Professor’s Comments July 1, 2014
Posted by OMS at July 1st, 2014
The Dow fell 26 points, closing at 16,826. Volume was moderate on the decline, coming in at 94 percent of its 10 day average. There were 274 new highs and only 8 new lows.
Not much changed yesterday. The Dow is still stuck in the middle of a 200 point trading range between 16,750 and 16,950.
There was another small change in the A-D oscillator last night, so we need to be on the lookout for a Big Move within the next 1-2 days
Given that the period immediately before the 4 July Holiday is usually very positive, I expect that the Big Move will be to the upside. The Big Move could touch off a small rally that could take the Dow close to the 17,000 level before the move is pressured by the upper trendline limit of the Pattern.
Once this move is complete, the odds start to shift in favor of another down leg that could drop the Dow back to the 16,300 level. This is where I would like to do some buying for the final leg up in the Ending Diagonal Pattern. Not now.
Right now I’m on the sidelines, waiting for a better opportunity. However, IF things set up for scalp trades early today, I might take a few positions.
The first day in July is usually VERY positive. And with a small change signal on the Board, today could be a lucrative day for scalps IF good entry points can be obtained.
All I will be doing is watching to see how the first 15 min bar prints. Then once I know the 15 min bar high, I will look to establish an initial position with a Buy Stop placed just above the 15 min bar high. After that, I’ll look for opportunities to add to that position on pullbacks where the 2-period RSI Wilder becomes oversold. Just remember that with scalp trades, we take profits quickly, keep positions small, and get out before the close. Never hold scalp trades overnight.
The markets will be closed Friday for the Independence Day Holiday. IF the Dow starts to approach the 17,000 level before the Holiday, I will stop scalping and look to get flat. I don’t see any point holding stocks going into the Holiday weekend, especially with a pattern that shows limited upside potential.
At some point, traders are going to start to realize that the GDP numbers announced by the BEA were downright awful (-2.9 percent). Another negative number and the government will have to admit that the economy is in a full blown recession. And with the Fed continuing to taper its QE4 stimulus program, the conditions for a significant pullback are increasing. The market still has some positive momentum (MACD) working for it, but at this point, the DMI and P-volume on the Dow (DIA) are negative. If the momentum starts to shift, all three PT indicators will turn negative. And IF this happens, you will see a lot of traders and institutions start to throw in the towel.
We already know that the Fed’s stimulus program is NOT creating the number of new jobs required to grow the economy. And now we officially know that the GDP for the first quarter of 2014 was a dismal -2.9 percent. This was a really BIG miss! What ever happened to the positive projections of 1.5 –2 percent that were being made? Yeah, I know that some of the drop was weather related. But can the weather account for a 4.2 to 4.9 percent miss? I don’t think so! And IF the weather can’t be blamed for the slowdown in growth, it must be something else. It could be that the economy is really starting to enter a recession!
BTW, I ran The Professor last night and he had 17 longs and only one short. So it appears that he too is slightly positive going into the Holiday. I’m not worried about the pre-Holiday period. It should be positive. But once we get past the Holiday, things could start to change. You might want to factor this into your trading plans.
That’s what I’m doing,
h
Market Signals for 07-01-2014 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
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.
Category: Professor's Comments