Professor’s Comments December 19, 2014
Posted by OMS at December 19th, 2014
The Dow rose another 421 points yesterday, closing at 17,778. The two day rise of 700 Dow points is reminiscent of the volatility that occurred during May 2010 when we had the ‘flash crash’, only this time Big Move was up. So in seven days, the Dow declined 925 points, only to gain 700 of those points back in two days. Wow! Talk about EXTREME volatility. It’s hard for technical analysis based on indicators and patterns to keep up with moves like this.
Volume on the NYSE was moderate, coming in at 111 percent of its 10-day average. There were 195 new highs and 24 new lows.
Yesterday’s rally blew past my upper target of 2040 on the SPX. This means that either one of two things is happening.
The first is that wave 2 up completed yesterday, or is nearing completion, and wave 3 down should begin within the next day or so. If this does not happen, it means that a new rally wave is underway that will take the Dow to new highs.
Right now, the indicators and Lists are mixed. Both The Tide and the Dean’s List turned positive with yesterday’s rally. I never like to trade against the Tide.
On the other hand, the breadth indicators that make up The Tide are just barely positive, so IF the market starts to decline within the next day or so, the Tide will likely turn negative again. This is what usually happens during retracement waves. The indicators become mixed.
Anyhow, with all of the positive index ETFs back on the Dean’s List, before I can take a trade to the upside, I need to see both a pattern AND positive PT indicators. Right now one could make a case that a large Hockey Stick has developed on the Dow after the mid-October rise. If this is the dominant pattern, then the Dow is going a lot higher. However before I can trade that pattern, I MUST see Green PT indicators. And right now, all of the PT indicators on the Dow are RED, especially the P-volume. The P-volume is not supporting the current rally. Same for my Money Flow indicators.
So with mixed indicators, I’m on the sidelines. I believe that we’ll know more about the direction of the market in another day or so.
One thing I should mention is yesterday’s gap move higher on the SPX. The ‘gap’ is something that needs to be watched closely today. It’s probably best to use the S&P tracking ETF (SPY) to see this. On Wednesday, the SPY closed at 201.79. Yesterday the SPY opened at 204.74, creating a 3 point upside ‘gap’. Upside ‘gaps’ tend to get filled. The Japanese call this ‘closing the window’. So If the SPY trades below yesterday’s low of 203.92, it’s likely that the index will continue to trade lower to close the window. If this should happen today, it could turn yesterday’s ‘gap’ into an ‘island gap’ or some type of ‘star’ pattern. These reversal patterns are usually seen at the start of major down moves, like the start of an impulse wave 3 down. So watch the 203.94 level on the SPY. It’s very important now.
Watching.
That’s what I’m doing,
h
Market Signals for 12-19-2014 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments