Professor’s Comments June 8, 2016

Intraday, the Dow was actually up over 83 points to 18,003, but couldn’t hold its gains into the close.  This could be a sign that the currently rally is getting tired.  Remember, the Dow should re-test the 18,184 level on what appears to be final wave ‘C’ up of Major Wave 2.  If this is the case, then we could see a lot of choppy trading ahead as the market completes its topping process.

Also, now that the Dow has touched 18,000, it’s even possible now that the markets topped yesterday.   My Wedge Pattern target for the SPX was near the 2120 level, and yesterday that index got as high as 2119.  The Wedge Pattern target for the NDX is slightly above 4600.  Yesterday the index closed at 4513.  So the patterns continue to suggest higher prices, but not that much higher. 

Remember too that the final ‘C’ wave within all of these patterns has a good chance of truncating, so none of the above targets are guaranteed.   

This is why I continue to rely on the cockpit indicators.  As long as The Tide, Dean’s List and cockpit indicators remain positive, I will continue to look for trades to the upside.  But I’m getting very cautions.

This is also one of the reasons I’m focusing on my Trigger Trades now.  Yesterday, CVX hit its upside trigger and went on to close up 2.15 points at 103.32.  The stock appears to be starting a Band Squeeze that could take it to the 108 level.   RDC, the previous day’s Trigger Trade, was up another 0.94 cents to 19.3.  In other words, it’s up over two full points in the 2-days since the trade was triggered. The 2-period RSI Wilder on RDC is now in overbought territory and its VTI is only 66.7, so the stock could see a pullback.  If you took the trade, please make sure that you are managing your money.

The thing I like about Trigger Trades in this market is the fact that they can be either long or short.  In most cases, the pattern suggests higher prices because the search algorithm looks for a positive Hockey Stick Pattern.  However, because there is a usually a pullback associated with the pattern, the pullback could also be the start of a down leg. This is why we MUST also pay attention to the downside trigger. 

In the current market, Trigger Trade stocks should be among the very first to sound the alarm that the Wave 2 rally is over.  Remember, when a market tops, not all stocks top at the same time.  Some have already topped and are starting to move off their highs.  For example, right now only 28.77 percent of the stocks on the NYSE are more than 20 percent off their highs.  At last February’s low, this number was up to 65.55 percent. When the market was topping in 2015, this number was consistently running near 20 percent.  So at 28.77 percent, we’re probably not at the top yet, but it’s likely that we’re getting close.

This is one of the reasons that I will be watching Weyerhaeuser (WY) today.  This is a stock that appears to have topped at the 32.56 level on 28 April.  Since then it pulled back to 30 in what appears to be the ‘Blade’ of a positive Hockey Stick pattern.  The only problem is that instead of starting a hard rally off its ‘Blade’, the advance was checked with a sideways move that has formed another small ‘Blade’.  This second consolidation could mean one of two things could be happening.  Either the stock is getting ready for another move up, or it could be in the process of distribution, and getting ready to start a significant move down.

Either way, it doesn’t really matter to me.  If WY starts to break above 31.62, I’ll buy it.  If it moves below 31.04, I’ll short it. The tight Bands should push the stock 2-3 points either way.  Most of my money flow indicators on WY are negative now, so I’d give it a bit more weight to the south side.

The other Trigger Trades I have for today are Barrick Gold (ABX) and Charles Schwab (SCHW).  The long trigger for ABX is 19.23, with a short below 18.  Schwab has a long trigger at 30.03 and a short below 28.93. 

Remember, all of these stocks are trades.  They all have very tight Bollinger Bands, so it’s likely that IF they move beyond their trigger point, they will be propelled higher or lower by the Band Squeeze. 

BTW, there was another small change in the A-D oscillator last night, so we need to be on the lookout for a Big Move within the next 1-2 days.  I believe the last 7 small change signals have resulted in 100+ point moves in the Dow.  So if the market starts to move, watch those trigger points.  The small change signal together with the Band Squeeze on the individual stock could result in a nice trade.

That’s what I’m doing,

h

Market Signals for

06-08-2016