Professor’s Comments July 19, 2016

Posted by OMS  at July 19th, 2016

The Dow rose 17 points, closing at 18,553.  Volume was moderate, coming in at 83 percent of its 10-day average.  There were 183 new highs and only 4 new lows.

Two things happened last night that we need to be aware of.

The first was that there was a small change (9 points) in the A-D oscillator, so we need to be on the lookout for a Big Move within the next 1-2 days.

The second was that the Hi-Lo indicator, one of the four breadth indicators that make up The Tide turned negative.  This caused The Tide to turn neutral for the first time the indicator has not been Green since 30 June. 

With the market near projected pattern highs, we need to be looking for a top.

At this point, it’s not clear if any pullback will be the start of a major decline or part of a small retracement.  The current rally leg on the SPX appears to be the ‘c’ wave of a small Hockey Stick pattern.  This ‘c’ wave is occurring within a larger Broadening Top Pattern that has a projected top between 2160-2180.  So with the SPX hitting a high of 2168 yesterday, we could be getting close.

On the other hand, the pattern on the Dow is not as clear.  When the Dow broke through the 20 April high of 18,168, it destroyed its Broadening Top Pattern and the low of 17,355 made on 27 June appears to be the completion of a wave 4.  This would mean that the current rally leg should consist of five waves, not three as in the SPX. 

So it’s possible that the Dow could pull back to the 18,300 level for a small wave 4, and then make one more small wave 5 rally to 18,600 before the five wave sequence is complete.  We’ll see.

With the markets near pattern highs, this is where I will rely on my indicators. If they start to turn negative, I’ll start looking for shorts. 

Besides The Tide, I’ll be paying very close attention to the VTI.  Since the VTI turned positive on 29 June, the Dow has risen 862 points.  The indicator never wavered during the entire rally.  This is why I wanted to share the indicator with you and have placed it on the cockpit. 

The other thing that happened last night was that Netflix announced earnings that beat expectations.  However even though the earnings were very positive, NFLX warned about a decrease in new subscribers, so the stock dropped almost 14 percent in post market trading.  Remember what I always say about earnings numbers…don’t trust them!   Regardless of what a company reports, always watch what happens to the stock price after the announcement.   That’s the real tell.  So with a decreasing number of new subscribers and an inflated P/E over 300, NFLX could be in for some tough sledding.

GLD closed at 127.04 last night with a 2-period RSI Wilder reading of 35.37.  The ETF will be interesting to watch during the next few days as the recent pullback has developed into the ‘Blade’ of a small Hockey Stick Pattern. If the major indexes pullback, gold should resume its rally.  My target for the current move is still the 134+ level.

That’s what I’m doing,

h

Market Signals for

07-19-2016

One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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