Professor’s Comments June 18, 2015
Posted by OMS at June 18th, 2015
The Dow rose 31 points, closing at 17,936. Volume was moderate, coming in at 106 percent of its 10-day average. There were 93 new highs and 80 new lows.
Before reading further, you might want to take another look at the high number of new highs and new lows that occurred yesterday. This is very unusual and it’s NOT a healthy sign for the market going forward. It’s the kind of activity that often occurs in the weeks ahead of a market crash.
Yesterday, the Fed announced that there will be no change in interest rates, leaving them near zero. Apparently they also noticed that the GDP for the first quarter of the year was below zero. And without real, sustainable growth, a rise in interest rates now would likely trigger a market crash! So the Fed is now between a rock and a hard place. They desperately want to raise rates so they can have a few reserve bullets for later, if the economy goes into recession. But with negative first quarter GDP growth rates, they can’t. So in effect, the Fed is out of short term bullets. The only tool they have left now is another QE type program, and we all know how the past few have worked to stimulate the economy.
Anyhow…
It appears that yesterday’s small rise was part of wave ‘c’ of final wave ‘e’ up. If the Dow does rally to the 18,350+ level like I expect, it won’t be straight up. There will be corrections along the way.
One thing I noticed yesterday was the movement of money into dividend paying utility stocks. This is not a healthy sign for the market for the short-term. It means that investors are quietly starting to move money out of growth stocks and becoming more defensive. It’s just another sign that a major top is approaching.
Here’ the thing. After yesterday’s small rally, the Dow is getting close to 18,000 again. If the market trades sideways or pulls back during the next few days, it increases the odds for a move toward 18,350+. Like I said, I believe this is what will happen. But you need to ask yourself if sticking around for those few hundred Dow points will be worth it. The current financial assistance program to Greece expires on 30 June, when a payment of 1.55 billion euros to the IMF is due. If an extension on the debt is not worked out between now and then, Greece will default. It could create a major crisis in world financial markets. I’m not that worried about the amount of the Greek default as much as I am about the defaulyt itself. It would immediately raise questions on the amount and quality of debt being held by European bankers with respect to Italy, Spain, and about three other European countries who have similar issues. Questions like this almost always lead to downgrades in both the lenders and holders of European Bonds.
As I have said many times on these pages, the markets are in the final stages of Major Ending Diagonal Patterns. And while the odds are still relatively high that they will chop higher for a bit longer, you should know that they do NOT have to. If we get some type of ‘Black Swan’ event now, the odds are EXTREMELY high that the market will truncate and start the next impulse wave down. So, please think about how you plan to manage your money in the weeks ahead.
For me, I’ve already decided. I plan to continue to scalp trade like I did yesterday. I didn’t check how all seven of the stocks highlighted by Emeritus for the Honor Roll finished yesterday, but the last time I checked, all were doing nicely. If you traded a few on the shorter term bars, you probably had a nice day.
Northrop Corp, NOC, opened at 159.04 and closed at 161.49. The stock has a nice Hockey Stick Pattern with tight Bands. It also has strong Money Flow indicators. It’s the kind of stock that I am looking to scalp on the 15s or 30s into the top. The thing that makes it attractive to me is the tight Bollinger Bands. Right now, I’m not only looking for tight Bands on the Daily’s, I’m looking for them on the shorter term bars as well.
This is what I was doing yesterday with gold. Going into yesterday, GDX, the gold ETF I have been watching for the past few days, opened lower and then traded sideways into the Fed announcement. But once the announcement was released, the stock started to move higher and once all of the PT and MF indicators turned positive, it was off to the races. The CCI went into the trend mode and the stock never had a down bar on the 15s for the rest of the day.
Remember, I’m paying a lot of attention to gold now. If I’m right, the next move for GDX (and several other gold stocks and ETFs) should be a ‘Rope Jump’. For GDX, that’s about another 2 points higher.
Last night, Emeritus only highlighted 2 stocks for the Honor Roll. But one of them was Coeur d’Alene Mining, CDE. I’m not a big fan of CDE as a mining company, but it has a very nice pattern with narrow bands. It’s not the sort of gold stock that I want to fall in love with, but she might be an interesting date.
BTW, IF we do have some type of Black Swan event during the next few weeks, I want to be holding a few gold stocks. So even though I’m mostly scalping gold now, I’m not afraid to have a few shares in my vault…just in case. And even if a ‘Black Swan’ event doesn’t occur, I still like gold, silver, and mining stocks at these levels. If Major Wave 4 down in gold has completed and Major Wave 5 up is just starting, you’re gonna be glad that you have some gold later this year.
Watching the 15s.
That’s what I’m doing,
h
Market Signals for 06-18-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEU |
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
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.
Category: Professor's Comments