Professor’s Comments February 17, 2016

Posted by OMS  at February 17th, 2016

The Dow rose 223 points, closing at 16,196.  Volume was low, coming in at 89 percent of its 10-day average.  There were 22 new highs and 37 new lows.

Yesterday’s strong rally appeared to be part of wave ’c’ up of Major Wave 2 up.  As I mentioned this weekend, I expect this rally will complete somewhere between the wave ‘a’ high of 16,585 made on 1 February and a declining 200 day moving average near 17,000.

Yesterday’s rally was enough to turn The Tide turned positive generating a Buy Signal. 

So now that The Tide has turned positive, I’ll start looking to buy stocks and positive index ETFs from my Lists.  As of last night, the Dean’s List was still negative with all four of the major index ETFs still on the List.  So for now, I have to pass on these index ETFs.  Also, because the Tide measures the breadth on the NYSE, I plan to focus on large cap stocks and energy stocks right now.  I’m really not interested in buying technology from the NASDAQ or Russell 2K. 

The other significant thing that happened yesterday was that DUG dropped off the Dean’s List.  So far, DIG, the positive energy ETF has still not appeared on the List. So I still need to be cautious with my energy purchases.  I’m still scalping GPOR and SLB, which made a nice move yesterday.  The Money Flow going into both stocks continues to impress.

One of the things students might want to watch after the market closes today is how GPOR reacts to its earnings announcement.  The stock has been moving sideways for the past few days in what appears to be minor wave 4 of Wave 1 up.  If the earning announcement is perceived as positive, it should be enough to boost the stock above its 200 currently near the 32 level.  This would be a significant development for both GPOR and most energy stocks as well.

BTW, GPOR’s consensus EPS estimate for the quarter is $-0.11. The reported EPS for the same quarter last year was $0.12. But don’t get hung up on the numbers.  Remember, the actual numbers do not matter.  The numbers could be anything.  What matters is the market’s reaction to whatever numbers are announced. 

So IF GPOR starts to move higher after the announcement, it will be a very important signal to where energy prices are headed for the next two months. 

For the past few months, energy stocks like GPOR have been forming classic TLB patterns.  And since it’s 14 December low, GPOR appears to have moved up in what could develop into a 5 wave pattern.  If the fifth wave of this pattern completes and GOPR makes a ‘Rope Jump’, it will be a sign that energy prices have bottomed and could be getting ready to move significantly higher.

Same for SLB and Equitable Resources (EQT) which is also on the MWL now.    Yesterday both stocks appeared to be breaking out from their ‘Blades’.

Yesterday EQT closed at 60.32.  If EQT continues to move higher from its ‘Blade’ pattern, the next logical target is a ‘Rope Jump’ above the 200 currently located at 67.17.

Most gold and silver stocks started to pullback yesterday.  After completing its ‘Rope Jump’, it’s now time for gold ETFs like GDX to pull back to moving average support and form wave 2 ‘Blades’.  If I’m right about a rally in large cap equities, gold stocks will likely NOT participate in the rally and use the time to develop ‘Blades’.  This is also something that students should watch as once the current rally in equities completes, money should once again start flowing out of equities and into gold.

Scalping energy stocks while waiting for DIG to appear on the Dean’s List. 

That’s what I’m doing,

h

Market Signals for

02-17-2016

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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