Weekend Strategy Review August 31, 2014

Posted by OMS  at August 31st, 2014

During the past week, I spent a lot of time talking about ‘Trading with the Tide’ and the ‘Sticks in the Sand’ that I use to measure Tide changes.

The reason I want to talk a little more about these indicators this weekend is because DIG, the Oil and Gas ETF, appeared on Friday’s Dean’s List along with several gold stocks and ETFs.  What I want you to take away from today’s discussion is that not all ‘Sticks in the Sand’ are equal.  They all can’t be treated the same way.

For instance, you might have noticed that PBE is currently near the top of the Dean’s List.

I called your attention to the bio-techs in late May when PBE appeared on the 27 May List.  The chart showed that it was in a strong Uptrend with narrow Bands.  However the PT indicators were negative.  So we had to wait.  The PT indicators turned Green on 5 June with PBE at 40.26.  PBE was giving the all-clear signal for the bio-techs.  A quick look at the Tide Chart showed that the Tide started to come in on 23 May.  In other words, the bio-techs were riding the incoming Tide.  On Friday, PBE closed at 47.78.

When I wrote about the ‘Two Sisters’ in May, AMGN was trading near 111.  The indicators turned Green on 4 June with the stock at 119.  Two months later, AMGN was trading at 127.31.  AMGN  closed at 139.38 on Friday.

BIIB had similar results.  When I first mentioned it in May, it was trading at 290.  On Friday, it closed at 343.04.  Both stocks just rode the incoming Tide.

So now that gold stocks and DIG have started appeared on the Dean’s List, we need to note and understand the differences between what happened with the bio-techs and where we are today with gold and energy.

First of all, we should note that only a handful of gold stocks are in Up Trends. These include AU, RGLD, GDXJ, GDX, and GOLD.  All of the other gold stocks and ETFs  on the Dean’s List (SGOL, GLD, AUY, and ABX)  are all still in downtrends.  But the Big Difference between the bio-techs and gold stocks has to do with the indicators.  At this point, NONE of the gold stocks or ETFs have positive PT indicators.  So we need to be patient and wait.

When PBE first appeared on the List, it also had negative PT indicators, as did the two bio tech sisters.  But when the Tide started to come in during late May, the indicators turned positive and all of the bio-techs rose with the Tide.

Gold stocks tend to act a little differently.  Sometimes they move with the Tide, but many times they go against it.   For example, in January of this year, when the Dow was falling, gold was rising.  Then from March thru June, when the Dow was rising, gold was falling.  And as I said, sometimes they move together as they did from June to late July.  So now that they are starting to appear on the Dean’s List, we just can’t assume that IF the market starts to fall, gold stocks will rise.  No, we need to pay attention to the indicators.

That’s why I’m being patient now.  I want to have all of the elements of the SIGN in my favor:  Dean’s List, Pattern and Indicators.

Same for DIG.  It re-appeared on the Friday’s List.  But while DIG is in an Up trend with a positive DMI and MACD, the P-volume is still negative. Same for HAL and SLB, where the PT indicators are still mixed.  So once again, we can see the Big difference between what happened with PBE (bio-techs) and where we are now with DIG, HAL, and SLB has to do with the indicators.  Not only do I need to see these energy stocks and ETFs on the Dean’s List, I need to see positive indicators.  And right now, the charts are still showing a lot of Red.

That’s why all I’m doing now is being patient and waiting.

Have a great weekend.  That’s what I’m doing,

h

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