Professor’s Comments July 17, 2013

Posted by professor  at July 18th, 2013

The Dow rose 18 points, closing at 15,470. Volume was heavier than normal, coming in at 110 percent of its 10 day average. There were 184 new highs and 20 new lows.

Since 11 July, when the Dow popped 169 points on Benanke’s comments about providing an accommodative monetary policy, the Dow has traded in a very narrow range. It closed at 15,460 on the day of his comments, and is at 15,470 five trading days later. There is an old adage on Wall Street that says “Never short a quiet market”.

One of the reasons this adage works is because ‘quiet markets’ are usually temporary pauses in an Uptrend. And if you look closely at a 60 min chart of the Dow, you will see that a small wave 4 triangle appears to be forming. The choppy trading action we’ve seen since 11 July appears to need one more small downleg to complete the triangle. And if a triangle is developing and IF we get a down day today, it could present us with a few opportunities for Rifle Trades on the next leg up.

The A-D oscillator is still a bit overbought at 142.6. I would really like to see it fall below 100 during the next day or so. If it does, it should provide a spring board to complete the final leg of wave 1 up of ‘c ’up. Once the rally starts, it should last about a week or so before wave 2 down starts to correct wave 1. But remember, this is for the general market. All stocks are NOT in a wave 1. The leaders are in more advanced wave 3s at this point and could continue to push higher.

Going into today, the 2-period RSI Wilder on the DIA is at 66.54. If it falls closer to 30, I will be looking for a Rifle Trade in DIA or DDM on the 60s. As I’m watching for this trade to develop, I will also be looking at few stocks on the Member’s Watch List. Again, what I want to see is a stock in an Uptrend with positive PT indicators that has pulled back enough to become oversold. Remember, I always like to buy my stocks ‘On Sale’.

A few MWL stocks that are in Uptrends with positive PT indicators are TSO, TGP, PLAB and PRGO. Also, keep an eye on Vertex Pharma, VRTX. Since early April when it popped over 30 points after being identified by Emeritus (several times) and placed on the Honor Roll, the stock has traded sideways between the low 70s and mid 80s. This pop and sideways trading period has kept many traders away. But don’t be fooled. After jumping 30 points, it’s amazing to me that the stock hasn’t pulled back! This is a strong stock. But what’s been fun about it is that every time for the past two months when the 2-period RSI Wilder has become oversold, the stock has gained from 1-4 points within the next two days. Right now the 2-period RSI Wilder is sitting at 41.91, not quite oversold. IF it drops to near 30, I’m going to pick up a few shares. That 3 month long corrective ‘Blade’ is too much for me to ignore, after a 30 point ‘Stick’. And as long as the indicators remain positive and it stays on the List, there is a good chance that VRTX will be one of the leaders of the wave ’c’ rally. You also might want to note that PBE, the Biotech ETF, is currently ranked near the top of the Dean’s List. Hmmm?

TBT, the inverse 20+ year Treasury ETF is a good example of what I’m looking for. For the past 5 days, TBT has been pulling back , correcting its rocket move since 10 May. The ETF remains on the Dean’s List, is in an Uptend with positive indicators and the pullback has knocked 4 points off the price. The 2-period RSI Wilder is way oversold at 7.65. In other words, it’s ‘On Sale’. So do I run out and buy it? No. Only when the 50s give say so.

Speaking of ‘say so’, I still don’t have any from FXI. The MACD remains negative on the positive side of that ETF pair, so I’m still holding my Basic Position in FXP. And even though all of the indicators are negative on FXP, I just can’t trade them in for FXI at this time without seeing positive indicators. Also the chart of FXI is flat out butt ugly, which is another reason why I’m looking for FXP to hold moving average support and rally from these levels. Watching closely.

Looking for Rifle Trades,.

That’s what I’m doing,

h

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.