Professor’s Comments August 28, 2013
Posted by professor at August 28th, 2013
The Dow plunged 170 points, closing at 14,776. The Nasdaq fell 79 points, closing at 3,578, with mixed indicators. Most of the decline on the Nasdaq was due to Apple, AAPL, which fell 14 points to 488.58. AAPL appears to be forming its Wave 2 Blade which is a real positive for the Nasdaq once it completes. It’s one of the reasons I’m still very Bullish on the markets.
Volume on the NYSE was heavier than normal, coming in at 112 percent of its 10 day average. There were 14 new highs and 80 new lows.
Last night, just before my Update Class started, I changed the name of the presentation I was about to give, from “Ready for a Rally” to “War or Rally?”
With the news stations talking about how Obama was getting ready to ‘punish’ the Syrians by lobbing a few tomahawks into the dessert, buyers stayed on the sidelines yesterday while sellers were busy dumping stocks. It was one of those days when a news event surfaced out of the blue, and people just wondered why? Hmmm? Just what we need now; another war. Like lobbing a bunch of missiles at the Syrian is going to do some good. I wonder of the Prez realizes that by doing this, he puts us on the same side as Al Qaeda?
Anyhow, just when it appeared that we were ready for a major rally from the 14,850 level, the Dow pierced its support zone falling as low as 14,765. On the surface, the 100 points doesn’t appear to be much of a drop, but by falling below 14,850, it sets up the possibility that wave 2 down can now trade down to the 14,551 level if it wants to. As we know from Class, wave 2s have a mind of their own, and this correction won’t be over until we see three things happen.
1.) The Professor starts to highlight more than 50 stocks.
2.) The PT indicators turn positive, and
3.) The Dean’s List confirms the new uptrend by turning positive.
Right now, the only positives on the Board are the two VIX Buy signals . And like I’ve been saying…they tend to be early. (BTW, last night the VIX closed back above it Upper Bollinger Band, which is a set-up for yet another VIX Buy Signal.)
It still appears that the only real change that yesterday’s threat of a ‘potential’ missile strike did to my rally scenario was delay it. The news put a cloud over the market. With Washington saying that the strike could occur anytime within the next week, buyers will remain on the sidelines for at least that long. And without buyers, the markets will likely drift sideways to lower. We could rally a bit today, but after yesterday’s 170 point drop, I would expect any pop to be a dead cat bounce.
One of the stocks that got hit hard yesterday was Royal Caribbean, RCL. which dropped over 2 points to close at 36.69. I have been talking about how I would like to see the stock drop a few points to fill out its Blade. And now, that has happened. If you wondered why, just think about the Independence of the Seas dodging 5 U.S Navy destroyers on its way to Haifa, with the Captain announcing that tonight’s pool party will feature a different type of fireworks. No, people don’t want to spend their vacations watching bombs and missiles.
Yesterday’s decline in Royal was checked by the 50 day moving average. And while only 2 of the 3 PT indicators have turned Red, it appears that the stock could still fall another 2 points to support at the 200 and still be OK. Like I said, people are concerned, but when it comes to cruising, the geezers (and I’m one of them), still love to cruise. It might not be off the coast of Turkey, but they’re still going to go someplace. And that’s really why I’m using Royal Caribbean as an example today.
Once this ‘potential war’ is past, life will go on. As soon as this imposed ‘cloud’ is removed, the market will likely rally hard. Think about it. Less than 9 percent of the Nation wants to do something about Syria. The other 91 percent are united that we should stay out. When was the last time that 91 percent of Americans agreed on anything? They’re thinking about what happened in Libya and Egypt, and worried that we could be on the wrong side again. And with cruise missiles costing mega bucks, they’re wondering if the money wouldn’t be better spent on building roads, schools or hospitals. Hopefully cooler heads will prevail and some peaceful, face saving solution will be worked out. Maybe the Navy cuts a deal with the Syrians to clear out a patch of dessert that we can use as target practice for a few drones. That way the Pres can save face, the Syrians get ‘punished’ without anyone getting killed, and everybody can go home and get on with their lives.
I still believe the market will rally hard once this cloud is removed. But it might take a few days before this happens. The geezers still want to visit places like Ephesus. Hopefully, Washington will give them a chance.
Watching from the sidelines.
That’s what I’m doing,
|Market Signals for 08-28-2013
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Category: Professor's Comments