Professor’s Comments August 30, 2016
Posted by OMS at August 30th, 2016
The Dow rose 108 points, closing at 18,508. Volume on the NYSE was the lowest of the year, coming in at 85 percent of its 10-day average. There were 214 new highs and only 11 new lows.
Rallies on low volume are usually suspect. This one appears to be the start of final wave ‘c’ up to complete the Expanding Top pattern. It’s always difficult to predict where an Expanding Top pattern will complete, but final wave ‘c’ up should come close to testing the 15 August high of 18,668.
Yesterday’s rally was strange because even though it produced a 100+ point gain on the Dow, which caused the Dean’s List to turn positive, the weak internals caused the Hi-Lo indicator to turn negative. So with all four breadth indicators negative, The Tide is negative again. Normally with a negative Tide, I would be looking for inverse index ETFs to trade from the Dean’s List. But right now the Dean’s List doesn’t have any.
Same for the VTI. Yesterday’s rally also caused the VTI to turn positive again, but last night when I ran the Emeritus algorithm, he didn’t produce any stocks to trade as longs for the Honor Roll.
Also, when I ran The Professor last night, he did not produce enough stocks on the long side to generate a Buy Signal. So with the VTI and The Professor both indicating that no trend is developing, I continue to watch from the sidelines.
Remember what I said last week about being patient and waiting for a trend to develop. If you jump the gun and start trading the downside without a trend in place, you will likely experience whip-saws. Yesterday’s rally was a good example of this. Remember too that we still have NOT seen any type of impulsive move to the downside, which means that the market will likely continue to chop higher in a series of a-b-c moves. In other words, be patient. I don’t believe the risk vs. reward odds are favorable for trading either side now.
BTW, yesterday’s VTI reading on the Dow was a neutral 57.55 with a 2-period RSI reading of 70.97. So going into today’s trading, the Dow is slightly overbought with No Trend in place. So IF yesterday’s rally was part of final wave ‘c’ up, the market will likely consolidate during the next day or so before it makes its final run to the top.
I’m also watching gold closely now as GLD continues to form what appears to be a wave 4 consolidation triangle. If I’m correct about the triangle, GLD should start its next leg up very soon.
Yesterday’s small bounce from oversold conditions was not enough to turn the VTI on GLD positive. It still heading lower and now has a reading of 38.99. As long as the VTI on GLD stays above 30, I will continue to hold my gold shares. If the VTI turns positive during the next day or so, I will add to my shares. GLD remains a Rifle Trade candidate on the 60s.
That’s what I’m doing,
h
Market Signals for
08-30-2016
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS |
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Category: Professor's Comments