Professor’s Comments September 21, 2016
Posted by OMS at September 21st, 2016
The Dow rose 10 points, closing at 18,130. Volume was low, coming in at 86 percent of its 10-day average. There were 33 new highs and 26 new lows.
The Fed will be announcing its latest policy on interest rates at 2pm today. What they say in the announcement and the follow-up comments could have a significant effect on the markets.
With the presidential election less than 50 days away, I don’t think they will announce a rate increase today. But ya never know. If you have been listening to what some of the Fed members have been saying recently, they have definitely changed their tone and become hawkish. So even though we probably won’t see an increase today, I believe we’ll get one in December. This probably won’t be good for most stocks, especially those that are sensitive to interest rates.
But even if rates aren’t raised today, I believe the markets will start to factor in a rate increase in December. Markets tend to anticipate these events, and right now the pattern on the Dow is starting to show it.
If you look at how the Dow has traded since 9 September, it could provide us with a few clues. On 9 September, the Dow fell 394 points in an impulsive move. It was the first impulsive move down since 24 June when the Dow fell over 600 points as a result of the Brexit surprise vote. The impulsive decline that took place on 9 September broke through an important trend line near the 18,400 level, which signaled that the final wave of Major wave ‘C’ up was likely over. In other words, two important things happened on 9 September: The Dow broke an important trend line AND had its first impulsive move down. Hmmm?
In the seven trading days that followed, the Dow has simply traded sideways in a very narrow trading range. If you look closely at the pattern, the sideways trading has formed the ‘Blade’ of a Hockey Stick pattern that uses the 9 September decline as part of a 557 point ‘Stick’. So IF a student subtracts 557 points from the recent ‘Blade High’ of 18,256, it would project a pattern target near the 17,700 level.
If the Dow starts to move toward this level, it would cause significant technical damage to the moving averages, as the 200 is currently located at the 17,832 level. So IF the Dow moves below 18.832, it would cause a negative ‘Rope Jump’. This would identify the move as part of Major Wave 1 down in a Major Five Wave down sequence. So regardless of what happens today with respect to interest rates, the overall pattern needs to be watched carefully. What happens today and in the weeks ahead will likely set the tone for the markets for the next 3-4 years.
I haven’t talked about money flow lately, but the Money Flow Indicator on the Dow is negative. It’s been negative since 14 September. In other words, as the Dow has been quietly trading sideways, money has been leaving the market. And even though Apple (AAPL) has been keeping the major indexes afloat, breadth on the NYSE (The Tide) and the NASDAQ is negative. If I calculated a Tide for the NASDAQ, it would be negative, even though APPL is pushing the index to all-time highs. So don’t be fooled by the indexes. They are NOT what they appear to be. If Apple starts to falter, a lot of things could change very quickly.
Gold had another flat day, with GLD rising 0.12 cents to 125.44. The VTI on GLD had a small change yesterday and is currently sitting in the No Trend zone at 34.5. If the Fed leaves rates unchanged, I would expect gold stocks to pop. This could cause the VTI to turn positive. BTW, since the VTI on GLD turned negative on 9 September, the stock has fallen a little over 2 points. However, it still has NOT broken through the lower trend line of its wave 4 triangle. As long as the triangle holds, a move above 129 would signal a test of the 135+ level.
I’m still watching GPOR and a few other energy stocks. The VTI on GPOR is still showing No Trend with an oversold 2-period RSI. Yesterday the stock popped over 0.50 cents intraday, but couldn’t hold the gain into the close. It still looks like an interesting scalp or position trade if the Fed doesn’t raise rates.
Waiting for the Fed announcement.
That’s what I’m doing,
h
Market Signals for
09-21-2016
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG-T |
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