Professor’s Comments December 23, 2015

Posted by OMS  at December 23rd, 2015

The Dow rose 165 points, closing at 17,417.  Volume was very light on the per-Holiday trading, coming in at 82 percent of its 10-day average.  There were 29 new highs and 65 new lows.

By bouncing off lower trend line support at the 17,200 level, the Dow appears to be attempting another run at higher prices.  Several of the cockpit indicators turned mixed yesterday, so it’s possible that some type of ‘Santa’ rally is starting. 

Right now the Dean’s List and The Tide are neutral and most of my trend indicators are still showing that no trend is underway.  And because yesterday was an extremely low volume session, it’s hard to make any assessment about any longer term move based on yesterday’s low participation.

The period go into the end of year Holiday Season is usually very Bullish.  And because the market is oversold, I would not be surprised to see the rally that started yesterday continue into year’s end.  But IF the Dow is to test the May highs, the indicators and Lists are going to have to get a lot stronger than they are now.

Yesterday I talked about how I was scalp trading since the market completed its trend leg in early November.  I will continue to do this during this for the next few week or so and then re-assess the strength of the move based on the indicators.  However now that the indicators appear to be turning positive, I will be looking to scalp stocks and ETFs to the long side.

Then IF The Tide, Dean’s List, and Money Flow indicators turn positive, I will start holding some of those positions.  If the Dow starts to move above 17,550, it would be a good indication that the final wave in the Five Waves to a Top (FWT) Pattern is starting.  A move above17,800 would confirm the move.

I’m not going to look for a lot of stocks to scalp now.  I’ll probably just take one of the two index ETFs currently on the Dean’s List, either UWM or QLD.  UWM, the positive ETF for the Russell 2K appears to be the more attractive of the two, as its money flow indicator is currently showing positive divergence.   Yesterday the Money Flow indicator turned positive and whenever this happens the ETF usually gets a pop. 

The pattern for UWM suggests that retracement wave ‘b’ down of an a-b-c move is completing.  If this is the case, and IF the Dow is starting its FWT move, UWM could reach the 90 level.  It closed yesterday at 79.58.  Just remember that the ETF is currently in a down trend on the Daily Chart, and the two scenarios I talked about for the market have not been resolved yet.  Both scenarios, one positive and one negative, are still in play, so trade cautiously. 

Also, last night I got several hits on health care related issues, including BIIB, CAH, CVS, and HCN.  None of these passed the criteria for the Honor Roll, but because HCN is currently #2 on the Dean’s List, I thought I’d mention it.  PBE, the Biotech ETF, is also on the Dean’s List now with an interesting pattern.  IF the market starts to move higher, I wouldn’t be surprised to see the health care issues lead the way.

That’s what I’m doing,

h

The markets will be closed on Friday for Christmas.  My next update will be the WSR. Merry Christmas!

Market Signals for

12-23-2015

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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