Professor’s Comments January 28, 2015
Posted by OMS at January 28th, 2015
The Dow got clobbered yesterday falling about 390 points intraday and then recovering 100 of those points with a late rally to close down 291 at 17,387. Volume was low, coming in at 87 percent of its 10 day average. There were 292 new highs and 45 new lows.
Six stocks accounted for most of yesterday’s decline in the Dow.. They were Caterpillar (-13 %), Microsoft (-8%), JPM (-10%), Goldman (-9%) and AmExpress (-11%).
All six stocks had one thing in common: They all had significant international exposure, and RED PT indicators.
All were ticking time bombs. They should have been dumped weeks ago!
Yesterday was a good example of what can happen when the Big Boys get scared and decide to dump stocks. The trigger was the poor earnings announcement by CAT and MSFT, but it could have been anything.
MSFT was showing EXTREMELY weak VAPct and OBV numbers for weeks. Volume accumulation has been negative since 8 December. On Balance Volume has been mostly negative since 24 November.
Same for CAT. Its OBV Pct went negative on 10 December when the stock was still at 93. Yesterday it finished at 79.84. The P-volume that you use as your gas gage has been in a steady decline since late November.
This is why I have been talking about and showing you charts of the Dow with its volume numbers for the past few weeks. The volume numbers remain horrible!
In the webinar I will be doing for AIQ Systems tomorrow afternoon, I will be talking more about stocks with significant international exposure and the danger they represent to your portfolio at this time. If you don’t understand this risk, you might want to register for the webinar.
But where there is risk, there is usually also opportunity. And right now, after yesterday’s decline, that opportunity is starting to look like it will be mostly be to the down side.
But has that time arrived? I think not.
The reason I say this is because even though the Dow tanked yesterday, The Tide remains positive. Strange as it may seem, a lot of stocks rose yesterday!
There were 1381 advancing issues on the NYSE vs.1763 decliners. This ratio is still way too high for a broad market decline to start. And as I showed above, the number of new highs swamped the new lows. The numbers were nowhere near enough to turn any of the breadth indicators on The Tide negative.
And without a negative Tide, I still can’t get too negative. Besides, yesterdays damage was pretty much limited to the Dow. Yeah, the NASDAQ dropped 90 points, but in the past month, about half the days have seen moves over 50 points. With a CCI of only –22.01, the NASDAQ is nowhere close to entering the Trend Mode. And with yesterday’s 2-period RSI Wilder falling below 30, the odds are high for a significant bounce today.
Yesterday’s plunge in the Dow dropped the CCI to -75, so it too is not in the Trend Mode. It’s 2-period RSI Wilder is also oversold at 11.12, so the odds for a bounce are high. But not as high as the NAASDAQ. Yesterday’s decline did a lot of technical damage to the Dow. By falling to 17,288 intraday, the Dow tested the 1Trend Line lows for the 4th time. Yeah it held this time, but usually after 3 retests, the odds start to increase that these levels will eventually be broken.
I mention the importance of the CCI again today because I want you to note the difference between trending and non-trending stocks in this market. Yesterday, a stock like Halliburton, HAL, which is in an Uptrend with a CCI at +172, actually rose 0.04 cents.
The stock continues to show strong Volume Accumulation numbers, together with positive PT indicators and tight Bands. If the market rebounds today, look for energy stocks like HAL to lead the way higher.
Remember, a day like yesterday scared the pants off a lot of the ‘slower’ money managers. They were complacent before yesterday’s sell off, and were willing to hold a few dogs with negative indicators. Today these ‘managers’ are receiving lots of calls from their unhappy clients asking them why they are still holding Microsoft, Caterpillar, and the Big International Banks. So don’t be surprised when you start to see a lot of money moving out of these dogs and into stocks with positive indicators. The lazy money managers finally got the message.
Anyhow, from an overall pattern perspective, we’re still in No Mans Land. Last night I was watching one of my all time favorite movies, ‘Run Silent, Run Deep’. And as Clark Gable approached the Bungo Straights, I thought about the hazards in the current market. For me the Bungo Straights are now between 17,260 and 17,923.
As long as The Tide remains positive, I’m positive and trading mostly energy stocks. But IF the Tide changes, I’m outahere. I don’t want to get torpedoed.
That’s what I’m doing,
h
Market Signals for 01-28-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | POS |
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