Professor’s Comments January 14, 2014

Posted by OMS  at January 14th, 2014

The Dow fell 179 points, closing at 16,257.  The decline was the Big Move predicted by the small change in the A-D oscillator.  Volume was heavy on the decline, coming in at 116 percent of its 10 day average.  There were 152 new highs and only 25 new lows.

The SPX fell 23 points to 1819.  Last week I mentioned 1820 las a likely target area for the current corrective leg.  We’re there now.

And now, there are several questions that need to be answered.

The first has to do with stopping the decline.  As long as the 1820 level holds, chances are that the lows of this decline have been seen.  Most indexes have now had a chance to develop the Blades necessary to support a move higher.

But simple corrective waves like the one that is occurring now have the potential to develop into more complex structures. So until The Professor starts too highlight 50 or more stocks as longs, I’m still exercising caution.

If the current corrective wave holds 1820 and starts a weak rally, there is a good chance that the move will only be the ‘b’ wave of  a larger a-b-c pattern.  If this is the case, it’s highly likely that wave ‘c’ down could drop back below the 1800 level.  So this is why I will be  watching The Professor very closely.

Last night, the DMIs on the Dow (DIA) and Nasdaq (QQQ) turned negative. The Dean’s List remains positive, but two of the inverse index ETFs, SDS and QID, have made an appearance.  As long as the Dean’s List remains positive and The Professor tells me that no downtrend is developing, I will maintain a positive view.

BTW, last night The Professor was relatively quiet, highlighting 2 longs and 16 shorts.  The small number of shorts is what I will be watching now.  If ithe number of shorts starts to increase, I will start getting concerned. But not right now.  Right now The Professor still doesn’t see a down trend developing.

On the positive side, TMF, the 20+ year Treasury ETF that I mentioned in my WSR this past weekend, had a nice day yesterday. It closed up 0.74 cents to 47.59.  Yesterday’s early decline to 46.94 gave me a nice entry point .  Same for some of the REITs. However when the market started to fall, even these issues were not immune to the selling pressure.  I used the opportunity to establish trading positions in VNQ and RWR, and a slightly heavier position in VNO because it is already in an Uptrend.

Once again, remember what I’m doing now.  I’m using the SIGN to establish trading positions.  All of the ETFs mentioned are on the Dean’s List.  They all have well defined patterns with positive indicators.  So all of the elements of the SIGN are in place.

What I want to see now is for all of these ETFs to enter the Trend Mode.  TMF, RWR, and VNO already have CCIs above 100.  But VNQ is still a bit short. 

I plan to stay in all of the above ETFs as long as the PT indicators remain positive.  But I will be paying close attention to these ‘trades’, because if you look at a chart of TMF, you can clearly see that the ETF is still in a down trend.  Remember, I’m looking for a potential ‘Turn Around’ in TMF after a TLB Pattern. The Professor’s Methodology says that I can take the trade looking for a Rope Jump.  However if the PT indicators turn negative at any time in this ‘trade’ I will kiss it good-by and wait for another opportunity.

Again, the reason I’m interested in TMF now is because of its longer term possibilities, given that the long bond projects to the 150-160 level.  After hitting a high near 146-147 in a wedge type pattern, the long Bond fell to the 127 area where it appears to be forming a bottom. So a rally could start from current levels.  However, the charts shows that 125 is still possible, and that’s why I need to see a Rope Jump before I get really serious about Bonds.

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

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