Professor’s Comments July 17, 2013

Posted by professor  at July 17th, 2013

The Dow fell 32 points, closing at 15,451  After noting three days of EXTREME overbought conditions from the A-D oscillator, the pullback was expected.  Volume was slightly heavier than normal, coming in at 106 of its 10 day average.  There were 184 new highs and 32 new lows.

Fed Chairman Bernanke will be on Capitol Hill later this morning talking about his plan for further stimulus.  And as we have seen recently, the markets are so on edge, that anytime he speaks now, it could impact the markets.  However this time, his prepared comments will be released to the public at 8:30am, so the markets might move even before he speaks.  We’ll see.

As I write this , European markets are off to a negative start pulling the Dow futures down about 30 points.  We didn’t get the Big Move from the small change in the A-D oscillator yesterday, so the signal is still on the board for today’s trading.

The Dean’s List remains long and positive, but somewhat weak as many of the ETFs on the List are supporting relatively low RS numbers.  DIA, SPY, and QQQ are all on the List, with RS rankings of 1.  I mention this today because over half the List contains ETFs ranked 1 and 0.  So IF we had a strong down day today, it could cause several of the ETFs to drop off the List, shorten it considerably, and cloud the intermediate term picture.

Remember, all I’m doing now with the US markets is mostly watching.  That’s because the P-volume on the Dow is still negative.  The P-volume on the QQQ and SPY is positive, so IF the market pulls back again today, I can start looking for Rifle Trades on these markets.  But I have to tell you that it’s particularly troublesome to for me to see that the Dow is not performing similarly.  With interest rated so low, and the final  ‘c’ wave rally appearing to be getting started, if all things were equal, I would expect to see investors flocking to the higher yielding dividend paying stocks on the Dow.  But they’re not.  They have been pumping money into the small cap stocks of the Russell 2000, which currently leads the Dean’s List.  . 

This is something I started to see just before the crash of 2001 and 2007-2008, as stocks approached a major top.  Investors abandoned the relative ‘safe’ dividend payers and started to seek high growth go-go issues.  Hmmm?  Could it be starting to happen again?

Right now, the Russell 2000, RUT, is overbought.  It’s another reason I’m just watching.

Anyhow, for now I’m not too worried about the markets starting a significant decline from these levels, especially with Bernanke saying that he still wants an accommodative monetary policy.  But you must realize that at this point, the Fed’s punchbowl is the only thing keeping the current party in stocks going. Yesterday’s earnings announcement with Coke and Goldman were off the mark, and put a damper on the start of this weeks earnings season.  If the punchbowl is removed, the party could be over very quickly.and it would be time to turn off the lights.

This is one of the reasons why I would REALLY like to see the P-volume to improve.

I’m still holding FXP, mostly because I don’t have a signal to switch into FXI yet.  I’m also watching TBT on the 60s now   Yesterday the 2-period RSI Wilder fell to 10.83, making it a candidate for a Rifle Trade. 

I also note that several gold and silver issues are starting to appear on the Dean’s List.  Most of the miners have nice TLB Patterns, so IF the PT indicators start to turn positive, they will become candidates for trades.  No falling in love here, no betting the farm……just trades.  There is still a chance that gold has not bottomed and may require one more leg down.  Until I see gold ‘Jump the Ropes’ and move  its 50 above the 200, it will remain a trade.

Watching and waiting the 60s on TBT.

That’s what I’m doing,

h

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