Professor’s Comments March 1, 2016
Posted by OMS at March 1st, 2016
The Dow fell 123 points, closing at 16,517. Volume was moderate, coming in at 97 percent of its 10-day average. There were 41 new highs and 26 new lows.
It appears that yesterday’s decline was a small retracement wave within the third leg of the Ending Diagonal pattern for wave ‘c’ up. If this is the case, the markets should resume their rise today taking the Dow up near the 17,000 level. The SPX should approach 2,000.
Once this rally leg is complete, there should be a small pullback for wave 4 and then a final rally wave to complete the pattern. From the looks of things, the Ending Diagonal pattern should complete within the next 1-2 weeks.
The DMI on the Dow turned negative yesterday joining the DMI on the QQQ in negative territory. Whenever there is a DMI turn on the Dow (DIA), I run The Professor algorithm to see if a new down trend is starting. If the Professor highlights more than 30 stocks as shorts, I start looking for the start of a new down trend.
However, the Professor only had 5 stocks highlighted as shorts last night. This tells me that the odds are high that yesterday’s decline was only a corrective pullback within the Ending Diagonal pattern and NOT the start of a new down trend.
So once this minor pullback is complete, the Dow should start its next rally leg higher, probably today.
One thing I did note about yesterday’s decline was that the Money Flow indicators have started to weaken. This was expected. Last week I mentioned that one of the first signs that the current rally was coming to an end would be a weakening of the Money Flow indicators.
Right now the two Money Flow indicator on the cockpit are almost neutral. I would expect them to stay positive for the next week or so as the market rallies toward 17,000 on the Dow. But keep your eye on them. If they start to turn RED, it will be time to manage money.
Remember, the current pattern for the Dow and S&P is a terminal Ending Diagonal. The target for this pattern is where it began or in the case of the Dow, near the 15,500 level. But because the next wave down will likely be Major Wave 3 down, the odds of dropping below well below 15,500 are high.
So even though I’m still trading (scalping) the long side for now, please pay attention to the Money Flow indicators in the days ahead.
That’s what I’m doing,
h
Market Signals for
03-01-2016
DMI (DIA) | NEG |
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
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