Professor’s Comments February 3, 2016

Posted by OMS  at February 3rd, 2016

The Dow fell 296 points, closing at 16,154.  Volume was moderate, coming in at 92 percent of its 10-day average.  There were 69 new highs and 125 new lows.

Not much changed with the indicators or the pattern after yesterday’s decline.

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

It’s possible that yesterday’s decline was part or all of the ‘b’ wave of an a-b-c sequence for Major Wave 2 up. If this is the case, then prices could approach the 17,000 level before Major Wave 2 up is complete.

One of the reasons I say this is because the two Money Flow indicators (the Coaches) remain positive even after yesterday’s large decline. This tells me that money is NOT leaving the market. And anytime I see a large decline without money leaving the market, I have to view the decline as a wave ‘b’ correction. If the Coaches had turned negative, I would have to view the move as the possible start of minor wave 5 down. But the indicators stayed positive, so I’m still cautious..

Also, The Tide is 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 is in some type of corrective wave, so I trade cautiously until they line up on one side or the other.

BTW back on 20 January, I talked about Hershey (HSY) and how I love to trade it going into February. I said, ‘”it has a long history of making nice rallies as Valentine’s Day approaches.”

I also said “it has a nice TLB pattern and a positive Money Flow indicator that is showing positive divergence. The moving averages are several points above current prices, so IF the Dow decides to put in a wave 3 bottom during the next day or so, I would not be surprised to see HSY lead the market higher during the next rally wave.”

When I first mentioned HSY it was trading at 84.61. Yesterday, even though the Dow was off close to 300 points, HSY finished at 89.5 after trading to a high of 90,32 the previous day. The Money Flow indicators are still very strong.

Here’s the thing: The next few days will be very important for HSY. If yesterday’s pullback in the Dow was wave ‘b’ of wave 2 up, then HSY could still move 5 -6 points higher during the Dow’s next rally wave. If HSY can break above 91, the next major resistance is near the 96 level. On the other hand, IF the Dow continues to decline today, it would likely mean that minor wave 5 down is starting. So Position Traders in HSY need to be concerned about money management. The market pattern is uncertain and HSY appears to be about half way to its target. This is when I start taking some money off the table, place a stop at my entry point, and let the rest ride. I want to make sure that Marcia has a nice Valentine’s Day.

For scalp traders: With the Dow still in some type of corrective wave sequence, I continue to look for scalping opportunities. And in February, the stock I’m always watching is HSY.

That’s what I’m doing,

h

Market Signals for

02-03-2016

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The Hockey Stick Pattern
The Creation of Waves and Trends
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