Professor’s Comments July 9, 2013
Posted by professor at July 9th, 2013
The Dow rose 88 points, closing at 15,224. Volume was slightly less then normal, coming in at 94 percent of its 10 day average. There were 279 new highs and 47 new lows.
At this point It appears that two possible scenarios could be developing. The first is that wave 2 up of wave (c) down is nearing completion. If this is the case, the current rally should complete below the 15,340 level on the Dow and wave 3 down should begin.
If 15,340 is broken, then there is a high probability that wave ‘b’ down completed at the 14,551 level, and that wave ‘c’ up of wave E up is underway.
The Dean’s List remains positive which favors additional upside. However, at this point, the PT indicators are still mixed. The DMI on the Dow is positive, but the MACD and P-volume are still negative. All of the PT indicators on the Nasdaq (QQQ) are still negative.
As I mentioned a few weeks ago, this is one of the problems trading corrective b waves. Until the all of the signals and indicators line up one way or the other, you never really know where you are in the pattern. And because the Dow is still over 100 points below the 15,340 level, odds are that we still won’t know if wave ‘c’ up has started for a few more days. That’s one of the reasons I said in my WSR that I wanted to see how the market traded early this week before taking any action with the indexes. BTW, I’m not in any hurry to commit to the markets at this point. If wave ‘c’ up has started, there will be plenty of time to get aboard that train as it moves toward a possible 16,900. The ride won’t be straight up; there will be pullbacks. On the other hand, IF wave ‘b’ has not completed, I don’t want to be holding a lot of stock, because the ride down could be very nasty.
So with mixed signals coming from the Dean and our indicators, I plan to remain on the sidelines.
The only things I’m trading at this point are EEV and FXP, which remain near the top of the Dean’s List. The two crude oil stocks I mentioned about two weeks ago, OIL and USO, have now moved into the top spots on the Dean’s List as tensions have increased in the Middle East, particularly with respect to the Suez Canal. The thing that is interesting about OIL is that it has finally moved into an uptrend, with its 50 now above the 200. Like I said in my past comments, I don’t expect crude to go to the moon on this move, however now that it has moved into an uptrend, it will start to set-up Rifle Trades on the 60s on pullbacks as long as it stays Green on the Daily’s.
Rising crude prices should be watched for another reason too. They will not be good for the equity markets. While the US does not get a lot of crude from the Mid-East these days, only about 10-12 percent, Europe and China do. We already know about how vulnerable the Chinese economy is to a pullback. It’s one of the reasons we’re trading FXP. But rising oil prices are now starting to impact the European stock markets. Right now the German Dax is currently trading near 8,000. If it starts to move below 7,700, the pattern suggests it could go into free fall. Same for the London FTSE, currently trading near 6,500. The levels to watch here are 6,200 and then 6,000. If these levels are broken, they WILL put significant pressure on US markets. So we need to keep an eye on what’s going on in Egypt and Europe for the next few weeks. The support levels I mentioned are very important to the direction of equities worldwide, and right now they appear to be entirely related to oil.
Mostly watching from the sidelines,
That’s what I’m doing,
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