Professor’s Comments March 26, 2015
Posted by OMS at March 26th, 2015
The Dow fell 293 points to close at 17,719. Volume was moderate, coming in at 101 percent of its 10-day average. There were 86 new highs and 14 new lows.
Well, we got the impulsive downside follow through I wanted to see to complete the ‘Island Reversal’ topping patterns. So now the odds are high that wave 2 up has completed and wave 3 down has begun. However, I still can’t be sure until the 17,620 level is broken. Until that happens, the possibility exists that yesterday’s down move could be part of a mulch-wave wedge pattern that will complete near the 18,300+ level.
The Dean’s List and the cockpit indicators have turned negative. However The Tide remains neutral. The lone holdout is the Up-Down oscillator which is still positive. This tells me that the Dow will likely test the 17,620 level in the days ahead, but once the test is complete, the Dow should bounce as retracement wave 2 of 3 down starts to come in.
Remember, IF wave 3 down has started, the decline in the Dow to below 17,000 should take place in a series of five waves. Right now, it appears that we’re only working on wave 1 of the 5 minor waves of wave 3 down. Once this wave completes, probably somewhere near 17,500-17,600, retracement wave 2 of 3 down should start to develop. If wave 1 completes near 17,550, I would expect wave 2 to rally back to 17,800-17,850 before the real damage of wave 3 of 3 down begins. In other words, if you’re not short already, there is a good chance you will have another opportunity from the 17,800+ level.
Another reason I believe the markets will not fall straight down from current levels is The Professor. When I ran the algorithm last night there were only 11 shorts. In the past, The Professor usually had to highlight 50 or more stocks before a significant down trend started. So it’s likely that even though the decline during the past two days has erased almost 400 points off the Dow, it’s only the preliminaries. The real damage of the Trend Wave (wave 3 of 3 down) has not started. It’s probably a week or so away.
So use the time wisely. If the Dow continues to fall below 17,620 in the next day or two, it will tell me that the Major Bull Market that started in March 2009 is over. And once 17,620 is broken, even if the Dow rallies back to 17,800+, it’s still over. The only thing that would change the wave count now is IF the Dow starts to rally BEFORE it breaks 17,620. And IF this happens, it means the Dow will likely rally back to 18,300+ before topping. But with a negative Dean’s List and cockpit indicators, the odds of a rally to 18,300+ are extremely low.
Right now, with negative indicators across the Board, you need to be thinking about protecting yourself. Because the decline of the past two days has been impulsive, it’s highly likely that wave 3 down has started. And anytime the market has completed a Major Topping Pattern (Ending Diagonal) and has shown indications that a wave 3 down has started, there is always a chance that panic will develop. If the market panics, prices could fall significantly lower without a retracement. I don’t see this happening now, mostly because The Professor is still pretty calm. But if he starts to highlight 50 or more stocks today, the odds for a panic drop will increase significantly.
I’ll be running all of my algorithms during the day. If the 17,620 level is broken and The Professor starts to become active, I’ll let you know. Hopefully he’ll stay calm, which would tell me that a wave 2 of 5 bounce is coming.
Protecting myself.
That’s what I’m doing,
h
Market Signals for 03-26-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments