Weekend Strategy Review November 15, 2015
Posted by OMS at November 15th, 2015
The Dow fell 203 points on Friday, closing at 17,245. It was down 665 points for the week. The NASDAQ was down 77 points on Friday and down 219 points for the week.
It appears that Major Wave 3 down is underway. The initial move down from the Head & Shoulders topping pattern has been completed. This should set the stage for a stair-step decline toward the 16,000 level on the Dow, which is where the larger Ending Diagonal Pattern began.
Friday’s decline caused all of the cockpit indicators to turn negative. So now with a negative Tide, I will be looking to buy and trade inverse index ETFs from the Dean’s List. This is what I do.
When The Tide first turned negative a few days ago, I started to look for inverse index ETFs to appear on the List. The first two ETFs to appear were TWM, the inverse ETF for the Russell 2K and SDS, the inverse ETF for the S&P500. If you bought a few shares of each ETF at yesterday’s open based on the shorter term bars, they are now showing small profits.
However if you look at a daily chart of these ETFs, you will see that both are only starting to rise from their bottoming patterns. The DMI and Money Flow indicators have turned positive, but the trend indicators are nowhere near entering the trend mode. The 35 period CCI on both of these inverse ETFs is still negative. The CCI on the Dow is still positive! Friday’ reading was only 11.3. It needs to go below -100 before the Dow enters the Trend Mode.
BTW, one of the reasons that you are not seeing a lot of stocks being highlighted as shorts for the Honor Roll is because Emeritus is still NOT sensing a trend yet. So even though the Dow fell over 500 points in the last 3 days, it has still NOT entered the Trend Mode.
So we’re seeing the markets making large impulsive declines, without being in a trend yet. Hmmm? What does this tell us?
Well, if you look closely at Friday’s action on the Dow, you will see that it closed back below the 50 and 200 day moving averages. In other words, it made a ‘Rope Jump’. Rope Jumps always suggest that the market could be changing direction. In this case, it would suggest that Major Wave 3 down is starting. And as we know from Class, all major declines should be accomplished in five waves.
So IF Friday’s ‘Rope Jump’ was part of Wave 1 down of Major Wave 3 down, once this wave completes, it should be followed by a wave 2 retracement, before the major trend waves begin. The retracement waves within wave 2 up should give us at least two opportunities to add to our inverse positions before the impulse wave (3 of 3 down) starts.
So from an overall strategy perspective, we need to be patient. My basic strategy is to hold positions in a few inverse index ETFs, and then add to them on rallies as the market starts to show its hand.
Here’s the thing to keep in mind. For the past few days, I have been reminding you that my current target for the Dow is the 16,000 level (160 on the DIA). This is where the Ending Diagonal began on 29 September. But this is only my initial target. The final targets are much lower!
Once 16,000 is achieved, the next target will be the 24 August low of 15,370. Beyond this is 12,000 and then if this level is broken, levels below 10,000 start to come into the picture.
My point in all this is that the decline you saw late this week is likely only the beginning. If I’m right, it’s only the start of Major Wave 3 down, Then once Major Wave 3 down completes, it should be followed by Major Waves 4 up and 5 down before this Bear Market is finished, probably in 3-4 years.
Protect yourself.
That’s what I’m doing,
h
Market Signals for
11-16-2015
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