Professor’s Comments January 28, 2016

Posted by OMS  at January 28th, 2016

The Dow fell 223 points, closing at 15,944.  Volume was moderate, coming in at 95 percent of its 10-day average.  There were 26 new highs and 52 new lows.

The Fed announced that it was leaving short-term interest rates unchanged.  However, it also said it was leaving the door open for the possibility of another rate hike  in March.  Are you kidding me?   I don’t know, but sometimes I think this Fed is living in a dream world.  Instead of talking about raising rates, maybe they should be thinking about what they’re gonna do in their next job. I’d fire all of them.  When I look at the mountain of debt they created and compare it to the good it’s done, I get sick.  So far this Fed has done nothing to help main street America or the grow the economy.  All it did was print trillions of dollars to pump up the stock market.  And now a good portion of those gains have evaporated.  Maybe it’s time for them to go home.

Anyhow, after the announcement the Dow started to decline.  And because the decline was impulsive, it’s possible that minor wave 5 down started yesterday.  The rally into the close could have been sub-wave 2 of this decline.

Remember, if minor wave 5 down started yesterday, then it too should decline in five sub-waves.  And if yesterday’s late day rally was sub-wave 2, then the market should continue to chop higher today to complete sub-wave 2 before the next impulse wave begins. 

So from a trading perspective, I need to be on the lookout for the start of sub-wave 3 down.  This wave should last for several days and take the Dow very close to the August lows.

If you look at the cockpit indicators this morning, you will see that the Coach (QQQ) has turned negative.  So money is starting to leave the NASDAQ. You should also notice that the Summation Index on the NYSE has turned negative again.  This is likely an early warning that sub-wave 3 down is about to begin.

Remember, the Dean’s List is already negative, and the Tide is neutral.  Actually, if you look at the four breadth indicators that make up The Tide, 3 of the 4 are negative.  Almost any additional decline from current levels will turn the Hi-Lo indicator negative and set up the condition for an impulsive decline.

Talk about impulsive declines… During the past few weeks, Emeritus has highlighting Welltower (HCN) as a short for the Honor Roll on at least two occasions.  Yesterday, the stock finally broke through its ‘Blade’ support and tumbled 4.4 points to close at 61.6.  It made for a wonderful scalp short.

Again, all I do is keep a list of Honor Roll stocks in my trading platform. Then when the indicators give say so, I pounce.

My other scalp short was the Dow.  Once it moved past 16,200 to complete an a-b-c move to my target, I started loading the boat with DXDs.  These also paid off handsomely as the Dow fell over 250 points before I exited the trade. 

So this morning I will be looking for entry points to re-establish my short trades.  All I’ll be doing is watching my short-term indicators.  Remember, if the Dow rallies early and moves near or above 16,000, I still believe a Position Trade established near this level has a high reward-risk ratio.  Same for scalpers, but if they have a profit near the end of the day, they might want to think about booking some of the profit and then holding a few short positions overnight.  This is what I do when I believe an impulse wave is about to begin.

BTW, I have selected the four students I need to help me develop my scalp trading course.  I will notify then later today. The two men and two women were selected on the base of seniority, except for the fact that one woman is a relative newbie. She convinced me that if I could teach her to scalp trade, I could teach anybody.  It made a lot of sense to me.

These four students will receive this training/mentoring at a heavily discounted price.  And even though I did not select the eight other students who wanted to help develop the program, I will offer the training to them later at the same price as the original four. 

Anyhow, the training will begin once I finish evaluating the webinar software.  Then we’ll see how it goes.  It should be fun.

Yesterday I booked a two-cigar profit by scalp trading.  Now that was fun!!

That’s what I’m doing,

h

Market Signals for

01-28-2016

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.