Weekend Strategy Review June 22, 2014

Posted by OMS  at June 22nd, 2014

The Dow rose 26 points on Friday, closing at 16,948.  It was up 172 points for the week. The NASDAQ was up almost 9 points on Friday, and was up 57 points for the week.

Both the Dow and the NASDAQ are now at a very important resistance levels. The Dow is back to its apparent wave 3 target high.  The NASDAQ is back to the high it made on 6 March after which it pulled back and made a negative ‘Rope Jump’ on 15 April.  So after the downside ‘Rope Jump,’ the current rally on the NASDAQ MUST be viewed as a wave 2 corrective rally unless proven otherwise.

One of the key sectors that I will be watching next week is technology. Specifically, I will be focusing on the Computer Hardware Group within the technology sector That’s because three of the largest stocks within this group, AAPL, HP, and IBM, are starting to show signs of reversing.  And if the technology sector starts to join the telecoms, which is currently the weakest sector, the technology heavy NASDAQ and the Dow could be headed for trouble.

Right now, all of the indicators on the major indexes are Green and they are all in well-defined Uptrends.  So if you have been participating in this rally since The Professor first gave his Buy Signal on 18 and 19 March, you probably have had a nice ride.

But as you continue to ride, keep an eye on Apple (AAPL).  Apple has formed a potential THT Pattern and made a spit adjusted high of 95.06 on 10 June.  Since reaching that high, the stock has pulled back a few points in what could be the start of a change in direction.  The P-volume turned negative on 13 June, telling me that the stock could be running out of gas.  So now IF the other two PT indicators start to turn negative in the days ahead, it will generate a classic THT Sell Signal.  I have included a chart of IBM with this WSR so you can see how the stock started to change direction after it completed its THT Pattern.  Once the PT indicators turned negative, it performed a negative ‘Rope Jump’, which pulled the 50 below the 200.  IBM, one of the leading technology stocks on the Dow, is now in a solid down trend.

As I said above, the reason I’m mentioning this today is because the major indexes are now at very important levels.  From these levels, the Dow could either start to rally hard toward the final top above 17,000 or start to decline toward 16,300.  Either way, the move should be intense.

That’s because the A-D oscillator had another very small change on Friday.  This small change signal was the second signal in as many days.  And usually when the oscillator gives back-to- back signals that have differences of less than a point, the move after the signal can be extremely violent. We’ll see,

Right now, the Dean’s List and all of the cockpit indicators are still very positive.  So I will continue to maintain my positive bias.  But I have to tell you that I am also very cautious now because the pattern suggests that we are either at or very close to a top.

The Professor is showing NO indication that a new trend is starting.  And on Thursday, the VIX came within 0.03 points of generating its third Sell Signal.

This is why I’ll be watching Apple. Taken together, the mixed signals from the indexes are not enough for me to make any changes to the small energy positions I still have in my portfolio. But the early signs are enough for me to start paying attention to a potential change in direction in technology. Technology is starting to look like the canary that will signal the next major market move.

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

h   

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