Professor’s Comments November 21, 2014

Posted by OMS  at November 21st, 2014

The Dow rose 33 points, closing at 17,719. Volume was moderate, coming in at 96 percent of its 10-day average.  There were 99 new highs and 36 new lows.

The market continues to trade in a very narrow range with a positive bias.  Yesterday’s small rally was enough to turn the breadth indicators positive again, so The Tide is back to being positive.  The A-D oscillator finished with a reading of 33.52.  The A-D oscillator on the OTC market finished with a reading of 0.91.

It should also be noted that yesterday’s early decline was over 80 points, so when the Dow rallied to finish up 33 points, the intraday move was likely the Big Move predicted by Monday’s small change in the A-D oscillator. 

The Dean’s List and PT indicators remain positive.  As long as these indicators remain positive, the market will likely maintain its Bullish bias.  However with stocks at or near the top of their patterns, the only question at this point is how much longer will this Bullish bias continue?

Looking at the volume data, it appears that yesterday’s rally was mostly due to a lack of selling rather than any significant new buying.  The P-volume on the Dow (DIA), NASDAQ (QQQ) and S&P500 (SPY) remained unchanged.  The P-volume on the SPY has actually been falling the past few days as the S&P has been pushing higher.  The rising price on lower and lower volume is creating a very significant negative divergence in the P-volume.  At the end of the day, it’s usually the P-volume that is the better tell.

So while prices can continue to push higher, traders should understand that the current rally is on very weak underpinnings.   All it will take for a significant decline to begin is a trigger. 

This could happen anytime within the next week or so.

Gold had a small rally yesterday off oversold levels.  GLD rose 1.18 to close at 114.86 with GDX rising 0.53 cents to close at 19.71.  The Daily PT indicators remain negative.  Since rising off their early November lows and pausing, it appears that gold stocks and ETFs have completing their ‘rest period’ which should enable them to  test moving average resistance on the Dailys.   If this test is successful and the PT indicators turn positive, the next move to look for is a ‘Rope Jump’.  Given that this scenario has a better than 50-50 chance of success if the indicators turn positive,  it should make for some interesting short-term trades on the shorter-term bars.

The Pistol Trade set-up I highlighted yesterday with ABX finished with a small profit.  Because I’m using these Pistol Trades to establish a small ‘trial’ position in gold, I am holding my shares overnight.  They are not ‘Scalp Trades’. 

The reason I’m doing this now is because a very nice bottoming pattern has developed on gold and silver related issues.  I’m still not sure if this is ‘The Bottom’, but because of the large potential for profit, I’m willing to take a chance.  Just remember, most gold issues are still in downtrends on the Daily Charts, so positions MUST be kept small.

Looking to add to my small trading position in gold.

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
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