Professor’s Comments April 17, 2014
Posted by OMS at April 17th, 2014
The Dow rallied for 162 points yesterday, closing at 16,425. The rally was enough to turn the DMI on the Dow (DIA) positive, however the MACD and P-volume remain negative. All three PT indicators remain negative on the NASDAQ (QQQ). Volume was moderate on the rally, coming in at 91 percent of its 10 day average. There were 105 new highs and 16 new lows.
Yesterday’s trading action was the first sign that things could be starting to chance. Not only did the DMI on the Dow turn positive, but the DXD, the inverse index ETF for the Dow, dropped off the Dean’s List and was replaced by DIA and DDM. All of the other inverse index ETFs remain on the List.
So we now have mixed signals. Whenever we have mixed signals, its likely that the markets are still in some sort of consolidation pattern. In other words, we need to look at and give added weight to the charts.
And right now the charts are suggesting that yesterday’s rally was likely a corrective wave within the final wave of the 3-3-5 Flat pattern or even a ‘b’ wave within the pattern. In either case, it still does not appear that the pattern is complete. The pattern still suggests that the markets will make one more wave down before a major rally starts. I’m gonna stay with 15,850 or so as the bottom…at least for now.
The major take away from yesterday’s trading action was that while the markets might not have reached a bottom in the current pattern, there is little to suggest that any decline from these levels will be the start of a new down trend. With the Dow trading slightly above 16,400, a move down to 15,850 still represents a potential decline of over 550 Dow points. And if you’re holding stocks, it’s likely that the move will scare you. But at this point, I am starting to feel more confident that any move near or below 16,000 now should be viewed more as a buying opportunity than anything else.
So all I will be doing today is watching.
I scalp traded a few shares from the energy sector yesterday, but even energy is starting to look tired. The sector could benefit from a few days of rest. If the market does pull back today, I will not be as aggressive as I have been for the past few days with my scalp trades. If I do anything, it will likely involve a short in gold..
Gold is starting to look tired. After gapping down two days ago, GLD spent yesterday trying to exceed Tuesday’s high. It didn’t. All of the PT indicators are now Red on GLD. The stock remains in a down trend (50<200) with a nice inverse Hockey Stick pattern that has developed during the past month. Tuesday’s gap down from the Blade tells me that GLD is in trouble. If GLD starts to break below yesterday’s lows, I will be looking to short gold stocks.
GLD is currently trading near the 125 level. It has a 10 point stick that projects to a target near 117. The two most recent bottoms are near the 114 level. So I would expect a move down to 117, and then a re-test of the 114 level. If GLD does in fact re-test these lower levels during the next month, it might be time to polish off our picks and shovels and go mining.
That’s what I’m doing,
h
Market Signals for 04-16-2014 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
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