Professor’s Comments September 25, 2014
Posted by OMS at September 25th, 2014
Even though the markets popped yesterday, the rally was accomplished on extremely weak volume and breadth. It appeared to be a classic ‘Dead Cat Bounce’.
Actually, yesterday’s bounce appeared to be either the ‘a’ wave of an a-b-c wave 2 retracement or the complete retracement.
We should know in another day or so if we see the market making an impulsive decline. Trust me…you’ll know when the impulsive wave 3 decline starts.
Strangely, even after yesterday’s 154 point rally on the Dow, the A-D finished the day with a reading of -165. In other words, the market is still extremely oversold! This is another one of the strange things that is happening in the market now.
If you recall, last week I mentioned that there were more than 100 new highs and new lows on the same day. This is something that I haven’t seen since mid-2007.
Well yesterday’s 154 point rally fits into the same category. It’s been a looong time since I have seen a large rally like yesterday’s that did not relieve the EXTREMELY oversold conditions.
Here’s what worries me now….
Usually when the A-D oscillator has several days of oversold conditions of -150 or less, the market tends to rally hard to relieve those oversold conditions. But when those conditions are NOT relieved, it’s possible that the market is either crashing or at a place where a crash is just around the corner.
So with the Tide still going out, be very careful with your trading now.
Like I said in yesterday’s Update, the market could have topped on 19 September. IF it did, it would mean that the Ending Diagonal Pattern completed at 17,350 vs the 17,400+ I was previously using as a target.
The Dean’s List remains positive. If DIA, QQQ, and SPY drop off the List in the next few days, I’ll start adding to the inverse ETFs that I currently own.
At this point I am not planning to make any trades against the Tide. I don’t see any percentage in being long stocks now. This risk is way too high.
That’s what I’m doing.
h
My next Update will be in the WSR. Did I say please be careful now? Please be careful!
Market Signals for 09-25-2014 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
BREADTH | NEG |
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.
Category: Professor's Comments