Professor’s Comments July 12, 2013

Posted by professor  at July 12th, 2013

The Dow rallied 169 points, closing at 15,460.  The rally was the Big Move predicted by the small change in the A-D oscillator.  Volume was on the heavy side, coming in at 118 of its 10 day average.  There were 371 new highs and only 11 new lows.

By moving above my target for wave 2 of ‘b’, it appears that wave ‘c’ up, the final wave in Major Wave E up, is underway.  The wave ‘c’ rally should last several months and take the major indices to new all time highs.  However there will be pullbacks along the way, and these pullbacks should give us several opportunities to use Rifle Trades to enter long positions.  Not now.

Right now, the markets are EXTREMELY overbought  Last night the A-D oscillator came in with a reading of 217.32.  The markets usually have a tough time of it after an A-D oscillator reading over 200.  So I would expect limited upside or some type of small correction for the next day or so.  If wave 1 of ‘c’ up is nearing completion, the next few days should be very telling.  That’s because once the current impulse wave completes, a small triangle should form on the short term bars.  If this happens, then it would be further confirmation that wave 1 of ‘c’ up is underway.

Another reason to watch the development of wave 1 up is because we need to see it complete so we can start making projections for where wave ‘c’ up will likely finish.  For the past few months, I have been saying wave ‘c’ up should complete just under the 17,000 level, with 16,880 being my actual target.  This target was based on wave ‘b’ completing near the 14,500 level.  And as things turned out, it appears that wave ‘b’ ended at 14,551.

However as wave ‘c’ starts to unfold, with wave 1 and 2 forming their Stick and Blade Pattern, we should be able to make better predictions to either confirm or change the level where wave ‘c’ up should end. 

I received several emails yesterday about FXP and EEV.  So I posted a comment that said I was holding my Basic Position until ALL of the PT indicators turned negative. This is what I do with my Basic Position once it has been established.  Most of my Basic Position in FXP was established on 29 May near 20 when the PT indicators turned Green after the ETF completed what appeared to be a small Hockey Stick, that followed a TLB Pattern.  

Once the PT indicators turned positive, the ETF ran up to 26.71 on 24 June at which point I mentioned that I was managing my money.  I did this because I know that stocks do not go straight up; they go up in waves.  And because of this, I felt that the move from 20 to 27 was likely only the start of the move, probably a wave 1 up.  To support a move higher, FXP needed to pullback.  I talked about how it needed to form a wave 2 ‘Bade’.  And further, I discussed the how the Blade would likely need two lower lows.

I believe that yesterday’s pullback was part or all of the second low.  We’ll see.

FXP is still in an Uptrend, with PT indicators that have NOT turned completely negative.  Yesterday’s pullback stopped right between support of the two moving averages.  So the moving averages are doing just what they’re supposed to do in a wave 2 pullback….provide support for the ETF!  Hmmm?

Last night, China’s finance minister said that he expects China’s growth rate to be about 7 percent.  His comments raised a few eyebrows, because it was the first mention of growth below the official government forcast of 7.5 percent.  Seven percent would be the lowest growth rate China has seen in 23 years!  Wouldn’t it be nice if the U.S. had a slowing growth rate of 7 percent? Apparently U.S consumers are starting to slow their purchases at Walmart. The Chinese minister’s comments caused the Hang Seng to fall 160 points overnight.  But the thing to watch will be what happens next Monday when the Chinese government releases its ‘official’ GDP data.   All eyes will be watching that number.  There are some analysts who believe China’s growth rate could drop below 7 percent, and if it does, FXP could be a very nice place to be.

So in summary, FXP is still in an Uptrend with its 50 above the 200.  Two of the 3 PT indicators are negative, but the MACD is still positive.  The ETF has fallen to support at the moving averages, in what appears to be a two wave, wave 2 pullback.  The most likely place for a wave 2 pullback to end is at the moving averages.  And there is  potential for negative news.

If China starts to slow, it will also impact EEV, the other foreign inverse ETF I’m holding which has a similar pattern.

Watching,

That’s what I’m doing.

h

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