Professor’s Comments May 28, 2015
Posted by OMS at May 28th, 2015
The Dow rose 121 points, closing at 18,163. Volume was moderate, coming in at 100 percent of its 10-day average. There were 64 new highs and 45 new lows.
The data I use to calculate The Tide came in very late last night, so I couldn’t confirm its status until early this morning. It’s still negative.
All yesterday’s rally did was relieve most of the oversold conditions from Tuesday’s decline. The rally did cause the Dean’s List and the Coach(QQQ) to turn positive, but with all of the breadth indicators that make up The Tide still negative, I can’t really do much from a trading perspective.
I can’t establish long positions now because I don’t want to trade against The Tide, and I can’t start shorting aggressively because all of the inverse index ETFs that I want to buy have fallen off the List So with mixed signals from the cockpit, I have to wait.
It’s likely that these signals will remain mixed for a few more days as the positive bias from the end-of month trading should keep the markets well bid.
If the markets rally as we move into June, I will be using any move higher to add to the ‘trial’ positions I’m currently holding. But right now, with a positive Dean’s List and a positive Coach(QQQ) telling me money is still flowing into the NASDAQ, I want to be very selective with my shorts.
If I do anything today, it will be with a few scalp trades in energy. For the past few days, several energy stocks have appeared as shorts on the Honor Roll. Yesterday these stocks rose along with the market and the positive 15-min bars kept me from entering short positions. But as we have learned, it pay$ to keep a list of any shorts that appear on the Honor Roll, especially if they rose with the market after making an appearance.
Remember, the Summation Index is still negative. And as long as the Coach(DIA) is negative, I can still scalp Big Cap shorts from the Honor Roll. This is something I have been doing to get paid as the markets continue to develop a top. By scalping the 15s, I can establish short positions when the indicators give say so and be out of the market by the end of the day. That way I don’t have to worry about the market going against me overnight.
This is especially important now if the market decides it wants to move higher to complete the final wave ‘c’ of the a-b-c pattern.
One of the ETFs I will be watching today is TMF. Yesterday I scalped the EFT for a small profit using the 15s. TMF is still NOT on the Dean’s List and the PT indicators are still negative. But that’s OK. By scalping the stock, all I’m doing now is starting to get a feeling for its movements.
If you look at a chart of TMF, you will see that the ETF is still in an uptrend, despite its fall from the 112 level in early February. The 50 is still above the 200. And the decline into mid-May which dropped TMF to 70 has been a Classic a-b-c correction. It even followed the Principle of Alternation for legs ‘a’ and ‘c’. Leg ‘a’ down into early May was complex; consisting of an a-b-c decline. Then after the wave ‘b’ rally, the wave ‘c’ decline that started in early April was asimple, straight down decline. Classic!
When ever you see the Principle of Alternation at work in a corrective wave sequence, it usually pay$ to watch for the pattern as it completes. That’s because the pattern is telling you the equity is only correcting, and that a new downtrend is NOT developing. So once the correction is complete the equity should resume its upward course.
This is why I’m scalping TMF now. I want to keep tabs on what it’s doing. All I’m doing is waiting for TBT to drop off the Dean’s List and for TMF to appear. When it does, I will stop scalping TMF and start holding it overnight. Then as long as it stays on the Dean’s List, I will continue to hold it in my IRA.
That’s what I’m doing,
h
Market Signals for 05-28-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
SUM IND | 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