Professor’s Comments April 26, 2016

Posted by OMS  at April 26th, 2016

The Dow fell 147 points early but then rallied late in the day to close down 27 points at 17,977.  Volume was low, coming in at 89 percent of its 10-day average.  There were 37 new highs and 4 new lows.

It’s possible that yesterday’s early decline and late rally were sub-waves 3 down and 4 up of Wave 1 down, something I talked about last weekend.  If this is the case, then sub-wave 4 up could continue to develop during the next day or so before the market starts its wave 5 decline to complete Wave 1 down. 

The alternate pattern is that yesterday’s decline and rally was part of wave 2 down of final Wave ‘C’ up, with an impulsive wave 3 up next.  If this is happening, then the Dow could rally back to the 18,200 level before topping.

One of reasons I have to consider the alternate pattern is because the Money Flow indicators on the cockpit are still positive.  As long as money continues to flow into the market, there’s always a possibility that the market could push higher. 

Also from a breadth perspective, so far all the down action we’ve seen since 20 April has only turned two of the four breadth indicators that make up The Tide negative.  I need to see all four of these indicators turn negative before I start shorting.

The key level I’m watching now for the Dow is 17,850.  If the Dow rallies today and starts to pull back, it will form a small Head & Shoulders pattern on the 15 min bars with a neckline near 17,850.

The ‘Head’ of this H&S pattern is about 311 points.  So IF the Dow breaks 17,850, it will likely send the Dow down to the 17,550 level.  If this happens, it should be enough to turn most, if not all, of the cockpit indicators negative.

Watching.

That’s what I’m doing,

h 

Market Signals for

04-26-2016

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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