Professor’s Comments July 29, 2015
Posted by OMS at July 29th, 2015
The Dow rallied for 190 points to close at 17,630. Volume was heavy, coming in at 115 percent of its 10-day average. There were 36 new highs and 197 new lows.
Yesterday’s rally from oversold conditions occurred pretty much on schedule. So now the Dow is about half way from where I’m expecting it to complete, probably closer to 17,750, +/ a few points.
The reason I’m using 17,750 as my retracement target is because this is exactly where the 200-day moving average was located yesterday. It is also very close to the interim high between the first two lows of a TLB pattern.
Nothing changed with the cockpit indicators yesterday. The Tide, Dean’s List, and Coaches remain negative. So all I’m doing now is being patient.
If the Dow starts to move above the 17,700 level now, I will start looking for opportunities to put on a few short positions.
I will likely start the process by buying a few shares of an inverse index ETF, like DXD or QID, and then ladder on additional positions IF the Dow continues to move higher. Ideally, I would like to buy DXD with the Dow in the 17,800-18,000 range, but with the Dow looking like it is about to start a wave 3 of 3 down, I can’t count on it retracing back to those levels. So I’ll start buying a few shares on any move above 17,700.
Also, once I buy the shares, I will hold them. I am no longer in the scalp-trading mode. Now that the Dow has broken through its key support level of 17,465, the odds are high that the next major move will be below 16,500.
Wow! 16,500??? Is this really going to happen? Hmmm? That’s over 1,000 Dow points from current levels. Just remember, The Professor algorithm had that string of shorts last week that highlighted over 50 stocks as shorts on Friday. In the past, whenever The Professor highlighted 50 or more stocks as longs, it usually led to a rally of over 700-800 Dow points. So a 1,000+ point decline after highlighted all those shorts would not be that much of a surprise.
Remember too that the Dow has now broken below the lower boundary of a Major Ending Diagonal Termination Pattern. The target for an Ending Diagonal is always where it began, which in this case is the 15 October 2014 low of 15,855.
So IF Major Wave 1 down of this new Bear Market is starting, it should complete somewhere under 16,000. And IF this is the case, then wave 3 of 3 down within Major Wave 1 down should end close to the 16,500 level.
This is why I’m looking to position myself for a potential wave 3 decline. I’m just playing the odds.
That’s what I’m doing,
h
Market Signals for 07-29-2015 |
|
---|---|
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