Professor’s Comments August 1, 2013

Posted by professor  at August 1st, 2013

The Dow fell 21 points, closing at 15,499.  The Dow had been up over 100 points earlier in the day, which was likely the result of the small change in the A-D oscillator.   BTW, the early rise made for a typical Fed day trade, just like I teach in Class.  Volume was heavy, coming in at 118 of its 10 day average.  There were 206 new highs and 73 new lows.

As expected, Bernanke and company announced they will continue to buy $85 billion per month of bonds and mortgages for the foreseeable future. This should keep interest rates low, and provide continuesd support for stock prices.  Bonds rallied on the news, causing TBT, the inverse 20+ year ETF to give back all of its early gains.  Apparently the bond market was looking for the Fed to start ending its tapering program in September.  When nothing was said about ending tapering near term, bond prices rallied.  In yesterday’s comments, I mentioned that this could happen, and if it did, TBT would continue to be range bound.  I believe this is perfectly normal for the ETF at this point, as the current pattern appears to need additional Blade development.

BTW, I hope many of you took a few bucks off the table after yesterday’s early pop in TBT.  Like I said, I didn’t expect a moon shot with this ETF, at least not yet.  TBT was just another example of a stock going to a target, and not the moon.  And yesterday’s early 2+ point pop was EXACTLY to the target I mentioned last week.  When a stock hits its target, we manage money.

There was another small change in the A-D oscillator yesterday, so we need to be on the lookout for another Big Move within the next 1-2 days.  And given that the jobs report will be coming out tomorrow morning, it is likely that the Big Move could be associated with that report.  But we need to get by today first.

Looking at the early futures which are currently up over 100 points, it appears that the Big Move will happen today.  And given that we could be nearing completion of wave 1 up, IF we get the Big Move today, it sets up the possibility that a disappointing  jobs report tomorrow could trigger the start of wave 2 down.  Unfortunately, we won’t know the results of the job report until 8:30 tomorrow, before the market opens. And this could cause a significant decline BEFORE you have a chance to do anything about it. So basically what I’m telling ya is to be very careful if we rally hard today.

Also, the first day of a new month is usually very positive for traders. That positive bias will go away after today, with days 2-5 usually being negative. Another reason to be careful.

Yesterday I received an email from Linda S. asking if yesterday’s pop to 15,634 was close enough to the top of 15,700+ I had been expecting.  She noted that her Summation Index had rolled over.  I don’t thing so.  The reason I don’t believe yesterday was the top is because we have been trading sideways for over two weeks now.  That sideways trading action has produced a Big Blade!  And IF I’m right about this particular Blade being wave 4 of wave 1 up, the markets should have a much stronger rally than I originally expected.  Right now, 15,700+ appears to be a minimum.  But things could change quickly with a poor jobs report.

Just before yesterday’s Fed announcement, I bought a few shares of SLB as a Rifle Trade. I didn’t pay much attention to the trade after I bought it and noticed that it fell late in day, closing at 81.33.   I bought my shares at 81,70, so I’m currently down 37 cents.  The PT indicators remain positive, so I’m still in the trade.  One of the reasons I selected SLB is because of the tight Bands on the 60s.  Tight Bollinger Bands usually cause the ‘toothpaste to get squeezed from the tube’, resulting in a Big Move.  But we know that the Big Move could be up or down, so IF the PT indicators start to turn Red, I’m out of this trade.

I won’t be doing much today, mostly because it the markets open with a Big Move to the upside, I don’t want to play given that the all important jobs report will be coming out tomorrow.  I prefer to wait until I see how the market reacts to that report.  IF tomorrow’s jobs report disappoints the markets, I’ll look for a few shorts for the move down.  I’m still thinking that wave 2 down should end near the 15,000 level.

On the sidelines looking to manage money.

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

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