Professor’s Comments April 15, 2014

Posted by OMS  at April 15th, 2014

The Dow rose 146 points, closing at 16,173. Volume was low on the rally, coming in at 91 percent of its 10 day average.  There were 60 new highs and 48 new lows.

After two days during which the Dow shed over 400 points, the relief rally was expected. Remember, the A-D oscillator had a reading of -150 going into yesterday’s session, so the market was very oversold. Yesterday’s session only moved the A-D oscillator back to -90.59, whjich means that the majority of stocks are still in down trends.

All of my indicators remain negative going into today’s session, so with the oversold conditions temporarily relieved, it’s likely that the market will resume its downward course today and continue to ‘feel’ for a bottom. During this bottoming  process, I will be watching all of my indicators and Lists for signs of a bottom. Right now, I still don’t see any.

However on the plus side, it was good to see the market rally yesterday, especially within the five wave corrective Flat pattern that appears to be developing.  The final leg of a 3-3-5 Flat always contains a series of down-up-down waves to produce the ‘c’ wave down.  Yesterday’s rally was likely wave “d” in the five wave sequence.  So the next wave down should be wave “e” or the wave that forms the actual bottom.

The VIX dropped 0.92 yesterday and closed back below its Upper Bollinger Band.  So now we have a new VIX Buy Signal on the board.  As I’ve stated before, VIX Buy Signals are usually very reliable, but they can occur several days early as the market completes its bottoming pattern.  I always like to have a fresh VIX Buy Signal in my pocket while I’m waiting for a bottom to form.

The Dean’s List remains negative, and The Professor is still sleeping.  Last night he only had 7 longs to go with 3 shorts.  So all I’m doing now is watching and waiting.

Gulfport Energy(GPOR) had an interesting day after it opened 1.20 lower.  The stock wen on to rally to an intraday high of 75.73 before pulling back to close unchanged at 74.  This type of trading is not something you want to see if you currently own GPOR.  That’s because yesterday’s trading action produced a candlestick that is often associated with a top.  And coming where it is in the overall pattern, yesterday’s candlestick could have been a top. We’ll have to see…

The target for GPOR in the Hockey Stick pattern that has been building since 10 January is the 76 level.  That target was derived by adding the 24.03 points of the ‘Stick’ that started on 24 June 2013 to the low of 52.28 made on 10 January.  So 24.03 +52.28 = 76.41.    In other words, by hitting 75.73 yesterday, GPOR was less than one point from its target.  It’s now time for me to move my stop on GPOR closer to the target.   The stock could continue to move higher in the days ahead,  but now that it is very close to its target price and appears to be completing its HS pattern, I would expect that it would need to pause a bit to form a new Blade before pushing significantly higher.

Halliburton (HAL) also had a strong day yesterday gaining 1.49 points to close at 59.08.  My target for HAL is at the 64 level, so another few days of strong trading could see HAL and all of the other energy issues approaching their targets.  The calendar say it’s 15 April, so the strong March-April period for energy is almost over.  I do not like to trade energy going into May.  That’s why I’m watching my energy stocks very closely now and starting to manage some money.

Don’t get me wrong; energy is still one of the few sectors showing any strength in this market.  And as long as this strength continues, I will be holding my energy stocks.  But you have to realize that several sectors, like the biotechs and technology, have really been hammered during the past few weeks.  And now that they are down, value investors will start to move money into these sectors.  Money that was previously going into energy.

I don’t see this happening yet as most of the sectors that I monitor are still showing negative trend scores.  But once the bottom arrives, it’s likely that some of the sectors that have lagged will start to turn around to help push the market to its final top.  All I’m doing now is waiting and watching to see which of these sectors will take over the lead.

That’s what I’m doing,

h

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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