Professor’s Comments February 19, 2014

Posted by OMS  at February 19th, 2014

The Dow fell 23 points, closing at 16,130.  Volume was moderate on the decline, coming in at 95 percent of its 10 day average.  There were 226 new highs and only 21 new lows.

Last night, the A-D oscillator had another ‘relatively’ small change reading of 12 points, so we need to be on the lookout for a Big Move during the next 1-2 days.

All of the major indexes are currently overbought with A-D oscillator readings above or near +200.  With overbought readings like this, markets generally take a breather.  It will be the extent of the pullback that determines the next major move.

Remember, we have two scenarios still on the board.  The first says that the recent rally since early February is nothing more than a wave 2 correction of the early January decline.  So IF the market starts to fall from these levels, wave 3 down could start to develop.

The second scenario is a bit more complex.  It suggests that the final wave up has not completed, and after a pause, the Dow will push higher towards 17,000 into the March-April time period. 

Recall too that The Professor has NOT confirmed the recent DMI change so we need to be careful.  The highest number of stocks he highlighted during the current rally has been 30.  And that’s why I projected that the current rally would likely pause near the 16,100-16,300 level.  So far the high for the current rally has been 16,167, or about half way into the ‘zone’.

The Dean’s List and the cockpit indicators remain positive, so the odds continue to favor additional rally after the ‘pause’. But if the Dean starts to weaken as the market pulls back during the next few days (to relieve the Extreme overbought condition of the A-D oscillator) we need to pay attention.  If the pullback starts to look impulsive, it will be a good clue that wave 3 down Is starting.

All I will be doing for the next few days is watching and scalp trading, getting out of my position by the end of the day.  I will NOT do any new buying at these levels until The Professor gives say so. 

I’m still watching the current rally in gold for signs that it is topping.  GLD is currently just a point under its 200 day moving average.  IF gold is going to make a sustained move higher, GLD must ‘Jump the Ropes’ during the next few days.before starting a pullback.  If it can’t, then it’s highly likely the current rally will end and the metal will start to drift lower on its way toward 1150.

Crude oil futures moved above 102 yesterday, pushing OIL, the Crude Oil ETF up 55 cents to 24.07.  The ETF is still in a down trend but that could change during the next few days as the 50 is rising quickly toward the 200.   IF crude starts to move into an Uptrend now, we need to pay attention as we’re less than two weeks from entering the very favorable March-April time period for energy.  The Oilfield Service Holders ETF, OHI, is already in an Uptrend, and is now Green after forming a beautiful Hockey Stick Pattern.  Hmmm?  Dean’s List, Pattern and Positive PT indicators.  Where have I heard this before?

Watching.

That’s what I’m doing,

h

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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