Professor’s Comments April 13, 2016

Posted by OMS  at April 13th, 2016

The Dow rose 165 points, closing at 17,721.  Volume was heavy, coming in at 116 percent of its 10-day average.  There were 124 new highs and 11 new lows.

Yesterday’s rally was enough to turn all of the breadth indicators that make up The Tide back to being positive.  The two Money Flow indicators on the Dow(DIA) and NASDAQ(QQQ) remain negative.  So overall, the cockpit signals remain mixed. And with mixed signals, I remain on the sidelines.

The past 10 trading days have been characterized by several large 100+ point swings with the Dow going absolutely nowhere.  From a pattern perspective, large moves without significant price movement usually means a triangle could be forming.  And because triangles are consolidation patterns, they usually lead to higher prices once complete. 

So now that The Tide has turned positive, it could mean that last week’s high will be tested or exceeded before Wave 2 up finally completes.   It’s looking like the start of the Wave 3 decline will have to wait a few more weeks.

From a trading perspective, here’s the problem.  Even though The Tide has turned positive, I’m really not interested in trading the upside with negative Money Flow indicators and a pattern that could terminate at any time. 

Also, there’s been a lot of Fed activity this past week with at least two emergency meetings with the Fed governors and a rare meeting between Fed Chair Yellen and President Obama.  The White House said the meeting focused on the American and global economy and Wall Street regulations, but we’ll never know for sure.  I wonder why the meeting was held right after the two ‘emergency’ Fed meetings.  And why did VP Biden also attend?   Hmmm?  It’s not like Obama meets with Yellen very often as the last time they got together was in November 2014.  Could something be happening in the world that they’re concerned about?  We’ll see.

Gold (GLD) rose 0.02 cents yesterday to close at 120.05.  The pattern continues to look like wave ‘b’ of an a-b-c pattern for wave 2 up.  If this is the case, I would expect gold to move lower as the equity market rises, with GLD falling toward the 110 level.   This is where I would like to buy gold.

That’s what I’m doing,

h

Market Signals for

04-13-2016

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