Professor’s Comments March 7, 2014
Posted by OMS at March 7th, 2014
The Dow rose 62 points yesterday, closing at 16,421. The Dow actually hit 16,450 which was the lower target for my ‘under 16,588’ scenario before pulling back, Volume was light, coming in at 93 percent of its 10 day average. There were 261 new highs and only 6 new lows.
On the surface, with the Dow gaining 62 points, it looked like the markets had a nice day. But in reality, the markets were very mixed. The NASDAQ and Russell 2000 actually finished the day down 6 and 1.2 points respectively! The P-volume on the NASDAQ continues to show severe negative divergence with price, and once the momentum shifts, this divergence could cause a lot of air to come out of the NASDAQ balloon. This is why we will need to pay strict attention to any DMI or MACD changes on NASDAQ stocks during the next few weeks.
The BLS will release the February Jobs Report at 8:30 this morning, so there is no point in trying to assess what the markets might do until we have a look a the numbers.
Going into the announcement, the Dean’s List is very positive as are the cockpit indicators.
There was also a very small change in the A-D oscillator last night, so once again there is a possibility of a Big Move within the next 1-2 days.
The positive Dean’s List, positive cockpit indicators and the two scenarios that I have been talking about for the past few weeks all argue for higher prices over the short to medium term. However, as I mentioned above, with the Dow hitting 16,450, we are now in the Zone for my ‘under 16,588’ scenario. Truth be told, I was almost certain that the Dow would reach 16,450, but to be just as truthful, I don’t have any idea as to whether the current rally will stop ‘under 16,588’ or if it will continue beyond 16,588 to ‘just under 17,000’. We’ll just have to wait for the markets to tell us with a change in the indicators.
At this point, there is no way to tell. I can make arguments to support either scenario. As long as the Dow remains under the 31 December high, I have to favor the ‘under 16,588’ scenario that says the current rally is just a retracement wave 2. Remember, the Dow ‘Jumped the Ropes’ back in early February, so we can’t ignore January’s down move as a possible wave 1. On the other hand, I can just as easily argue that the current rally is part of a final “e” wave that will top closer to 17,000. The Dean’s List and cockpit indicators favor this scenario. Today’s Jobs Report should help clarify which scenario is actually in play.
However, instead of focusing on the unknowns at this point, It might be better to look at a few things we do know.
Earlier in the week, when I was talking about Bonds, I said that TMF still has more work to do before it can move higher. And yesterday, we saw TMF pull back 1.46 points as it continued to form its Blade. Here’s the thing: If you look at the Dean’s List now, you will see that TMF had fallen off the List, being replaced by TBT, the inverse Bond Fund. I’m not interested in buying TBT now because it is in a severe down trend with Red PT indicators. But by dropping off the Dean’s List, TMF has given us something to watch in the future. It will be like a mini-market indicator. That’s because as long as the current rally in equities continues, odds are that TMF will stay off the Dean’s List as money flows out of Bonds into equities. But once TMF starts to re-appear on the List, it should be the first sign that the music has stopped in equities and the party is over.
Same for EEV, the inverse Emerging Markets ETF. Yesterday EEV dropped 0.65 cents as the situation in the Crimea calmed…at least for the day. The indicators continue to remain Red on the ETF as it does its work. This tells me that most foreign markets are still OK. I’ll become very interested in EEV IF the PT indicators start to turn Green. Not now.
BTW, I received an email from a student thanking me for yesterday’s explanation on Rifle and Pistol Trades. He said: “Thanks, this is very helpful. And just so you know that your teaching is not lost, I executed the trade you described in your response exactly the way you described it and took a very nice profit.” I love it when I get feedback like this ;>)
Waiting for the Jobs Report.
That’s what I’m doing,
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Category: Professor's Comments