Professor’s Comments September 3, 2014
Posted by OMS at September 3rd, 2014
The Dow fell 31 points, closing at 17,068. Volume was high on the decline, coming in at 116 percent of its 10 day average. There were 231 new highs and only 14 new lows.
For the past two weeks, the Dow has basically gone nowhere. On 20 August, the Dow was trading at 16,979. Yesterday it closed at 17,088, a difference of 109 points. Hmmm? Sideways trading after a long stick within a corrective wave 4 tells me that something more complex is going on. It sets up the possibility that wave 4 is developing some type of zig-zag pattern. The two weeks of sideways trading must now be considered as the ‘Blade’ of a small Hockey Stick pattern that project one more wave higher before corrective wave 4 completes.
Breadth remains positive as does the Dean’s List. So both The Tide and the Dean support one more rally before the top of wave 4 arrives. That top is likely to be a few hundred points from current levels, probably near 17,250+ on the Dow. Once complete, the Dow should fall to the 16,300 level +/-.
So what to do? I still believe that it’s not a good time to be buying stocks. Those potential 200 points of upside gain still look pretty small when weighed against a downside risk of 800 -1,000 Dow points. If I do trade, it will only be as a scalp, and only if I can find something with a good entry point.
Finding entry points for the past two weeks had been difficult, as the market usually flat lined after the open. There have been very few opportunities for scalp trading gains during the day. Yesterday was a good example as the Dow opened higher only to give back its gains and then make four more minor directional changes during the day to finish almost unchanged. The small intraday moves are the kind thing that drive a scalp trader nuts! After the day was completed, you just stand back and wonder…Why did I do this?
Anyhow, hopefully the sideways corrective wave is over now and the rally to complete wave 4 will begin. It’s hard to estimate how long the rally will last, but it should be about a week or so if it too has a small corrective wave within it.
Anyhow, all I plan to do is watch and relax. If the Dow gets closer to the 17,200, I’ll start to look for a few shorts. Especially if it appears that one or more of the Tide indicators start to weaken. That’s NOT happening now, even with yesterday’s 30 point decline. Breadth remained strong. The A-D oscillator is still showing a very healthy reading of 93.35. When it starts to drop below zero, I’ll start to pay attention. Not now.
Also, during the weekend, I called your attention to the appearance of several gold stocks on the Dean’s List and the fact that DIG had replaced DUG. But I told you NOT to get too excited and wait for the PT indicators to change. Now you know why.
Gold and oil related issues got hammered yesterday. All of the gold stocks and ETFs that were on Friday’s List dropped off. Same for energy as DUG replaced DIG. This is what happens during corrective waves when the PT indicators do not generate a Buy signal. It’s why we pay attention to the SIGN where we need to see a stock on the List, with a pattern AND with positive PT indicators.
BTW, Halliburton (HAL) now looks like it is developing a negative Hockey Stick Pattern that projects to the 62 level. SLB to 100+. I would LOVE to see both stocks at that those levels for the next run up. I’m just waiting :>)
That’s what I’m doing,
h
Market Signals for 09-03-2014 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
BREADTH | POS |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments