Professor’s Comments March 23, 2016
Posted by OMS at March 23rd, 2016
The Dow fell 41 points, closing at 17,583. Most of the other major indexes were either flat or off slightly. Volume was low again, coming in at 83 percent of its 10-day average. There were 70 new highs and 9 new lows.
Even though the Dow had its largest down day in over two weeks, it did not change any of the cockpit indicators. The indicators remain positive, so it’s still possible that final wave ‘c’ up of Major Wave 2 up can continue to push slightly higher.
Yesterday’s early 84-point decline driven mostly by news of terrorist bombings in Europe started out looking impulsive, but quickly found support. A small rally followed causing the Dow to move back into positive territory before a late day decline caused the Dow to finish down. It was not the kind of trading action that usually marks the beginning of a major impulsive wave down.
So it’s likely that the markets will hang around current levels, with a positive bias for the next few days. The past two days have seen the Dow gain 21 points, then lose 41, which is basically sideways trading that could be a small corrective wave within wave ‘C’ up. If this is the case, it argues for one small final wave up before the final top is in.
Be patient. Major tops usually take time to develop, and this one appears to be no different.
The volume continues to be very low and major divergences are occurring between the number of advancing and declining issues. This is NOT something you want to see if you’re Bullish.
We saw this same thing happen last November, when price continued to push higher on poor internals. This eventually led to a 2,500-point decline into mid-January. However the Dow stayed at elevated levels for almost a month before finally rolling over.
Remember, the large institutions still have a lot of stock in their bins that they need to unload. It will take time. This is why declines like the one we saw yesterday are quickly checked. The institutions want to keep prices high while they dump stock.
Right now they’re mostly selling the small cap issues on the RUT 2K and NASDAQ. This is why the patterns on these indexes have morphed into a-b-c patterns instead of an Ending Diagonal. Once they clear the bins of their small cap holdings, the selling will start on the larger caps issues. It’s what happens. It’s why the markets have been mixed for the past several days. It’s what causes the divergences in the A-D indicators.
It’s also why I’m on the sidelines.
That’s what I’m doing,
h
Market Signals for
03-23-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
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
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Category: Professor's Comments