Professor’s Comments May 29, 2015

Posted by OMS  at May 29th, 2015

The Dow fell 37 points, closing at 18,126.  Volume was moderate, coming in at 96 percent of its 10-day average.  There were 66 new highs and 60 new lows.

Not much changed after yesterday’s trading.

The Tide remains negative, but the Dean’s List is still mostly positive.  Three of the 4 positive index ETFs remain on the List.  However last night, the inverse index ETF for the Russell 2000 appeared on the List, so this morning I will be looking for an entry point to buy a few shares.

At this point, I’m still being cautious.  That’s because both Coaches, my Money Flow indicators, remain positive.  And as I discussed last night at my Repeat Update Class, whenever these indicators are positive, it’s generally not a good time to be shorting stocks. 

As long as both Coaches remain positive, there is always a possibility that the markets will move higher into early June before reaching a final top.

Also as I demonstrated last night, when the indicators are mixed, Emeritus does not highlight a lot of stocks for the Honor Roll.  He’s telling us that he doesn’t see a lot of stocks starting to trend.  And without a tend starting, the odds for making a profit are low.

It’s just a lot easier to wait for the Coaches and the breadth indicators to line up before taking a trade.  Then if Emeritus starts to highlight several stocks for the Honor Roll, the odds of a successful trade become high. 

The other algorithm that is keeping me out of the market now is The Professor.  He’s sleeping.  For the past few weeks, even though the market has experience several large daily moves, The Professor has only been highlighting 10-15 stocks each day.  In the past, whenever he highlighted more than 50 stocks as longs or 25-28 shorts, it was always a good indication that a new trend was starting.  So when I see him only highlighting 10-15 stocks, I can’t get excited.

All the above tells me is that we’re likely still in some type of corrective wave sequence.  And whenever we’re correcting, there is always a chance that the market will move higher once the correction completes.

This is why I’m still very cautions now.  The Dow remains in a pattern that suggests it will retest the recent highs of 18,350 as wave ‘c’ of the a-b-c pattern unfolds. At this point, it’s an even money bet. I NEVER bet a lot with those odds.

I also noted that even though TBT, the inverse bond ETF, was still on the Dean’s List , money is now flowing out of TBT and into TMF.  This is NOT something you want to see if you’re long TBT. 

Remember, I believe that U.S. Bonds are in the process of completing a simple a-b-c correction before starting another sustained up leg.  If this is happening, then TBT should drop off the Dean’s List in the next few days and TMF should appear.  If it does, I’m a buyer.

Same for gold.  The last time I checked on the metals, they were busy trying to consolidate the troops and supplies for their next assault.  They’re still consolidating.  But yesterday, the Money Flow indicator on GLD turned positive after being negative for 7 days.  I’m still not terribly excited about the metals now, but they are doing all of the right things required for the next move higher.

Again, take a quick look a daily chart of GDX.  Notice the ‘Rope Jump’ that occurred on 14 May?  Wave 1 up?  Then after the ‘Jump’ it pulled back, just like it was supposed to.  Hmmm? It was reason enough for me to buy a few shares yesterday.  I still believe that gold has a lot of work to do before it starts to move higher.  But now I have a few shares to keep me interested in what’s going on with the miners.

That’s what I’m doing,

h

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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