However, once the next rally starts, we’ll need to start watching The Professor.  If he starts to wake up, and only highlights a few stocks, I’ll remain on the sidelines.  If he starts to highlight 50 or more, I’ll look to trade a few longs.  But IF he goes nuts and highlights more than 100, I’ll become more aggressive, but still cautious.  There’s always the chance that any rally from current levels could truncate.

The A-D oscillator had another ‘relatively’ small change last night, this time 13 points, so we need to be on the lookout for another Big Move within the next day or so.

Most gold stocks looked pretty tired yesterday.  The rally in gold that pushed gold price to the 1290 level has formed a small triangle-wedge pattern.   Triangles are usually associated with wave 4s.  So the thing to watch on gold now will be the 1260-1270 level.  If the metal starts to trade below these levels, the odds increase for a move toward 1150 or below.  Watch gold now.

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
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