Professor’s Comments February 2, 2016

Posted by OMS  at February 2nd, 2016

The Dow fell 17 points, closing at 16,449.  Volume was low, coming in at 86 percent of its 10-day average.  There were 86 new highs and 36 new lows

The Dow remains in a counter trend rally, but at this point I can’t tell if the rally is minor wave 4 within Major Wave 1 down or part of Major Wave 2 up

If its minor wave 4, then it should be very close to completing as my projected target for this wave was 16,400+.  If it’s part of Major Wave 2 up, prices should continue to rise after consolidating for another day or two finishing close to the 17,000 level.

The Tide and both Coaches are still positive while the Dean’s List remains negative. So the signals from the cockpit remain mixed.  Whenever the cockpit signals are mixed, it’s likely because the market has entered some type of corrective wave, so I trade cautiously until they line up on one side or the other.

Yesterday I did not see the impulsive trading action to the downside that I was looking for to confirm the start of minor wave 5 down.  Maybe that will happen today

The reason I say this is because the A-D oscillator closed with a second consecutive reading above 150, which tells me that the market is overbought.  So as a minimum, the market should decline today to relieve those overbought conditions.   But what remains to be seen is whether the decline will be enough to turn The Tide and Money Flow indicators negative.

BTW, the difference in A-D oscillator readings for the past two days was 18.2, which although outside my 10-point range for a ‘Small Change Signal,’ is still pretty small.  So I would not be surprised to see a relatively big downside move today.

Again, the thing to look for will be the impulsive action.  At this point, the market can’t just pull back again and stop.  If minor wave 4 up is complete and minor wave 5 down is starting, there MUST be downside follow through.  Otherwise, the declining wave could easily turn into wave ’c’ of an a-b-c retracement for Major Wave 2 up.

Watching,

That’s what I’m doing,

h

Market Signals for

02-02-2016

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

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.