Professor’s Comments February 9, 2016

Posted by OMS  at February 9th, 2016

The Dow fell over 400 points early before a late afternoon rally gained back all but 178 of those points, closing at 16,027.  Volume was heavy, coming in at 116 percent of its 10-day average.  There were 53 new highs and 445 new lows.

The bounce off yesterday’s lows was the type of trading action often see at market bottoms.  And given that the overall pattern for the Dow still appears to be a wave 2 correction, it’s possible that yesterday’s low was wave ‘b’ of an a-b-c-pattern for Major Wave 2 up.  If this is the case, then yesterday’s late afternoon rally was the start of wave ‘c’ up which should take the Dow back to the 17,000 level.

If you notice, I used the ‘IF’ word in that last sentence, because I have several concerns at this point.

The first is that the charts for the NASDAQ and the Russell 2K are not in the same overall pattern as the Dow now.  They are a lot weaker and appear to be in a wave 5 down. 

Also, last night The Tide turned negative.  Usually when this happens, I start looking to short stocks from the Honor Roll.  This is one of my primary strategies.  However, there’s a problem with this strategy now.  Emeritus only listed one stock as a short last night.  There should be lots more.  So the algorithm that generates stocks for the Honor Roll is telling me to be cautious about the short side.

Same for the two Money Flow indicators on the cockpit.  Both are still positive. If the next major wave down was starting, both of these indicators should be turning negative. They’re not.

The Dean’s List is still very negative, so the cockpit indicators are still on mixed signals.  Again, whenever the cockpit indicators are mixed, it’s usually because the market is in some type of corrective pattern.   And after yesterday’s bounce off 15,804, that pattern appears to be wave ‘c’ up of Major Wave 2 up.

It’s a Big IF.

Here’s the problem with the above analysis.  Yesterday the Dow closed at 16,027.  The 20 January low is at 15,451.  So until the Dow moves below that low, most technicians will not say that Major Wave 3 down has started.  But that’s over 575 points from yesterday’s close.  With the trading tools on this web site, IF all of the cockpit indicators turned negative, I would say that Major Wave 3 down started.  This call would probably happen several hundred points before most analysts were able to do so.   But even after yesterday’s big decline, the indicators are still mixed.  So with mixed indicators, I still have to go with the Wave 2 scenario.

Gold popped as stocks fell yesterday.  The early pop and late decline caused a Hanging Man pattern to form on GDX.  A Hanging Man is usually seen near tops.  If this candlestick is followed by a negative Doji today (small candlestick), it will mean that the ‘Stick’ portion of the rally is over and that sellers are taking control.  IF this is the case, the next step in the turn-around process for GDX should be a pull back to the 200 to form the ‘Blade’.  Once this ‘Blading’ process is complete, I’ll start getting serious about gold.  Not now.  Right now, I’m just managing a few shares.

BTW if you noticed, I haven’t been talking about Scalp Trading lately. This is because I’ve been working on my new mentoring program.  But I have to tell you that the indicators and techniques that I will be teaching in this program absolutely nailed yesterday’s late afternoon rally.  From your emails, I know that many of you can’t wait to participate in this program.  Please be patient with me.  Good things take time to develop.

That’s what I’m doing,

h

Market Signals for

02-09-2016

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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