Professor’s Comments April 22, 2016

Posted by OMS  at April 22nd, 2016

The Dow fell 114 points, closing at 17,983.  Volume was moderate, coming in at 107 percent of its 10-day moving average.  There were 86 new highs and only 8 new lows.

Yesterday’s large decline was the Big Move predicted by the small change in the A-D oscillator.  The decline added a Bearish Engulfing candlestick to the Bearish pattern that formed during the previous two days of trading. This overall pattern is often seen at market tops.

However, even though it’s starting to look like a top is in, I still don’t have confirmation.

The Tide, Dean’s List, and all of the other cockpit indicators remain positive.  And until these indicators actually start to turn negative, I’m still watching from the sidelines.

After looking at yesterday’s trading, I was very surprised that both Coaches, the Money Flow indicators for the Dow(DIA) and NASDAQ(QQQ), remained positive. Several of the other indicators that I use to measure volume and money flow have already turned negative, but the two on the cockpit remain positive. These guys don’t turn easily, and right now they’re getting pretty close.  If the market continues to trade lower today, I would expect confirmation from these indictors.  I don’t have it yet.

The other thing I’m watching now is interest rates.  Last night TBT, the inverse Bond ETF replaced TLT on the Dean’s List.  This is a pretty big deal because it could mean that actual interest rates are starting to rise.  And rising rates would be another negative for equities at this point. 

Right now, only two of the three PT indicators on TBT are positive, with the MACD being the lone negative holdout.  The ETF is coming off a TLB pattern, so if the MACD joins the party, rising interest rates (and falling Bond prices) will start to attract lot of attention.

BTW, bond traders might want to go back and review the performance of some of the other “Sticks in the Sand”, to see what happens when one ETF in a pair of ‘Sticks’ drops off the Dean’s List and the other appears.   It’s generally not good for the ETF that falls off the List. 

One of the more recent examples is with the Energy ‘Sticks’, and how DIG replaced DUG in late February.  When DID appeared on the List on 17 February, it was trading at 26.86.  Yesterday it closed at 35.17 after dropping 0.32 cents.  Pay attention to those ‘Sticks in the Sand’, especially when the overall market could be at an important turning point.

I’m just watching today.  Marcia and I will be traveling to Boston today before flying home.  I’ll post the WSR on Sunday morning.

That’s what I’m doing,

h

Market Signals for

04-22-2016

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