Professor’s Comments October 23, 2014
Posted by OMS at October 23rd, 2014
The Dow fell 153 points, closing at 16,461. Volume was on the low side again, coming in at 84 percent of its 10-day average. There were 99 new highs and 26 new lows.
As I mentioned in yesterday’s comments, the market was EXTREMELY overbought and was set-up for a decline. All it took was a trigger, which came in the form of shoots being fired in the Canadian Parliament. The trigger could have been anything. With an overbought A-D oscillator reading of 200 plus, the market was ready for a decline.
BTW, did you notice how TWM popped for 1.34 points to close at 49.06? With the 2-period RSI Wilder showing a reading of 3.91, it was ready to pop. You might want to note this set-up for future trades whenever the ETF is oversold and showing positive PT indicators ;>)
The Dean’s List remains negative as do the PT indicators. However The Tide remains positive, so we have mixed indicators. When the indicators are mixed, the market is usually in some type of corrective mode. The Chandes T-score on the Dow remains at -10 telling us that the major trend is still down.
One thing I noticed last night was that TWM and QID, the inverse ETFs for the Russell 2K and the NASDAQ 100, re-appeared on the Dean’s List. So after today’s 153 point decline, the obvious question is has Major Wave 3 down started? Well, at this point I still don’t know. If the Tide was negative, I would definitely say that the impulse wave has started. But right now it’s still too early to call. Let’s see what happens during the next 1-2 days. If the impulsive trading action we saw today continues, it will be an easy call. Remember, Wave 3 down should be a large impulsive wave. If it’s anything but a straight down move, odds are that Major Wave 3 down has not started. Trust me…you’re gonna know.
One other thing I noted about last night’s Dean’s List is that two utility ETFs, XLU and PUI, have also appeared on the List. Utilities are large borrowers on money, and as a result are extremely sensitive to changes in interest rates. But with TMF near the top of the Dean’s List, I’m not too worried about an increase in interest rates anytime soon. As you know, several students have asked about income producing stocks for the past few weeks, and XLU currently yields 3.54 percent. I have to tell you that I’m not crazy about owning ANY stocks long at this point, given the possibility of a Major Wave 3 decline. But IF you put a gun to my head and told me that I had to buy a dividend producing stock and then manage the risk with the PT indicators, seeing an ETF like XLU on the List with TMF providing high cover is an interesting choice. However without seeing a large positive divergence in the P-volume….I have to pass.
Watching,
That’s what I’m doing,
h
Market Signals for 10-23-2014 |
|
---|---|
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