Weekend Strategy Review November 15, 2014

Posted by OMS  at November 15th, 2014

The markets finished the week mixed.  The Dow fell 17 points, closing at 17,635.  The NASDAQ rose 11 points to 4,225.  My target for the NASDAQ coming off the small wave 4  is near 4250-4230.  Yesterday the NASDAQ-100 got as high as 4225, so it’s almost there.  The SPX was flat, closing up 0.49 points at 2,040.  It too appears to be very close to the target range of 2040-2050 I mentioned a few weeks ago.

Volume was moderate on the NYSE, coming in at 98 percent of its 10-day average.  There were 134 new highs and 51 new lows.  In other words, the distribution process continues.

As you know, I like to talk about strategy on the weekend.  I started to do this yesterday, talking about how I would be using The Tide and the Dean’s List to trade the market on its next move down.  If you didn’t read Friday’s Comments, I suggest you do this first, and then come back to this WSR.  I want to make sure that you understand the basic strategy I will be using to trade the market as it starts to turn.

So go do it.  Re-read yesterday’s Comments.

Ok, so where are we now?

Well for starters, the A-D oscillator had another ‘small change’ yesterday.  The oscillator declined to 48.36, down 7.44 points from Thursday’s reading of 55.8. This means that we need to be on the lookout for a Big Move in the markets within the next 1-2 days.  Also, IF that Big Move is down, it will likely drive the A-D oscillator into negative territory and we could have a Tide change.  So watch the A-D oscillator.

I should mention that besides the A-D oscillator, the Up-Down Oscillator and all of the other breadth indicators that make up The Tide are also very close to turning negative.  It won’t take much for them to change at this point.   I’m attaching a chart of The Tide so you can judge for yourself.

You might want to also note the EXTREME negative divergences that have occurred in breadth during the past few months.  In particular, note the big divergence in the Summation Index and Hi-Lo indicator.  These indicators are telling you that this is NOT a healthy market.

Ok, so all I’m doing now is waiting for the Dean’s List and Tide to turn negative.  Once this happens, I’ll start looking to trade inverse ETFs as they start to appear on the Dean’s List.   On Friday, I told you that one of the first ETFs that I’ll be looking to buy is TWM, the inverse ETF for the Russell 2K.  It still appears to be the weakest index of all the majors.  While the Dow, SPX and NASDAQ have made new highs during the past few weeks, the Russell has not.  It’s still several points below its 1 July high of 1213.55. 

On Friday, TWM rose 0.17 on positively diverging P-volume.  The PT indicators are still RED, so I’m still watching.  If it appears on the Dean’s List next week and the indicators turn Green, I’m a buyer.

Last Tuesday I talked about the U.S. Dollar and gold, as RGLD and GOLD started to appear on the List.  I said that IF the dollar starts to fall, it could trigger a significant improvement in the price of gold shares.   On Wednesday, I said that If a few more gold issues, besides RGLD and GOLD, start to appear on the Dean’s List, I’ll look to buy a few trading shares when the PT indicators turn positive.  Yesterday, several other gold related issues joined RGLD and GOLD on the Dean’s List.   So now GDX, ABX, GLD, SGOL are on the List along with three silver issues, SLV, SLW and PAAS.  Hmmm?

The PT indicators on the gold rabbits, RGLD and GOLD, have turned positive.  However the indicators for the rest of the colony have not.  If the PT indicators on GDX turn positive next week, I’ll buy a few shares as a trade. 

Same for SLV, the physical silver ETF.  I actually feel that silver has even more potential than gold at this point.  While gold could be starting a wave 5, silver could be starting an impulsive wave 3.  I’ll take a wave 3 every day of the week over a wave 5.  My longer-term target for silver is above the 50 level, with 60-70 possible.  If the indicators turn positive this week, I’m a buyer. 

Remember…I’ve been waiting a loooong time for both gold and silver to bottom.  I’ve been telling you to be patient; that gold would likely fall to the 1150 level.  Remember?  Last week gold touched 1140 before rebounding.  So now that gold has reached my target, it might be time to pick-up a few trading shares.  We have a pattern (TLB), gold shares are starting to appear on the List.  All I need to see now is positive indicators.

I should note that UUP, the positive U.S. Dollar ETF is still on the List.  If UUP falls off the List and is replaced by UDN, the inverse ETF for the Dollar, it will make me feel a lot better about my gold purchases.  It still appears that the Dollar, currently near 87 is at the top of its 2-year HS Pattern.  I’m looking for it to start a significant decline that could take it below 70 during the two years.

Again, all I’m doing now is waiting and watching the Dean’s List and Tide for a change.  Remember….I always want to trade with the Tide.  Not sometimes, ALWAYS.

Have a great weekend.

That’s what I’m doing,

h

FAQ

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