Professor’s Comments October 29, 2013

Posted by OMS  at October 29th, 2013

The Dow fell less than a point yesterday, closing at 15,569.  Volume was light as the market treaded water,  coming in at 93 percent of its 10 day average.  There were 189 new highs and only 11 new lows.

The end of the month is usually a very bullish time for the markets as mutual fund managers readjust their portfolios.  However once the new month starts and the re-adjustment is complete, the markets are vulnerable to a correction.

The Fed will start its FOMC meeting today, with an announcement scheduled for tomorrow at 2pm.  I don’t expect much from the meeting, but most traders will be cautious going into the announcement. I’m not sure why.  Everyone pretty much knows that with the extremely weak jobs data we saw last week, the Fed is not likely to begin tapering until after the December meeting. But when a market is living on ‘juice’ , the addicts become nervous every time someone gets close to their needle.

Last night, the Obama administration announced a six-week extension until March 31 for Americans to sign up for coverage next year and avoid new tax penalties under the new health care overhaul law.  As more and more Americans start to become aware of the problems with how the new law will impact them,.from ‘glitches’ on the web site to increased costs, they are becoming nervous.. Finally, they’re starting to pay attention.  Remember what I said about how this could embolden lawmakers and impact the debate in January.  It’s starting. 

The Dean’s List remains strong, and the cockpit indicators are positive.  But the pattern suggests that we are completing one of the rally legs of the Ending Diagonal.

Several weeks ago, The  Professor woke up to tell us the market is starting to trend higher.  Now the Dow is now up about 700 points.  So I checked in with him last night to see if he had any news.  He was sleeping.  He tends to do this when the move he projected nears completion.  I’m just watching to see if he wakes up again, but this time with negative thoughts.  We’ll see.  Like I said this weekend, the pattern suggests a drop to at least the 1700 on the S&P, possibly as low as 1680.   That’s a move of about 500-650 Dow points.

Because of this, I’m not in any hurry to buy stocks now.

Same for gold stocks.  I have been watching Royal Gold , RGLD, for the past week looking for an entry point.  However the past few days have been anything but positive for the miners, as they now appear to be forming a small Blade that could take them on one more leg lower.  As I mentioned in Class, normally when stocks start to form a  wave 2, they do it closer to the 200 after a rope jump.  This allows the price to pull the 50 closer to the 200 where it can eventually cross and move the stock into an uptrend.  But this is still not happening with Royal, and I don’t see any volume accumulation  that suggests it will.  So Royal could be forming the Blade of the stick that developed from the 27 August high to the 15 October low.  Right now the PT indicators are positive, but be careful if they turn negative.  That’s a 22 point stick.

Also, after the market closed last night Apple announced some really positive numbers on both earnings and revenue.  But the price dropped from 530 to 510.  Hmmm? A big drop on really positive earnings?  I’m always cautious when I see something like this.  Remember, it’s not the actual earnings number that counts.  What I pay attention to is the markets reaction to the earnings number.  Apple is currently trading at it’s projected Hockey Stick target.  And now it’s about 40 points above its 50 period moving average, and appears vulnerable to a small pullback.  If the pullback occurs, it will likely form a Blade that will enable the stock to move higher.  Keep an eye on Apple during the next few weeks.  Also, if Apple starts to consolidate or pullback, it’s likely the NASDAQ will do likewise. 

Watching.

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

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.