Professor’s Comments October 22, 2014
Posted by OMS at October 22nd, 2014
The Dow rose 215 points, closing at 16,615. Volume was on the light side again, coming in at 87 percent of its 10-day average. There were 80 new highs and 22 new lows.
By moving above the 16,500 lever, the current rally can no longer be viewed as a corrective wave 4 in a 5 wave sequence. It is more likely that Major Wave 1 down completed on 15 October at the 15,855 level and the rally we have seen during the past 4 days is part of Major Wave 2 up.
So what does this new wave count mean to the current pattern? Well for starters, it means that the current rally will likely trade up to the 16,675 -16.700 level before it completes. The 16,675 level is 2 October low of minor wave 1 of 1 down. It should provide strong resistance. Then once Major Wave 2 up completes, Major Wave 3 down should begin. This wave should take the Dow down to the 15,500 level, possibly lower. It still appears that the Major Wave 3 decline could start later this week given the current overbought conditions.
If the Dow trades much beyond the 16,700 level, something else is happening with the overall pattern.
Last night, the A-D oscillator came in with an EXTREMELY overbought reading of 209.3. The market usually pulls back from an overbought reading over 200 wthin1-2 days.
The Dean’s List remains negative, as do the PT indicators. The Chandes T-Score also remains in a solid down trend with reading of -10, so I have to stay negative. However the rally has caused several of the inverse ETFs I have been trading to drop off the Dean’s List. This means that before I can add additional shares of an ETF like TWM now, it must re-appear on the Dean’s List. The PT indicators on TWM remain positive, so I continue to hold my shares. BTW last night, the 2 period RSI Wilder on TWM finished with an EXTREMELY oversold reading of 3.91. Stocks with positive PT indicators usually bounce with RSI readings like this.
Watching,
That’s what I’m doing,
h
Market Signals for 10-22-2014 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
BREADTH | 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