Weekend Strategy Review July 27, 2014
Posted by OMS at July 27th, 2014
The Dow fell 123 points on Friday, closing at 16,961. The decline was the Big Move predicted by Thursday’s ‘relatively’ small change in the A-D oscillator. The Dow was down 140 points for the week. The SPX was down 10 points on Friday and flat for the week.
Last week I posted a chart that showed how breadth on the NYSE was declining. I talked about how the market appeared to be approaching an interim top, and how difficult it is to trade the long side when the four breadth indicators are negative. So this past week you had a chance to see what usually happens when breadth starts to decline. The market usually goes down.
I’m posting three charts with this WSR. The first is an updated breadth chart so you can see that breadth is still negative and declining. And because of this, except for my ‘trade’ in TWM, I’m still mostly on the sidelines. I’m just waiting for the markets to roll over.
The second chart is an update of the TWM trade. As you can see from the chart, all the indicators are still Green. All I’m doing now is holding the position.
If you recall, I first started to trade TWM, the inverse Russell 2000 ETF, because it appeared on the Dean’s List after forming a classic TLB Pattern. This is something I always do when I see a stock or ETF first start to appear on the Dean’s List. I take out my SIGN and make sure that the ETF has all of the the elements required for a trade: (1) Dean’s List, (2) Pattern, and (3) Indicators. So when I saw TWM on the DL with a TLB Pattern, I just waited for the PT indicators to turn positive. When they did, I bought a half position near 45.60. On Friday, it closed at 46.39. The indicators remain Green, so I’m still holding.
The reason I’m reviewing this ‘trade’ with you this weekend is because on Friday, DXD, the inverse ETF for the Dow-30, appeared on the Dean’s List. Hmmm? So now, of the 4 major indexes, two of the tracking ETFs are positive (QQQ and SPY) and 2 are negative (Dow and Russell 2000). In other words, the List is starting to change. It’s starting to turn negative.
And because of this, I now want to watch DXD, It’s on the List with a TLB Pattern. So now all I have to see is for the indicators to turn positive. (Remember, DXD is an INVERSE ETF that rises when the Dow declines).
As you can see from the chart, the indicators on DXD are still yellow. The price on my charts is color coded to reflect the status of the DMI and MACD. When both are negative, the price bars turn Red. When both are mixed, price turns Yellow. And when the DMI and MACD are both positive, the color turns Green.
This way all I have to do is look at the color on the price bars, then check the P-volume, and if everything is Green, I have all the information I need to make a Buy decision.
Again, to Buy a stock or ETF, I need to (1) see it on the Dean’s List or Member’s Watch List, (2) see a Pattern and (3) see Green Indicators.
So with DXD, all I need to see now is Green Indicators. If this happens next week, I’ll Buy my second trading position. Trading positions are always half positions.
Market Signals for 07-28-2014 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
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