Professor’s Comments June 19, 2015
Posted by OMS at June 19th, 2015
The Dow had a strong rally yesterday, closing up 180 points at 18,116. Volume was high, coming in at 113 percent of its 10-day average. There were 124 new highs and 52 new lows.
Although the timing of yesterday’s rally was somewhat of a surprise, it was expected. Anytime The Professor algorithm highlights 50 or more stocks as longs, it tells me that the market is heading higher. And last night, The Professor highlighted another 49 stocks as longs, so it appears that the Dow is on its way to retest the 18,350+ level.
The only issue I have now is how it gets there. The current wave ‘c’ up is likely the final wave in the a-b-c pattern for ‘e’ up. And because the overall pattern is corrective, we need to look at the structure of the pattern for clues.
The Principle of Alternation says that when the ‘a’ wave of a corrective pattern is complex, the ‘c’ wave should be simple. It also says that if the ‘a’ wave is long in time, the ‘c’ wave should be shorter. So if this principle is in effect for corrective wave ‘c’, it should be pretty much straight up and last into the end of June.
This is also what The Professor algorithm is telling me by highlighting 50 and 49 stocks during the past two days. A rally is also supported by a positive Tide and Dean’s List.
Yesterday was another strong day for most Honor Roll stocks. And now that the Summation Index has turned positive, I would expect these stocks to continue to rally as the market moves higher. The only thing I’m concerned about now is the level where the Dow will eventually top.
Ok, the Dow closed at 18,116. The pattern suggests the top will be slightly above 18,350, probably closer to 18,400. So for the purpose of this discussion, there are about 300 points of upside potential iremaining n the pattern. Possibly a bit more if wave ‘c’ completes in a ‘spike’ rally.
On the other hand, the Greek debt crisis is still not resolved. Reuters is reporting that an emergency meeting has been scheduled for Monday morning. Apparently, a deal needs to be made several days before the 30 June deadline so funds can be transferred. It also appears that Greek savers are pulling money out of their banks at lightning speed now, and there are reports that Greek banks may not open on Monday. If this happened, it will set the stage for a mini-crisis with the banks…not only in Greece, but in most of southern Europe. So even though the Dow is currently in a rally mode, that rally might be short lived. A potential ‘Black Swan’ event triggered by a banking crisis always trumps the potential gain of a pattern. And given that the Ending Diagonal Pattern is a termination pattern, a ‘Black Swan’ event could be the trigger for a breakdown of that pattern. So be careful!
Yesterday I heard a lot of ‘commentators’ on CNBC talking about how insolated and well protected the major U.S. banks are from any European banking crisis this time around. Hmmm? I wonder. I also wonder why if the banks are so well protected, why are so many ‘bankers’ coming on TV to reassure their investors? It seems to me that whenever this starts to happen, there is usually trouble ahead.
So when I look at the potential 300+ Dow points that are in the current pattern from a risk perspective, they don’t seem so large. And that’s why I will only be scalp trading today. I don’t want to be holding a lot of stock going into this weekend.
My gold ‘trial’ stocks are the exception. Yesterday, most of my gold and silver stocks had another nice day. CDE, a small gold stock highlighted by Emeritus popped 0.40 cents yesterday. Not bad for a $6 stock! The DMI on GLD turned positive after popping 1.47 points to close at 115.32. A few days ago, I said GLD would likely move about 4 points higher to 117. It appears that the move is right on track.
Now the thing to keep in mind about GLD now is NOT those additional 2 points. That’s not important. The thing that is very important now is for GLD to perform a ‘Rope Jump’. On this move, it needs to move above the 200. If it does, it should re-appear on the Dean’s List along with several gold related ETFs. And this needs to happen soon. If gold is starting Major Wave 5 up, most of the mining stocks that I’m either holding or interested in should start to move higher now. Not only as a reaction to the Greek crisis, but in response to a very important Bullish pattern.
So continue to watch for gold stocks and ETFs to re-appear on the Dean’s List. If they do, I’m a buyer.
BTW, you might want to watch Silver Wheaton, SLW, too. It popped 0.20 yesterday to 18.93. The Money Flow indicator has turned positive and the Bands are narrowing on the Daily Chart. Same for PAAS, which has even stronger MF indicators. I bought a few shares of SLW yesterday as a trade looking for a ‘Rope Jump’ above the 20 level.
That’s what I’m doing,
h
Market Signals for 06-19-2015 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
SUM IND | POS |
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