Professor’s Comments August 21, 2019
Posted by OMS at August 21st, 2019
Yesterday’s low volume decline appeared corrective, so it’s likely the alternate scenario I talked about in yesterday’s Comments is taking place. In this scenario, the Dow could rise to the 26,600 level before starting to fall after Labor Day. Because of this the Model will be placing a stop on its shares of DXD at yesterday’s low of 27.33.
There is still a chance the Dow could fall to the 25,800 level before rising to 26,600. However, because yesterday’s action was NOT impulsive to the downside, there is no reason for the Model to be holding the DXDs. So, the Model will be exiting the trade sometime today and look to re-purchase the shares at lower prices. DXD’s are NOT something to hold while the market is correcting. The are much better suited for times when the market is about to enter an impulsive wave down. And because yesterday’s trading lacked impulsive action, I don’t see that happening for another 1-2 weeks. On the other hand, any impulsive action to the downside would obviously be cause to re-examine this analysis.
Also, mining stocks had a strong rally yesterday an appear to be approaching a short-term top. The HUI reached a high of 219.13 before pulling back to close at 217.46. It’s possible that the 219 level was the top of wave 3 up within a five wave sequence for Major Wave 3 up. If this is the case, the HUI could continue to pull back to the 188-185 level (wave 4) before the next rally leg resumes.
Gold appears to have completed its wave 4 correction on 1 August, with wave 5 up now underway. Because of this, the Model plans to hang on to its shares of UGL, with the possibility of adding more on any dip.
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