Professor’s Comments March 13, 2014

Posted by OMS  at March 13th, 2014

The Dow fell over 90 points early Wednesday, and then recovered all but 11 of them to finish at 16,399.  It was the type of trading action that is usually associated with a short term bottom.  Volume was on the low side, coming in at  85 percent of its 10 day average.  There were 55 new highs and 43 new lows.

Yesterday’s low volume decline, taken with the small choppy declines of the past few days appear to be a corrective ‘b’ wave within final wave “c” up.  It was the first real clue that the market has given us about market direction in the past two weeks.  Now we have a small Hockey Stick Pattern in place that should enable the Dow to re-test the 16,588 level.  What happens after that is still unknown at this point.  That’s because we still don’t have a signal from The Professor that the market is starting to trend.  And for this market to push beyond 16,588, it will likely need the strength of a healthy trend.

The Dean’s List and cockpit indicators have remained positive during the recent pullback, which also supports the case for higher prices now that a HS Pattern in place.

Energy and Banks appear to be the strongest sectors after the pullback, so this is where I plan to focus my trades during the next week or so.  With a potential top only 288 points away, I don’t want to have a lot of stock spread out in weak sectors as some of the sectors are starting to look like they are rolling over.

Yesterday I mentioned how the 2-period RSI on Halliburton (HAL) was oversold.  Its early morning decline down to the 54.58 level gave us a nice opportunity to pick up a few shares.  The stock closed at 55.39.

I received a question from a new student last night about HAL and its oversold contrition.  Here’s the deal:  I’m ALWAYS interested in adding shares of a stock that is ‘on-sale’, in a well defined Uptrend, with a nice HS Pattern, and Green indicators.  I’m especially interested in the stock when it is energy related and the calendar says March or April. As long as the Dean’s List remains positive, and the two scenarios I have on the board point to higher prices, I will remain interested.  But I’m not going to bet the farm either.

As this market pushes higher, I’m getting more and more choosy about the stocks I want to own.

I noted that the PT indicators on TMF turned positive yesterday.  I’m still not convinced that Bonds are ready to roll at this point, but by turning positive, it might help lift the price above the moving averages.  I’ll become much more interested in Bonds once I see the ETF enter an uptrend.

BTW, you might watch TMF during the next few weeks to see how it trades as the overall market pushes higher as I expect.  If TMF does start to move into an uptrend, it will be another sign that money from equities is starting to flow into Bonds.  When this happens, it will likely mean that a top in the equity market is at hand.

My Healthcare REIT, OHI, reached a ‘talking about it top’ yesterday. By hitting 33.35, it reached the highest level since I first mentioned it back in early February.  Now don’t get me wrong, when I first mentioned OHI, I said that you’re NOT going to get rich trading this REIT, You’re not!  It’s like watching grass grow! But for that part of my portfolio where I’m looking for a high yield, and some capital appreciation, its doing its job.  OHI also gives me a toe in the water of the Healthcare Sector, as I look for a candidate to ride in the days ahead.  Right now I don’t own any healthcare or pharma stocks.  However IF the Professor gives me his all clear signal, it’s likely that I will be picking something up from the Member’s Watch List..

Lastly, I just want to mention EEV.  The ETF has been busy doing its Blade building work for the past few weeks.  Yesterday the stock popped at the open, but there wasn’t enough volume behind the move and it quickly pulled back..  What has my attention now on EEV are those tight Bands.  What I want to see EEV do now is start to move above its moving averages, lifting the 50 above the 200 to put the stock into an Uptrend.  EEV is my foreign market indicator.  I’m just being patient.

That’s what I’m doing,

h

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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