Professor’s Comments September 4, 2013

Posted by OMS  at September 4th, 2013

 After being closed for the labor Day Holiday, the Dow opened almost 100 points higher, but then gave back most of those gains by mid-day, and then rallied into the close.   The Dow finished up 23 points, closing at 14,833.  Volume was heavy, coming in at 133 percent of its 10 day average.  There were 50 new highs and 62 new lows.

Going into yesterday, the futures were sharply higher on news that President Obama would seek Congressional approval before striking Syria.  The news seemed to be just what the markets needed to start a rally.  However by mid-day, several Congressional leaders were expressing support for an air strike, sending mixed messages to the markets, and stocks fell. The up-down-up trading action appeared to be another piece of the wave 2.

I started to run The Professor at 11am yesterday to see if the early rally was going to develop legs.  But even with the Dow up over 80 points, the Professor only had 9 stocks highlighted.  By the end of the day that number had increased to 14, still short of the 50+ that I’m looking for to signal the start of wave 3 up.

So the ‘Syrian Cloud’ remains over the market.  And now with the discussion in Washington appearing to focus on the objectives of a strike, rather than just sending a warning shot, the ‘cloud’ could be with us for awhile.  Be patient.

One thing to remember is that the BLS will release the jobs report on Friday.  So with the ‘Syrian Cloud’ hanging over the markets and the unemployment numbers due out Friday, traders will likely remain cautious.  Here’s the thing to remember: Syria will pass, and eventually the market will start to focus on the payroll data.  If Friday’s jobs report is strong, then it is likely that the Fed will want to start tapering early. If the numbers are softer than expected, the Fed will likely choose to delay tapering, or reduce it to some extent.  I believe that the jobs report is much more important than Syria in determining the next major move in the markets.  And as long as we don’t get into an extended war, the patterns should hold and the markets should rally.

The Dean’s List remains negative, and the cockpit indicators are still Red.

I spent some time yesterday looking at a few stocks from the Member’s Watch List which appear to be developing nice patterns,  These include APPL, BIDU, DECK, and JCI.

APPL ‘Jumped the Ropes’ on 13 August, and has been developing a wave 2 Blade.  The Blade appears to be nearing completion, but it could fall closer to the 200. If APPL drops to the 475 level during the next few days, I would look to establish a small position in the stock using a Rifle Trade on the 60s. I believe that if APPL starts to move higher from its Blade, it will take the NASDAQ with it.

BIDU has been trading sideways since the end of July, even though the overall market has declined almost 800 Dow points.  As I always say, strong stocks correct sideways.  And right now, BIDU is telling me that it is a very strong stock.  If it starts to move above 141, the enormous stick that it has developed since the beginning of July could come into play, taking BIDU to significantly higher levels.

JCI is another stock of interest.  Same sideways pattern as the two mentioned above, but needs the P-volume to turn positive.

DECK was highlighted by Emeritus last night and placed on the Honor Roll.  The stock has been in an Up trend since April, and appears to have competed its wave 2 Blade on 26 June.  If this is true, then the small stick and blade that formed since that time are likely waves 1 and 2 of wave 3 up.  Further, yesterday’s 1.27-point pop caused the 35 period CCI to move above the 100 level, which means that wave 3 of 3 up could be starting.

While SLB is not currently on the MWL, I noted that the P-volume in SLB is higher now than it was on 22 July when the stock was trading a few points higher. If SLB starts to break above 83,33, it should cause the 35 period CCI to enter a trend mode.  The 15-point ‘Stick’ suggests a target near 95.

And finally, CORN should also be watched.  The ETF recently completed a TLB pattern, and turned Green on the Daily’s.  However yesterday’s pullback caused the DMI on the Daily’s to turn negative.  The thing that caught my eye on CORN is the P-volume.  While the price is only 2 points from its yearly lows, the P-volume is near its highest level of the year.  This tells me that something is going on with CORN.  If the DMI turns positive, I will become very interested in CORN as a trade.  The ETF still has a lot of work to do before I can get serious about it, but anytime I see something turn Green after a TLB Pattern, it always attracts my attention.

Waiting.

That’s what I’m doing.

h

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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