Professor’s Comments June 23, 2015
Posted by OMS at June 23rd, 2015
The Dow rose 104 points yesterday, gaining back most of the 100 points it lost on Friday. While the Dow closed at 18,120, the internals were not that strong. Volume was moderate, coming in at 94 percent of its 10-day average. There were 171 new highs and 48 new lows.
It appears that final wave ‘c’ of the a-b-c wave to a top has started. The pattern suggests that wave ‘c’ of ‘e’ up should complete somewhere above the 18,350+ level. But don’t count on it.
There are two reasons for this. The first is that the final wave of an Ending Diagonal Pattern has a nasty habit of truncating. It doesn’t have to reach 18,350+.
The second is that even though yesterday’s rally was over 100 points, the Money Flow indicators on both the Dow and NASDAQ actually fell. This is something that is very strange to see on day when the Dow rallies for 100 points.
The Coach(DIA) actually turned negative. This tells me that money is now starting to leave the large cap international stocks.
At this point, the cockpit indicators remain mixed. The Dean’s List is positive, but the Tide remains neutral. The lone breadth indicator that is keeping The Tide neutral is the Up-Down oscillator. It’s still very negative at -30.53 and it appears that it will have a difficulty time turning positive even if the Dow does rally to 18, 350+. In other words, it’s very likely that we will have a neutral Tide going into the top.
One of the things I did last night was run the Professor algorithm. I wanted to see what he said about the final run up. Remember, just after wave ‘b’ of the a-b-c pattern bottomed on 15 June at 17,698, the Professor highlighted 50 stocks as longs one day and 49 the next. It was a pretty good indication that the final rally wave was starting. But last night, after the 100 point rally, the Professor only had a handful of longs. Actually, the number of shorts listed outnumbered the longs by one. Again, very strange on a day when the Dow gained 100 points.
So I continue to wait. There are several things on the table now that could have a significant impact on the markets. And while the world continues to be focused on Greece, the biggest domestic issue has to do with the Supreme Court decision on the Obamacare subsidies. The ruling could be announced at 10am today. If the Court decides against the subsidies, it will be extremely negative for health care insurance stocks. So be careful if you own these issues.
One reason I say this is because even though most of the insurers have been making new highs recently, their Money Flow indicators are negative. Take a quick look at the Money Flow on Aetna (AET), Cigna (CI), and United Healthcare (UNH). Yesterday, even though Aetna rose almost 4 points to 128, money has been pouring out of the stock for the past 5 days. This tells me that even though things appear to be rosy on the surface, some folks are very concerned about what the Court might decide. Again, be careful. Those recent highs could very easily turn into a THT Pattern if the DMI turns negative.
I’m still watching a few gold and silver stocks, like GDX and SLW for a scalp trade on the 15s. Yesterday both stocks had patterns with narrow Bollinger Bands that suggested a potential Big Move. But watching these stocks has been like watching grass grow. Something tells me that not much is gonna happen with the metals until the equity market starts to roll over. But that’s OK. August is usually a very good month for the metals, and it’s only about 5 weeks away. I’m patient.
That’s what I’m doing,
h
Market Signals for 06-23-2015 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
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
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