Professor’s Comments September 25, 2015
Posted by OMS at September 25th, 2015
The Dow fell 71 points, closing at 16,201. The low for the day was 16,016. Volume was heavy, coming in at 111 percent of its 10-day average. There were 7 new highs and 357 new lows.
The decline from the 17 September top to yesterday’s low of 16,016 was a picture perfect 5 wave affair. It tells me the primary trend is down.
But no market, no matter how weak, goes straight down. There will be corrections along the way. And because we are currently in a Major Bear Market with a lot of traders shorting the market, the corrective rallies will be sharp whenever these traders panic and cover their short bets.
Yesterday, both Money Flow indicators on the cockpit turned positive. This tells me that yesterday’s bounce off the 16,016 low will likely continue. I would expect it to end near the 16,400+ level. After that, the primary down trend should resume.
Yesterday’s early break of the 16,200 level was interesting. In my earlier comments, I said that IF 16,200 was broken, the Dow should fall about 250 points, then bounce before declining to the 15,500 level. In other words, I was looking for an a-b-c retracement after the 5 waves down completed.
However yesterday’s early decline and late rally produced a ‘hammer’ candlestick, which often marks a stronger than normal bottom. So instead of the small bounce off the bottom I was expecting, the retracemnet will probably be more like 400+ points.
If we get a rally today, it should provide option traders with another opportunity to buy a few puts. BTW, yesterday’s early decline and late rally was an example of what can happen to option profits. Unless you were on your toes about 11am and took profits when you saw the rally starting, a good portion of your profits evaporated. Anyhow, we should get another shot if the Dow approaches 16,400, SPX near 1960. There are the levels I will be watching to establish additional short or inverse positions.
Gold had a strong rally day yesterday with GLD gaining 2.27 points to 110.49. If equities rally today, I would expect gold to pull back a bit before the rally to a ‘Rope Jump’ resumes. I booked a nice profit on my 16 November 119 Calls yesterday, and will look to buy them back on any pullback.
Anglogold, AU, rose 0.53 cents to 8.38 after being highlighted by Emeritus for the Honor Roll. The stock has a nice Hockey Stick Patten with tight bands. My Money Flow indicator is nice and positive, and both trend indicators are very close to moving into the trend mode.
Remember, Emeritus is a trend algorithm. It highlights stocks that have a high probability of trending. I’m NOT saying they will trend, only that the probability is high.
When I look to purchase a stock or ETF, I look for something on one of my Lists, with a Pattern, and positive indicators. (This is what the SIGN says: Dean’s List, Pattern and Indicators). Then I look to see if the stock has tight bands giving it the possibility of entering the trend mode. There are never any guarantees in trading. All we can ever do is try to put the odds in our favor.
That’s what I’m doing,
h
Market Signals for
09-25-2015
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
SUM IND | 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