Professor’s Comments January 22, 2015
Posted by OMS at January 22nd, 2015
The Dow rose 39 points, closing at 17,554. Volume was moderate, coming in at 97 percent of its 10 day average. There were 146 new highs and 60 new lows.
Not much changed with yesterday’s trading action.
The Tide remains neutral with a negative Dean’s List and PT indicators.
I should say something about the Tide here, because it is NOT really neutral at this point. It’s actually a mixed Tide.
As you know by now, The Tide consists of four breadth indicators: the High-Low indicator, Up-Down Oscillator, Summation Index, and the A-D oscillator. When all of these indicators are heading in the same direction, I change the color of the cockpit light to reflect the direction of the move. GREEN for positive, RED for negative, and YELLOW for neutral.
But today, it’s different. Currently all four of the breadth indicators on the NYSE are GREEN while those same indicators on the OTC market (NASDAQ) are RED. This is a very unusual situation. And until it resolves itself one way or the other, we need to exercise caution.
Last week, I talked about two possible scenarios for the Dow in the short term. With a negative Dean’s List, the odds favor the scenario that says the Dow topped on 26 December, and the subsequent waves since then have been part of Major Wave 1 down. However IF this is the case, then I have to assume that minor wave 3 of Major 1 down has been developing since 13 January. But there is a problem with this assumption. That’s because IF we are in minor wave 3 down, then the trading action should be impulsive. It should be straight down with only minor corrections along the way. And right now, this is NOT happening.
The past four days of trading could still be considered a correction to the impulsive action we saw on 13-15 January. But this sideways to up trading has to stop soon and the down trend needs to resume for this to be a wave 3.
Otherwise something else is going on. And that something else is likely the start of a new rally leg (wave ‘e’ up) that will take the Dow back above the 18,000 level.
Right now, with a mixed Tide and a negative Dean’s List, it’s still too early to tell. But IF the Tide and Dean’s List turn positive, the odds will shift to favoring the long side.
Gold was flat yesterday. GLD put in a ‘Hanging Man’ candlestick pattern that is usually seen near rally tops. It could be signaling that the wave 1 rally in gold has completed and the wave 2 Blade is starting. With yesterday’s small rally in gold, GLD is now about 5 points above its 200 day moving average. It will be interesting to watch what happens to the ETF during the next week or so to see how it trades in relation to the 200. As long as it stays above the 200 it will continue to pull the 50 higher. This is exactly what I want to see as I watch gold from the sidelines.
Another thing I’m starting to watch now is crude oil and energy. Yesterday the DMI on my old friend Halliburton turned positive. So now two of the three PT indicators are positive on the stock. The lone holdout is the MACD. Also, the Bollinger Bands have been tightening as the stock has traded in a very narrow range for the past seven weeks. And the 35-period CCI has moved up to 93.14, just shy of the Trend Mode. Hmmm?
The calendar says it’s mid-January. I LOVE to trade energy in March-April. Hmmm? Halliburton is a very beaten down stock now. Six months ago, HAL was a 74 stock. Investors couldn’t get enough of it. Now its at 40 and nobody wants it. Well maybe not everyone. It’s currently Green on the 60s. If it pops today, there is a good chance that it could enter the Trend Mode. Trending stocks tend to catch the attention of professional traders. If the stock enters the Trend Mode, I’m gonna bet a few pros will start to wade in.
Last year, HAL spend most of December and January basing near 50 before it took off on a 20 point rally. Same narrow bands, same CCI. The Big difference is that last year, HAL was in an Up Trend with its 50>200. Now its in a downtrend. However the stock is on the Member’s Watch Listalong with several othere energy favorites like SLB, SNP, SPN, and TOT, and its current downtrend has formed a TLB Patttern. So IF the PT indcators turn positive, I can start to look at it as a trade.
And IF HAL does start to rally, it could trigger an energy rally that could take the Dow above 18,000.
Watching energy.
That’s what I’m doing,
h
Market Signals for 01-22-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
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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Category: Professor's Comments