Professor’s Comments February 18, 2016

Posted by OMS  at February 18th, 2016

The Dow rose 257 points, closing at 16,453.  Volume was moderate, coming in at 99 percent of its 10-day average.  There were 27new highs and 21 new lows.

Yesterday’s strong rally appeared to be a continuation of wave ’c’ up of Major Wave 2 up.  As I said in previous Comments, 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.

The rally during the past three days has been mostly straight up, with the Dow now approaching the 16,500 level.  Because of this, I would not be surprised to see the market rest a bit before moving higher.  The extent of this rest period or pullback will determine where it eventually completes. 

Last night the Dean’s List turned neutral with 3 of the 4 positive index ETFs making an appearance.  So now, I can start trading the positive index ETFs that are on the List.  But because I believe that the current rally is the final wave of Major Wave 2 up, I’m not going to go hog wild.  I’d rather wait for Major Wave 2 up to complete and then look to trade the impulse wave (Major Wave 3) down.

The other thing I’m doing now is trading energy.  Last night DIG, the positive energy ETF, appeared on the Dean’s List.  So now that my ‘Stick in the Sand’ for energy is on the List, it tells me that the environment has turned favorable for energy stocks.

So with the favorable seasonality period for energy (March- April) only a few weeks away, this is where I plan to focus most of my buying.

BTW, I found yesterday’s announcement that Warren Buffett bought a bunch of Kinder Morgan (KMI) very interesting.  As most of you know, Buffett is a big supporter of the current Obama administration.  One of the reasons he does is to keep the Keystone XP pipeline from being built.  That’s because the tracks of Buffett’s railroad (BNSF) sit on top of North Dakota’s Bakken formation, where energy producers are using fracking and other extraction methods to pull crude from the ground in unprecedented volumes. Because pipeline capacity is limited in the area, oil companies have turned to BNSF to ship their product to refineries.

But with an election coming in November, and the possibility of a change in the White House, Buffett appears to be hedging his bets by buying a pipeline company.  Maybe this is why candidates like Trump and Sanders are attracting so much attention when they talk about campaign contributions and influence peddling.  Makes my blood boil when I think about how one man can stop the construction of a pipeline that would benefit all of us, just to make a profit. 

Anyhow, energy stocks like SLB, EQT, and GPOR continue to form nice patterns supported by substantial inflows of money.  If these stocks pull back a bit during the next  few days, I would view it as a buying opportunity.

I always like to be long energy going into the March-April time period.

That’s what I’m doing,

h

Market Signals for

02-18-2016

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