Weekend Strategy Review August 22, 2015
Posted by OMS at August 22nd, 2015
The Dow fell another 531 points on Friday, closing slightly below my target for wave 3 of 3 down at 16,469. It was down 1,118 points for the week. The NASDAQ was down a whopping 171 points on Friday and down 342 points for the week.
When the Dow was down over 300 points on Friday, I decided to take profits on ALL of my inverse positions. Yeah, I missed the additional 200 points that occurred in the final hour of trading once panic set in, but by then I was enjoying a fine cigar and a glass of bourbon by the pool. It was a good week to be short.
Last week in my WSR, I talked about how the Dow was setting up for a significant decline and the strategy I would be using to take advantage of the move. So now that the decline has happened, the question is “What now?’
Hmmm? Well, let’s talk about what might happen next week. However, before I do, I want to say ‘Thank You’ to all of my students for their emails this past week. It was nice to know that they were following The Tide and The Dean’s List and were either safely on the sidelines or invested in inverse ETFs, gold or long Bonds during the decline. While I was reading those emails, I wondered how many Financial Advisors or brokers were getting emails like mine? Probably not many.
And then I wondered some more. I thought about all those seniors in the Jacksonville area and around the country who were still invested in this market, and had lost a good chunk of their savings during the past week. They listened to media ‘commentators’ and entertainers like Cramer and bought into what they were saying about the market being the only place to be given the low interest rates on CD’s and savings accounts. So they loaded up on high yielding dividend paying stocks, thinking that these were ‘safer’ places to be. Last week, this strategy got crushed. And today, I can just imagine how many of them are worrying about what they’re gonna do if the market continues to head south? I’ll bet many of them are still looking to CNBC or FOX news for answers. They’re gonna be disappointed.
Anyhow, while I was relaxing by the pool yesterday, I picked up the phone and called a few of my friends in the local media. I was frustrated. Very frustrated! I asked them why the media never has stories about how people can protect themselves given the risk that was (and is) building up in the markets. All their reports are about murders, rapes, and robberies. Why don’t they have more stories about things that might actually help people? For weeks, it’s been pretty obvious to me that the market was getting ready to take a dive. During the week, I even mentioned the Put Options I was buying, something I never do. The decline should have been obvious to many people. It wasn’t that hard to see. Wouldn’t a report warning of the dangerous pattern that was developing on the Dow have been more useful? How ’bout a report that the Monthly Money Flow indicators were turning RED after 4 years of being Green. I can see it now; the reporters wouldn’t even have to say anything. All they would have to do is show a flashing Red light at the bottom of the screen, like a flood warning or an approaching tornado. Is a market crash less important than a flood when it comes to protecting the lives of our seniors?
It was interesting to have this discussion with one of my friends who anchors a local newsroom. He’s been around long enough to see the business change significantly over the years. One of the things he talked about was how the 26-28 year old ‘producers’ decide the things you watch. Hmmm? After we talked, I wonder how many of these 26 year olds knew anything about the market? They probably just graduated and don’t have two nickels to rub together, never mind learning about investing or saving money for the future. At 26, it’s probably foreign to them. They simply don’t know. But yet, they are the ones deciding on what you get to watch.
Maybe we should do something about this? How ‘bout if all of us call our local TV stations this weekend and ask them to eliminate the mindless dribble they are currently providing. I for one would like to see more intelligent reporting on stories that matter to us. Stories about the economy, job creation and what having an $18 Trillion debt really means to our future and the future of our children. Stories that would address the real issues impacting our Nation and not just fluff. No more crap about the latest rape or murder, or social engineering. Enough! There’s too much at stake now for this dribble to continue.
A lot of this information is available. But the media treats us like dummies. And while some of those 26 year olds might actually like to watch all those reality shows, it doesn’t mean that the rest of us do. And then we wonder why our country is in trouble? When the Dow is below 10,000, all those 26 year old reality TV watching ‘producers’ will be wondering why they don’t have jobs anymore.
Yeah, I’m frustrated. I see things happening. A few months ago, the charts were telling me the Dow would top above 18,300. It did. Then the same charts suggested it would decline to 16,500. It did. And now that the Dow hit 16,500 on Friday, the pattern suggests that there is even more trouble ahead. Big trouble! But no one seems to care. Trust me, they will care a few months from now, but by then it will likely be to late. Trillions of dollars will be wiped out from the savings of our seniors. The money they depended on for retirement or invested for a grandchild’s education will be gone. It’s a shame that more people don’t understand the markets. They put their faith in TV commentators, entertainers, or 26 year old brokers and they think they’re safe. They’re not. They rely on the opinions of others and don’t know about a few indicators that they can find on the internet. They have time to watch a ballgame or a TV show, but don’t take a few hours to go to a class and learn how to protect themselves.
Anyhow, with the Dow now EXTREMELY oversold, it should bounce next week. The A-D oscillator had a reading of –228, and whenever you get readings below –200, the market usually bounces. The only time the market doesn’t bounce Is when it’s crashing, and I don’t see a crash happening now. I believe the current decline is only part of wave 3 down of Major Wave 1 down. The real ‘crash’ will likely happen later this year, probably starting in mid-October after a Major Wave 2 retracement. That’s when all those 26 year old ‘producers’ will have to start worrying about their jobs.
IF I’m right about the bounce early next week, it will likely trigger a VIX Buy Signal. That’s because the VIX closed in the ionosphere on Friday. If you want to look at something incredible, take a look at a chart of the VIX this weekend. The Upper Bollinger Band is at 21.51, but the VIX is a ridiculous 28.03. Now that’s oversold!!!!
IF the market does rally early next week, it will likely cause the VIX to close back below its Upper Band and generate the VIX Buy Signal. And IF this happens (I strongly believe it will), it will trigger a nice short covering rally that will develop into wave 4 of Major Wave 1 down. Then after wave 4 completes, wave 5 down should drop the Dow below the 16,000 level to complete Major Wave 1 down of the new Bear Market. Remember, the target for Major Wave 1 down after an Ending Diagonal Pattern is ALWAYS where the Ending Diagonal Pattern began. In this case it’s last October’s low of 15,855.
BTW, I haven’t calculated where the next wave up will end. I’ll do it later next week, once I see where wave 3 of 3 down completes. Then once I calculate the target for the wave 4 retracement, I’ll start getting short again from those higher levels for the next ride down to 16,000.
Anyhow, take some time off this weekend to enjoy yourself. Also, if you have been following the Dean and The Tide, please try not to smile when your friend tells you about the hit he took last week. Try to look compassionate.
Better yet, tell him about some of the things you have learned about the markets from taking Classes on The Professor’s One Minute Guide to Stock Management. Recommend the book and the website. BTW, the next Basic Class starts on 2 September, with another scheduled for 3 November.
Also call your local news station and tell them about your experience with the market this week. Ask to speak to one of those 26 year old ‘producers’. I’m serious! If we don’t tell them about our experiences and request better programming, we’re doomed to watch the crap they think we want to watch.
Also, take some time to talk with your family members and friends about how you protected your money this week while the market was tanking. We all benefit by sharing the things we learn. Just remember, when it comes to the market, it’s not a reality show or a computer game. There are no do overs. When you lose money, it hurts! The loses impact our savings, our retirement or the money set aside for a child’s education. It’s real money. ALWAYS protect yourself.
Have a great weekend. Last week was a tough time to be trading the markets. So this weekend, PLEASE take some time to enjoy yourself. I want you refreshed and mentally prepared to attack the next waves of this volatile market.
That’s what I’m doing,
h
Market Signals for 08-24-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
SUM IND | NEG |
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, Weekend Strategy Review