Professor’s Comments March 18, 2015
Posted by OMS at March 18th, 2015
The markets were mixed yesterday. The Dow fell 128 points, closing at 17,849 while the OTC market closed up 8 points at 4,937. Volume on the NYSE was moderate, coming in at 94 percent of its 10-day average. There were 103 new highs and 73 new lows.
There was a small change in the A-D oscillator of less than 5 points, so we need to be on the lookout for a Big Move within the next 1-2 days.
There is a good possibility that yesterday’s early down move on the Dow followed by a retracement rally were the initial moves of wave 3 down. If this is the case, then the Big Move predicted by the small change in the A-D oscillator could be wave 3 of 3 down.
The Dean’s List and Coach (Money Flow) remain positive, but The Tide and the DMIs remain negative. These mixed signals should be resolved within the next 1-2 days. Be patient.
One of the things I found interesting about yesterday’s trading action was DECK and LSTR, the two stocks highlighted by Emeritus for the Honor Roll. Both stocks are listed on the NASDAQ, and while the QQQ was rising, DECK and LSTR fell 0.78 and 0.65 points respectively.
The difference between the two stocks and the QQQ was the Coach. While money was still flowing into the QQQ (its Coach is Green), the Money Flow indicators for DECK and LSTR were Red. Money Flow is one of the indicators that Emeritus uses to identify stocks that are about to enter the Trend Mode.
If you look at the CCI on both stocks, you will see a significant difference between them. The CCI on DECK (<-100) shows that it has already entered the Trend Mode. On the other hand, the CCI on LSTR is still a positive 1.55, telling me that it still has a bit more work to do before it starts to Trend. But still Emeritus picked both stocks, even though one is trending and one is not. This is because he’s looking at Money Flow and its potential to spot stocks that could start to break down.
So during the next few days, watch to see if the Coach on DIA and QQQ start to turn negative. Especially with an outgoing Tide. For example, right now after looking at yesterday’s action where we saw how the Dollar is impacting Big Cap international stocks more than their small cap domestic sisters, we know that the Dow is weaker than the NASDAQ. So IF we see the Coach on the Dow turn negative, I would favor any Big Cap issue that Emeritus highlights as a short over any short highlighted on the NASDAQ. Given that situation, I would also favor the DXD over the QID if I wanted to trade an index ETF.
In other words, I want to have BOTH The Tide and the Coach in my favor. So now IF the Coach on the Dow turns negative, it would tell me that money is starting to flow out of the Big Cap stocks at the same time the breadth is negative. Knowing this really stacks the odds in my favor. And then when I see Emeritus highlight a Big Cap stock as a short, with potential to trend, it gives me another advantage by telling me which stocks to trade.
So be patient. Right now the Tide and Coach are at odds with each other. The Tide is also not in agreement with The Dean’s List as the Dean is still positive. This is what usually happens during a wave 2 retracement. The indicators become mixed. But those mixed signals are themselves an important signal. They’re telling us that the market is likely process of forming some type of retracement wave. Retracement waves are NOT trends, and most times once the retracement is over, the market resumes trading in the direction of the DMI. And right now, the DMI is negative on the Dow (DIA), SPX, and QQQ.
Continue to watch for a break of the 17,620 level on the Dow. Also watch yesterday’s low of 17,785 for a preliminary indication that 17,629 will be tested. The reason I mention this is because a small H&S Pattern has formed on the 60 min chart of DIA. If 17,785 is broken, it’s likely that 17,620 will be tested.
This is one of the reason’s I’m watching the Coach now. I want to know when money starts to flow out of ALL of the indexes.
That’s what I’m doing,
h
Market Signals for 03-18-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | NEG |
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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Category: Professor's Comments