Professor’s Comments February 6, 2014
Posted by OMS at February 6th, 2014
The Dow fell 5 points, closing at 15,410. The SPX dropped 4 points to 1751. The NASDAQ was flat. In other words, the markets finally stabilized. However, there is still a 50-50 possibility that the markets could make one more leg down from current levels before Wave 1 down is complete. I still see the down side risk on the Dow as being about 100 points or so, possibly to the 15,300 level. I also continue to believe that once the wave 2 retracement rally starts, it should terminate near or slightly above 16,000. What happens in the next few days will determine the actual target.
Volume was moderate, coming in at 98 percent of its 10 day average. There were 23 new highs and 80 new lows.
Not much changed with the indicators. Just about all of them are negative, including the Dean’s List. But this is just what you would expect at this point.
Last night, the A-D oscillator came in with a relatively small change of 13 points. As you know, for me to light the small change light in the cockpit, I require the small change to be 10 points or less. However during the past two years, small changes of up to 15 points have produced Big Moves, so we need to be on the lookout for a Big Move within the next 1-2 days.
It will be the quality of this move that will determine the next major move in the markets.
Tomorrow is the all important Jobs Report, so the Big Move could be deferred until then. It’s highly unlikely that traders will be taking big positions in front of tomorrow’s report.
All I have been doing for the past few days is scalping DUST. Yesterday just before the close, I was taking profit on my shares as I continue to watch gold to start its next leg down.
Here’s the thing: Right now, there are a lot of gold stocks on the Dean’ List. As the market has been declining for the past two weeks, the metals have had a nice rally. Royal Gold, RGLD, has led the pack gaining 10 points since it first turned Green on 2 January. The stock is now trading above its moving averages, but the averages themselves are still in down trends. Until they cross, I still MUST consider any move in Royal to be suspect. We’re just on a date.
But while Royal has ‘Jumped the Ropes’, most gold stocks have not. They’re not even close! Stocks like AU and AUY are still looking pretty sick.
So unless proven otherwise, I have to assume that gold (the metal) has NOT completed its Major Wave 4 down, which could drop the metal to the 1150 level as the pattern suggests. If this happens, the HUI will likely test the area near 190 or below.
And that’s why I’m scalping DUST now. I’m not in love with DUST. But during the past two weeks, the ETF has been very good to me as it has moved between 28-33. I must have scalped it 7-8 times, maybe more.
I don’t look at my relationship with DUST as a longer term proposition, but because at 30.84, the ETF is 6 points below the moving averages near 36.5. DUST could easily move back toward those averages.
DUST is still Red on the Daily Charts, and that’s the primary reason I’m only scalping it now. If it were to turn Green on the Daily’s, I would hold my position overnight and turn my scalp into a date. But until this happens, I have to kiss her goodbye every night and look forward to seeing the next day’.
If I’m right about getting a retracement rally in equities, I believe that the luster will start to come off most gold stocks in the weeks ahead driving the price of DUST higher. There isn’t a lot of overhead resistance in the ETF until it reaches the low 40’s which is my target IF it turns Green. It’s a Big IF, but until I see signs that equities are going to make a retracement run, I’m perfectly content to scalp DUST until I can take her on a real date. Notice I said ‘date’. That’s because even IF the PT indicators start to turn Green, I can not get serious about DUST for the longer term. But IF gold does bottom near 1150 or below as I expect, we could have a heck of a good time in the weeks ahead.
That’s what I’m doing,
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Category: Professor's Comments