Professor’s Comments January 2, 2013

Posted by OMS  at January 2nd, 2014

In last week’s early WSR, I talked about Johnson Controls (JCI).  I said I wasn’t interested in JCI because even though it has a nice pattern and was highlighted by Emeritus, it’s P-volume turned negative causing the stock to drop off the MWL.

On Tuesday, the stock popped 0.41 cents turning the P-volume positive.  The stock re-appeared on the MWL.  So now I’m interested in JCI again, especially if it starts to move higher.

GPOR also popped 1.88 points on Tuesday, closing at 63.10.  The stock has reached the halfway point to its target near 66.  At halfway points, I start to take a few bucks off the table, and place a stop at my entry point.  That’s why I use Hockey Stick Patterns to predict targets.  So I can estimate target and the halfway point.

On Tuesday, I also received an email from Gene S. calling my attention to the fact that the long bond had fallen to the 127 level.  A few months back, when the long bond was trading between 145 and 147, I mentioned how it would likely fall to the 126-127 area.  In other words, interest rates have been rising.

With TBT on the List, you might think that I would be rushing out to buy TBT, the inverse 20+year treasury ETF.  Hmmm?  I’m not.  That’s because despite the fact that TBT will likely rise short term, the Weekly chart still suggests that TBT is only a trade.  It has a classic TLB pattern on the Weekly’s with tight Bands and positive PT indicators.  But despite all this, TBT is still in a downtrend on the Weekly’s and has NOT had a rope jump to indicate that the current rally on the Daily’s is a wave 1 up.

We saw the same pattern on Royal Gold recently when RGLD formed a similar pattern on the Daily’s.  After a Rope Jump, it developed its Blade below the moving averages, so it was unable to pull the 50 above 200.  The downtrend continued.

Here’s the deal with Bonds.  I’m not looking for a short-term trade in either TLT or TBT.  The odds are poor.  Right now, I would rather trade individual stocks from the MWL.  If I do get involved with the Bond ETFs, I would rather do it on the long side with either TLT or TMF.  The charts are telling me this is the better bet.   And unless TBT does some work in the weeks ahead to move it into an Uptrend, it means that interest rates are headed LOWER, NOT higher.  IF this turns out to be the true, it means that the economy is NOT improving.  It also means that stocks like LEN and PHM are NOT going anywhere once they complete their current short-term patterns.

On Friday, the SPX closed at 1848, only 12 points from where I expect resistance to develop.  That’s not enough upside room for me to get excited about trading anything new now. Remember, while the first few days of the New Year have been positive for the past few years, the month of January has not been especially good for buying stocks.   With the markets making a nice run into the New Year, we’ll likely see some portfolio re-balancing taking place in the next few days.  This should put some pressure on the markets, especially the NASDAQ.

Now why did I mention the NASDAQ?  Well, it goes back to the divergence in the P-volume that I have been talking about during the end of year rally.  The divergence in the P-volume on the NASDAQ is horrible!  If you get a chance today, take a look at it on the Q’s and you will see what I mean.  It’s telling me that the current rally is NOT healthy.  And at some point, we could see prices start to break lower.  Maybe not now, but in a few weeks from now, as we move into mid-month.

That’s why I’m not in any hurry to be buying stocks.  I’d rather wait to see how things develop in the next few days.  After all, the New Year is just getting started.   There will be plenty of trading opportunities ahead with much better odds.

On the sidelines.

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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