Professor’s Comments July 1, 2015
Posted by OMS at July 1st, 2015
The Dow rose 23 points, closing at 17,620. Volume was heavy, coming in at 111 percent of its 10-day average. There were 24 new highs and 248 new lows.
Not much changed with yesterday’s trading. The Dow bounced at the open as expected, but couldn’t hold its early gains. If yesterday’s rally and pullback was part of an a-b-c move to correct Monday’s 350 point decline, then we still should have one more rally leg up to complete the correction before the next major down leg begins.
The Dow has declined 613 points since the 23 June top of 18,189. So IF it retraces 50 percent of those points, it should trade back up to the 17,882 level, which is 262 points from yesterday’s close.
One of the reasons that I believe the markets will rally now is because of the VIX. On Monday, the VIX closed above its upper Bollinger Band which is the set-up for a VIX Buy Signal. Yesterday, the VIX stayed above its upper Band. So if the market starts to rally today, it’s likely that the VIX will close below the upper Band generating the Buy Signal.
IF the market rallies back up to 17,882, as long as The Tide and the Money Flow indicators remain negative, this is where I will start looking to establish a few short positions using inverse index ETFs from the Dean’s List. Just remember that the current rally…if it occurs, is likely a corrective wave 2. I have to assume this because the Dow made a negative ‘Rope Jump’ on Monday’s decline which suggests the move down was wave 1 down of a five wave sequence.
So IF the Dow starts to rally now, it can rally all the wave back up to the 23 June high of 18,189 and still be a wave 2. This is why I need to exercise caution about where I start putting on my shorts. It’s why I will be paying a lot of attention to the cockpit indicators and my Lists in the days ahead. As long as the indicators remain negative, I will look to short the market from the higher levels I mentioned above. But If the cockpit turns positive, I will stop shorting and wait for the indicators to turn negative again.
I’m still looking at gold, but it’s been like watching grass grow. Both the money flow indicator and P-volume on GLD remain positive, and the pattern suggests higher prices. But it’s hard to tell where the 3-3-5 pattern will complete. It could end any day now or it could take a few more weeks. But it appears that the metals will not start their major wave 5 rally until the equity market starts to break down. Just be patient.
That’s what I’m doing,
h
Market Signals for 07-01-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
SUM IND | NEG |
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