Professor’s Comments April 8, 2016

Posted by OMS  at April 8th, 2016

The Dow fell 174 points, closing at 17,542.  Volume was moderate, coming in at 103 percent of its 10-day moving average.  There were 76 new highs and 14 new lows.

The market continues its topping process.  Yesterday’s decline appeared to be wave ‘d’ of a Bearish Rising Wedge pattern to complete Major Wave 2 up.  If this is the case, then one more wave up should complete the pattern before prices start to decline.

The cockpit indicators remain mixed.  The DMI on the Dow (DIA) is negative but still positive on the NASDAQ (QQQ).  The Money Flow indicators on both indexes remain positive.

The positive Money Flow indicators tell me that it’s still very early in the topping process. And even though yesterday’s decline was large, it’s still likely that the Dow will rally back to test its recent high before the wedge pattern completes.  So IF the market rallies early today, short term traders should watch the Money Flow indicators on the 30 and 60 minute bars for signs of weakness.  They should provide the first indication of a potential change in the Daily bars.

I would really like to see the Money Flow indicators turn negative before I start to aggressively short this market.   Right now these indicators are very close to tuning negative, but they haven’t turned yet. And as long as the Money Flow indicators remain positive, a short-term rally is not only possible, it’s likely.

Yesterday’s decline caused TWM, the inverse ETF for the Russell 2K to appear on the Dean’s List turning the List to neutral.  In the days ahead I would expect more of these inverse index ETFs to appear as the List shortens.

Same for The Tide.  Right now 3 of the 4 breadth indicators that make up The Tide are negative.  The lone positive holdout is the Hi-Lo indicator.  Once The Tide turns negative I will start buying inverse index ETFs from the Dean’s List.

Watching the indicators and being patient.

That’s what I’m doing,

h

Market Signals for

04-08-2016

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

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.