Professor’s Comments September 27, 2016

Posted by OMS  at September 27th, 2016

The Dow fell 167 points, closing at 18,095.  Volume was moderate, coming in at 90 percent of its 10-day average.  There were 80 new highs and 15 new lows.

Yesterday’s decline broke below the lower trend line of the small Hockey Stick pattern that has been forming since 14 September.  However, the decline did not break the lower trend line of the larger pattern located at the 18,000 level.  So without a break of the larger trend line, which would likely turn all of the cockpit indicators negative, the Dow remains in a No Trend condition, with an oversold RSI (16.82).  In other words, the Dow should bounce today.

However given that the Dow broke the lower trend line of the small Hockey Stick pattern, it sets up the possibility of a test of the 18,000 level in the days ahead.

Yesterday’s decline did some technical damage to the cockpit indicators.  The decline turned The Tide, VTI, and the DMI on the Dow negative.  It did not turn the DMI on the NASDAQ negative.  So with a negative DMI turn on the Dow, I ran The Professor to see if he would confirm the DMI turn.  He did NOT!   He only had 20 shorts to go with 8 longs.  That’s not enough to confirm the negative DMI turn…yet. However another decline will almost surely get the Professor’s attention.

Also, Apple (AAPL) appears to be forming a small Bullish Hockey Stick Pattern, so it’s likely that any substantial decline from current levels will have to wait until this pattern completes.

Looking at the results of last night’s presidential debate, it appears that neither side did much to swing independent voters, so trading will likely continue to remain range bound.  The Fed and the President’s Plunge Protection Team will likely continue to support the market going into the election, but just remember that this support will likely go away if the incumbent party does not win.

So continue to be careful and watch the 18,000 level.  As long as 18,000 holds, prices will likely bounce between 18,000 and 18,700, responding to an overbought or oversold 2-period RSI.  But with a negative Tide, and a negative short-tern pattern, I’m reluctant to trade the upside.  So I’ll probably wait to see if a small rally develops and then look to fade the rally.  These are not exciting trades, but given the inherent danger I see to the downside in the months ahead, I don’t feel the reward-risk is worth it.

Gold pulled back from overbought conditions yesterday.  GLD fell 0.1 cents to 127.55.  The slight pullback appeared to be associated with the development of a small ‘Blade’ on the ‘Stick’ that has formed since 16 September.  If this is the case, the ‘Blade’ should continue to develop during the next few days giving the ETF the necessary strength to test and break the 129 level.  The 50-period moving average on GLD, currently near the 126.50 level, would be a perfect place for the ETF to rest before the next move.

The world’s major oil producers are meeting in Algeria this week, trying to find a way to push prices higher.  Like I said a few weeks ago, I don’t expect any major agreement from the meeting that will seriously cut crude production, but watch for things to happen on the margins.  Even small deals between one or two countries could impact crude prices in the short term and push crude prices back to the 60+ level.

Several energy stocks are on the Dean’s List now, with NBR and TSO, near the top.  Students should look at how these stocks have been responding to oversold conditions during the past few weeks.  In just about every case, the stocks popped after the 2-period RSI entered oversold territory.

Also, most of the energy stocks on the List have been trading sideways for the past few weeks, consolidating.  If any positive news comes out of Algeria this week, these stocks are poised for a pop.  Just remember that DUG is still on the Dean’s List, so any energy trades should only be considered as scalps.

That’s what I’m doing,

h

Market Signals for

09-27-2016

One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE

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.