Professor’s Comments March 14, 2014
Posted by OMS at March 14th, 2014
The Dow plunged 231 points yesterday, as Putin assembled his troops on the Crimean boarder. NYSE volume was moderate, but there were twice as many declining issues as advancers. The number of new highs and new lows came in at 74 and 41 respectively.
While yesterday’s decline was substantial, it did little to change the overall patterns that I have had on the Board for weeks. However several of the technical indicators, including the DMI and MACD, turned negative yesterday so we now have mixed indicators..
On the positive side, the Dean’s List remains strong, and yesterday’s decline actually produced another set-up for a VIX Buy Signal as the VIX closed above its upper Bollinger Band. The VIX has identified six really nice Buying opportunities since April 2013. Three of these were from levels over 20. Right now the VIX is only at 16.22, so I’m not looking to short volatility at this point. But IF the VIX does start to move higher, which I do not expect, I’ll look to take a short position in the index. From these levels, I’m just content to watch for a close below the Upper Band to trigger the VIX Buy Signal.
With the DMI on the Dow and NASDAQ turning negative, I was busy running The Professor testerday to see if he was concerned about the down slide. After all, the Dow had been down for three straight days (-34, -67 and -11 points) so I was concerned that a new trend could be developing. The Professor wasn’t as concerned as he only had 12 shorts to go with 8 longs. Nevertheless, with a negative DMI on the cockpit, we’ll have to pay close attention to our trend indicators now.
The thing I really felt good about yesterday while I was watching the market fall was how The Professor kept me from establishing a lot of new long positions. For the past few weeks, as the market had been consolidating, I have been itching to get back in. But The Professor kept saying, no, no NO! It’s not time.
So while others were watching their stocks fall, I was actually making money from the small ‘trial’ position of TMF that I bought several weeks ago. The ETF gained over 2 points yesterday. Now don’t get me wrong, I’m still not ready to commit any new funds to TMF as I believe that it still has a lot of work to do over the next few weeks. The stock is still in a down trend and needs to get the 50 above the 200. But yesterday’s pop did tell me where folks are likely going to put their money if things in the equity markets start to worsen. Yesterday was a good learning experience from that perspective; one that should prove valuable down the road.
Same for Halliburton, HAL. Yesterday’s big decline in the Dow hardly put a dent in the stock as it only fell 14 cents. All it did yesterday was strengthen the Blade that has been forming during the past two weeks. I noticed a similar strengthening of the pattern in several other energy stocks yesterday, including TOT and SPN.
Anyhow, with the set-up for a VIX Buy Signal on the Board, all I will be doing now is waiting and watching. Like I said above, yesterday’s trading action did not do any significant damage to either of my two scenarios. So IF the market starts to rally, we should get a Buy signal from the VIX. Then I’ll look for the DMIs to turn positive again, and finally look for confirmation from The Professor. I still believe that we’ll see higher prices in the days ahead, provided that Putin does not do something really stupid. In that case, all bets are off.
That’s what I’m doing,
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Category: Professor's Comments