Professor’s Comments April 28, 2016

Posted by OMS  at April 28th, 2016

The markets were mixed again yesterday after the Fed announced that it would keep interest rates unchanged.  The Dow rose 51 points, closing at 18,042. The NASDAQ closed down 25 points at 4,827.  Volume on the NYSE was moderate, coming in at 110 percent of its 10-day average.  There were 125 new highs and only 5 new lows.

Yesterday’s late rally after the Fed announcement appeared to be part or all of corrective wave 2 up on the Dow and S&P500.  If this is the case, then the markets should start an impulsive decline very soon, possibly today.

The wave labeling on the NASDAQ is only slightly different.  It appears that Wave 2 up on the technology laden NASDAQ completed on 20 April at the 4,969 level.  The fact that the DMI on the QQQ turned negative yesterday tends to confirm this labeling.  

With all of the major indexes appearing to be completing corrective wave 2’s, the thing to watch now is for impulsive action to the downside.  Impulsive downside action of 200+ Dow points dropping the Dow below the 17,850 level would tend to confirm that wave 3 down is underway.

An impulsive move below 17,850 will likely turn many of the cockpit indicators, including The Tide, negative.  And because wave 2 up has formed the ‘Blade’ of a small Hockey Stick pattern, a move below 17,850 projects a target near 17,550.

BTW, DIG remains on the Dean’s List and is now above 37.  If the Dow does start the wave 3 decline that I expect, it will be interesting to see how the energy stocks will respond.  Remember the favorable time to trade energy is March-April and that period is coming to an end.

Last year, energy stocks peaked in late April  before starting a significant decline.  Will this happen again this year?  If DIG drops off the Dean’s List and is replaced by DUG, it will tell me that the recent run up in energy is over.  Pay attention to these ‘Sticks in the Sand’.

For today: Watch for impulsive downside action and a possible Tide turn.

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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