Professor’s Comments August 2, 2016
Posted by OMS at August 2nd, 2016
The tale of two markets continues.
The Dow fell 28 points to 18,405, while the NASDAQ rose 22 points to 5,184. Volume on the NYSE was moderate, coming in at 110 percent of its 10-day average. There were 357 new highs and 20 new lows. Those 357 new highs on the NYSE are still precluding the momentum shift that I’m expecting.
The VTI on the Dow continues to fall, while the same indicator on the NASDAQ continues to rise. The Tide remains neutral with three of the four breadth indicators being negative. The lone holdout is the Hi-Lo indicator. Most of the other cockpit indicators remain positive.
The VTI on the Dow has now fallen for six consecutive days, and each day saw a small decline in the Dow. The VTI on the NASDAQ turned positive on 29 June with the index trading at 4,779. The indicator remains positive and now the NASDAQ is trading at 5,184. That’s pretty impressive.
Anyhow, something will have to give. It’s NOT likely that the divergence between the Dow and the NASDAQ will continue much longer. Looking at the patterns, I believe that the NASDAQ will give first and start following the Dow lower.
How much lower? Hmmm? The patterns on the Dow and NASDAQ are not that clear at this point for making good estimates. But the pattern on the SPX suggests a move below the 27 June low of 1990. That’s a decline of 181 points from current levels.
So with one S&P point currently worth about 8.4 Dow points, a decline of 181 points in the SPX is roughly equivalent to 1,520-point decline in the Dow. That would put my initial target for the Dow close to the 16,885 level. The 27 June low on the Dow is the 17,063 level, so any decline below this level would mean that that the February lows near 15,500 will be tested.
Yesterday the DMI on the Dow closed with a reading of 1.37. In other words, it’s very close to turning negative. If the DMI on the Dow turns negative during the next few days, please pay attention. Remember, this is NOT a healthy market. The recent rally is being driven by two things: Central bank intervention (money printing after Brexit) and investors throwing money at stocks in an attempt to obtain yields. Both of these are NEVER reasons to invest, because it’s like a game of musical chairs. When the music stops, somebody loses. Don’t let that somebody be you.
The VTI on GLD continues to move up, and is now less than 3 points from entering the Trend Zone. Yesterday, GLD closed at 129.22, up 0.24 cents. If GLD can enter the Trend Zone, it should move toward my minor wave 3 target of 135+.
BTW, IF GLD moves above 135, don’t get greedy. It’s highly likely that the ETF will see some type of minor wave 4 pullback before moving higher. GLD is currently moving up in an Ascending Wedge Pattern for its Major Wave 3, and wedge patterns like this are always subject to sudden endings. So while the odds for a move toward 135 are high, especially if the VTI moves into the Trend Mode, students should think about managng money once the price moves closer to pattern targets. It would not be unusual for GLD to retrace to the 125 level in minor wave 4 of Major 3 up.
Watching for a VTI turn on the NASDAQ.
That’s what I’m doing,
h
Market Signals for
08-02-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | NEG |
VTI | NEG |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
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.
Category: Professor's Comments