Professor’s Comments January 16, 2014

Posted by OMS  at January 16th, 2014

The Dow rose another 108 points, closing at 16,481   Volume was heavy, coming in at 112 percent of its 10 day average.  There were 253 new highs and only 21 new lows.

While it’s still a bit too early to tell, it appears that the markets are starting the upside breakout I have been expecting. The Dow and SPX appear to need one more small pullback before the small wedge of our Hockey Stick Pattern is complete.  Then once it does, the next rally leg should start.

The NASDAQ broke out of its consolidation area with Apple gaining almost 11 points to lead the way higher.  This is very good news for the tech sector, because as you know, I don’t see how the NASDAQ can make any serious attempt to move higher unless Apple participates.

Anyhow, if we get another down day or two, that’s where I will start looking to increase my holdings. 

Last night, The Professor had 42 longs and only 2 shorts.  So he’s wide awake now telling us to get ready.  He still hasn’t given his Buy signal, but he’s getting close. The Dean’s List continues to be positive, and last night all of the cockpit indicators turned positive.  So all of the elements of the SIGN (List, Pattern, and Indicators) are now in place to support a rally in the markets.  All we need now is The Professor’s trigger.. 

But as you know, the market does not move all at once.  Some sectors start early, and it appears that the REITs are doing just that.  Most, if not all of the REITs I talked about during the weekend have now entered the trend mode.  A quick look shows that all of the ones I mentioned gained over 0.50 cents yesterday to put their CCIs above 100.

Just remember that these are trades.  No falling in love yet.  And the reason I consider them as trades is because 2 of the 3 REITs I own (RWR and VNQ), are still in down trends.  We NEVER fall in love with stocks that are in down trends where the 50 is still below the 200.  The Professor’s Methodology says that stocks can be purchased as trades after a TLB pattern has formed and the PT indicators turn positive. And that’s what I’m doing now.  Dating the REITs.

Once (IF) I see these ETFs start to ‘Jump the Ropes’ I’ll become more interested.  Then, once the ‘Rope Jump’ is complete, I’ll wait for a two wave pullback before I start to acquire my full Basic Position.  But right now, we’re just dating. 

If at any time the PT indicators start to turn negative on these REITs, the date is over. 

One of the reasons that I’m still very concerned about the REITs and the market in general is because of the REITs appear to be leading the way.  In most market rallies during the past few years, technology is usually the sector that leads.  The REITs are usually the laggards.  So it appears that the very nature of the market is starting to change.  There’s no doubt that the Big Boys are still keeping their money in the markets, but now most of their new  buying is no longer going into technology.  The new buying is starting to become more conservative. 

Anyhow, let’s give the markets another day or so to complete their Blades. 

What I want to see today is a small pullback on relatively light volume.  If this happens, I’ll start to buy one or two stocks from the Honor Roll. 

Last night, several of the stocks I’m watching have moved very close to entering the trend mode.  So IF we get a relatively small pullback today, many of these same stocks should be ready to move higher in the days ahead.  You might want to check the CCI on  your favorite stocks during this period to see how close it is to trending. 

The ones I will be focusing on MUST have all of the elements of the SIGN in place.  In other words, they MUST be on one of my Lists, they MUST have a pattern, and all of the PT indicators MUST have turned positive.  If your stock or ETF passes these tests, then check to see how close the CCI is to entering the trend mode.  If your stock or ETF does not appear ready to trend, you might want to look for another partner to dance with.

Remember, we could be getting close to a top. That top could still be several months away, or it could start to form just after the SPX exceeds 1860  I won’t have a good feeling for this until after The Professor tells us the strength of his Buy signal.  But the thing we do know is that markets appear to be in the final “e” wave of an Ending Diagonal pattern  The next rally could be the last dance.  So this is not the time to go bottom fishing, or to own cheap stocks.  What I want to own now is strong stocks; those that are in well established Uptrends, that will be pushed even higher by the institutions.

So basically I’m looking for two types of stocks now.  Those that will take advantage of the Feds newly printed money, which will cheapen the dollar and make their products more competitive in the international market, and those that will take advantage of the potential money shift as the market becomes more conservative.

One candidate in the former category is Caterpillar.  It was highlighted by Emeritus last night and placed on the Honor Roll.  The stock has formed a nice HS Pattern and in doing so, has pulled its 50 back above the 200.  So CAT is now in an Uptrend.  With stocks in an Uptrend, we can start looking to buy them as Rifle Trades. 

IF the market corrects today and CAT pulls back with the market, the stock and others like it will be high on my List.   I’ll be watching the 2-period RSI Wilder on the Daily chart and IF conditions are right, look to pull the trigger on the shorter term bars.

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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