Professor’s Comments August 13, 2013
Posted by professor at August 13th, 2013
The Dow fell 6 points on Monday, closing at 15,419. Volume was extremely light coming in at 87 percent of its 10 day average. There were 107 new highs and 64 new lows.
With the markets in what appears to be the middle of a wave 2 correction, it’s been all about gold and silver for the time being. The metals lead the Dean’s List.
Since turning Green off it’s TLB Pattern, Royal Gold, RGLD, the Dean’s favorite gold rabbit, is up over 8 points to 58.27. Same for SLV, which I highlighted during the day on Friday, when its DMI turned positive after its TLB Pattern. SLV is now up over a buck.
But don’t get too comfortable with the metals. I still believe that they are only trades. No matter what they do on this pop, if they are in fact in the process of turning around, they will need to form Blades before they can move significantly higher.
On the other hand, if this pop turns out to be a false alarm, gold should meet stiff resistance at the 1360-1400 level, and then start one more leg down to the 1100-1150 level to complete wave 5 wave of its Major Wave 4 triangle pattern,
Besides my concern with the patterns, another reason I’m not comfortable with the metals now has to do with the Fed’s tapering program. Looking ahead, It appears that everything will hinge on the August jobs report, which will be announced on the first Friday of September. The jobs report, which we know is a complete fabrication, has been averaging about 200K jobs per month for the past year. It was higher than 200K per month in the December 2012 to April 2013 period, but has declined in the past three months. And while the late summer and early fall tend to be Bullish for the metals, I believe the biggest influence on metal prices going forward will be the Fed’s stimulus program. If the September jobs report is weak, and the Fed delays its tapering program, then the metals will likely continue to rally. However, if the report is strong, it’s highly likely that tapering will start soon, causing gold to decline again, this time to the 1150 level.
All I’m doing now is following the indicators. As I mentioned in my WSR, when the indicators on a stock or ETF turn Green after a TLB pattern, we usually see a minimum of a 5 percent rise. SLV, now at 20.62, is currently up about 4 percent since turning Green with a near term target of 22.3. Royal is up over 16 percent at 58.27. The small Hockey Pattern that developed in late July and into early August on Royal projected a target near 59. The 200 on RGLD is currently at 60.71 and should provide significant short-term resistance. Again, remember these stocks are only trades. Once the indicators turn negative, we exit the trades. No falling in love. I only fall in love IF I see a ‘Rope Jump’ after a TLB Pattern and then see a nice Blade develop. That hasn’t happened yet with gold or silver. So I’m not in love….at least not yet. With the metals still in downtrends, I need to see them do a lot more work before I think about any sort of serious relationship with them.
I’m still watching Schlumberger, SLB, as it pulls back forming a nice Hockey Stick Pattern on the Daily’s. The stock is still in an Up trend with positive PT indicators making it a candidate for a Rifle Trade on the 60s.
The two crude oil ETFs, OIL and USO, remain on the Dean’s List as they appear to be forming nice wave 4 triangles for Blades. If I’m correct about the triangles, they might need one more small leg down to complete the pattern. Both ETFs remain in Up trends with positive PT indicators.
Same for TBT, the inverse 20+ year Bond ETF which continues to form its Blade in a move sideways. The ETF fell to a low of 74.73 yesterday before rallying to close at 76.26. I’ve been saying that TBT could fall, to the 73 level, which is where the 200 ma currently resides (73.24). And while the Blade does not appear to be strong enough to support a move into the low 90s at this point, I might consider buying a few shares as a trade if the indicators turn Green on the 60s.
Once the current rally wave in the Dow completes, I still believe the next wave down will take it close to the 15,000 level.
|Market Signals for 08-13-2013
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Category: Professor's Comments