Professor’s Comments September 28, 2016
Posted by OMS at September 28th, 2016
The Dow rose 133 points, closing at 18,228. Volume was moderate, coming in at 97 percent of its 10-day average. There were 81 new highs and 21 new lows.
All day yesterday, the business news media was saying that the 133-point rally was caused by Hillary’s successful debate performance. Hmmm? I say it was caused by an oversold 2-period RSI Wilder (16.82) with a VTI showing No Trend conditions. These technical conditions existed for 4.5 hours before the actual debate took place, so the market was primed to rally no matter who won or lost the debate. Silly media! The market just did what the technical indicators said it was supposed to do.
So what are the indicators saying now? Hmmm?
Well, after yesterday’s rally, the VTI has turned positive, but it is still below 50 so it still has a negative bias, and is still showing NO Trend conditions. But now the 2-period RSI is showing a reading of 57.38, so it’s no longer oversold, but still a few points shy of the 70 level where it will become overbought.
So here’s the deal: IF the market opens higher today, watch the 2-period RSI on the Daily Chart. If it becomes overbought (above 70), I’m going to buy a few ‘trial’ positions in DXD and SH.
When I ran The Professor last night, he only had 18 longs to go with 11 shorts. So he doesn’t see yesterday’s rally getting legs. And The Tide is still negative.
Also, several of my Money Flow indicators not only stayed negative after yesterday’s rally, but actually lost ground. And without Money Flow, the rally isn’t going anywhere.
So I’ll be looking to fade any rally out of the gate this morning.
From a pattern perspective, we still have the small, broken ‘Blade’ of the Hockey Stick pattern on the board, which suggests a move below the 18,000 level before it completes. But the important thing here is that if 18,000 is broken, it could signal an even larger decline. Right now, with an active Fed, it looks like the market is setting up for a relatively minor decline of about 3-5 percent, with the larger decline coming after the elections. But ya never know.
If the VTI and the other trend indicators start to enter the Trend Mode, the relatively minor decline I see coming could easily get legs. This is why I will be establishing a few ‘trial’ positions now, just in case things start to get ugly.
Then IF The Professor starts to highlight lots of shorts, I’ll just add to these ‘trial’ positions.
Most gold stocks pulled back yesterday, right on cue. The VTI on GLD was showing No Trend conditions and the 2-period RSI was oversold. So GLD fell back to support at its 50 day moving average. It needs to rest near the 50 for a few days before testing the 129 level. Yesterday’s decline dropped the 2-period RSI to oversold levels (15.47) so don’t be surprised if the ‘rest’ isn’t too long.
I noticed that UDN snuck onto the Dean’s List last night, appearing at the bottom. The only problem is that UUP is there too! So it could be that the Dollar is in transition, and ready to decline. If this happens, it should be very positive for gold.
I still believe that gold’s recent consolidation is preparing it for a move up. But right now I can’t say whether the consolidation triangle is a wave 4 within a five wave sequence, or something else. If the consolidation is a wave 2, then GLD could exceed my 135+ target. For now, I’m just going to stay with the 135+ target.
That’s what I’m doing,
h
Market Signals for
09-28-2016
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | POS |
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Category: Professor's Comments