Professor’s Comments January 10, 2014
Posted by OMS at January 10th, 2014
The Dow fell 18 points, closing at 16,444. Volume was heavy, coming in at 128 percent of its 10 day average. There were 213 new highs and only 23 new lows.
In case you haven’t noticed during for the past week or so, the volume on the NYSE has been increasing while prices have remained flat. This is a classic sign of distribution, where the institutions are unloading stock to the smaller investors. It’s not a major problem for now, but it will be something to watch in the weeks ahead. Distribution is one of the early warning signs that a top could be approaching.
Today is all about the December Jobs Report. Given that the markets have been in a very narrow trading range for the past two weeks, where the Dow has traded between 16,400 and 16,588, I would expect a breakout to occur very soon. It could be today.
Last night, the A-D oscillator had a very small change, so we should look for a Big Move within the next 1-2 days.
There’s no point in trying to anticipate which way the Big Move will be, up or down. I always prefer to have the market tell me what it wants to do and then react to it.
Yesterday I started to run The Professor algorithm after 11am, but didn’t see anything to change his neutral bias. He finished the day with 12 longs and 15 shorts, telling me there was still no trend developing.
I thought this was very interesting, because as you know The Professor has been neutral since after Christmas. And during this time, the market has gone nowhere! On the day after Christmas, the Dow was trading at 16,479. Yesterday, the Dow closed at 16,444. So if you listened to the ‘experts’ on CNBC, you lost money. If you listened to The Professor, you stayed out of the markets because there was NO Trend.
Now to a casual observer, this might not seem important. Trust me, it is very important. I don’t see any reason for putting money at risk when there is little opportunity for gain. Remember, trading is an odds game. So why would you risk your money when there is no point in even playing the game? As long as you’re in a trading range, stocks can go either way. Yeah, the odds tend to favor an upside resolution, but until the actual breakout occurs, your money is at risk. No, I prefer to have the market tell me it wants to go higher (or lower) and then play. Too much can happen while you have your money at risk without favorable odds. A major disaster could occur overnight. War could be declared in the mid-east impacting the world’s oil supply. Israel could attack Iran. China could invade the disputed Japanese Islands, or shoot down another airliner that violates its newly declared airspace. Who knows what can happen overnight. And any one of these events could impact the markets and your stocks.
That’s why I love The Professor. He not only tells me when the odds are favorable for the start of a new trend, he also tells me when nothing is going on.
So yesterday, when the Dow was down about 80 points, I ran The Professor. I wasn’t worried that a new downtrend was starting because The Professor wasn’t waving his Red Flag. Think back to last week, just after the Dow rallied for 122 points, practically all of the commentators on the major networks, including Fox Business News, were telling you to buy, buy, buy. They were saying that a new tend was starting. You were going to miss the train. IF you listened to them and bought into the market, you had your money at risk without stocks going anywhere. During this same period, the Professor didn’t buy any of the hype and maintained his neutral stance. He told me to stay safely on the sidelines. That there was no point in trading because odds were low.
A few days ago, I posted The Professor’s Buy signals for 2013 on the outside of the web-site. This way IF you are talking to your friends or family members about The Professor’s Methodology (which I encourage you to do), you will be able to show them The Professor’s results.
With a tool like the The Professor, I’m perfectly happy to be on the sidelines now waiting for the Jobs Report. If The Professor starts to see a new trend developing, that’s when I’ll put my money at risk, knowing that I’m trading with favorable odds.
That’s what I’m doing,
My next Basic Class at UNF starts Wednesday, 15 January. Please tell your friends.
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Category: Professor's Comments