Professor’s Comments July 2, 2013

Posted by professor  at July 9th, 2013

The Dow rose early, rallying 174 points to a high of 15,083 before reversing to close up 65 points at 14,974. The initial Big Move was predicted by the small change in the A-D oscillator.

Volume was light on the rally, coming in at only 80 percent of its 10 day average. There were 169 new highs and only 11 new lows.

The rally to 15,083 was interesting to watch, because that was the level I had talked about in my WSR where resistance would likely start to appear. If you look closely on the 60 min bars on the DIA, you can clearly see that yesterday’s rally was not entirely unexpected. That’s because going into yesterday, there were four distinct waves higher starting on 24 June, with last Thursday and Friday being part of a small wave 4. So yesterday’s rally likely completed the 5 wave sequence of wave 2 up.

If this is the case, then yesterday’s afternoon decline could be the start of wave 1 of 3 down of ‘c’ down. We’ll see.

Given that the markets are still in a period of positive pre-holiday bias, I would expect the markets to maintain a positive bid into the Holiday, with continued low volume. The low volume during this time period could exaggerate the short term moves, so trading could become very volatile, especially if today and tomorrow are parts of a small wave 2.

The Dean’s List remains negative as do the PT indicators. The P-volume on the Dow (DIA) remains particularly troublesome, as it is now lower than it was on 1 March when the Dow was trading at 14,089. That’s a lot of negative divergence from a very important indicator!

Anyhow, all I’m doing today is watching a few inverse ETFs and stocks as possible shorts.

Specifically, I’m watching DXD. If DIA turns RED on the 60s, I’ll start buying a few shares.a few shares of DXD.

Both FXP and EEV have pulled back just as I depicted on the chart I posted last week, forming ‘Blades’. The Bollinger Bands have narrowed on the 60s during the pullback process, so IF the PT indicators turn Green now, I’ll be looking to buy some Eating Cake. FXP on the 60s is perhaps the Best Pattern to watch for a trade today. The ETF tops the Dean’s List, has positive PT indicators on the Daily’s, and is now in an Uptrend with its 50>200. The 2-period RSI Wilder is oversold at 15,25 which tells me that it could be a good time to go hunting.

Yesterday I mentioned three stocks as potential shorts that were highlighted during an intraday algorithm run. The stocks were UNH, WFM and MHK.

UNH is forming a Rising Wedge as part of a THT Pattern. If the DMI turns negative, I’ll look to short the stock. WFM would become an interesting short IF it starts to break below 50.32. MHK is perhaps the most interesting of the lot, but did not make the final cut of last night’s Honor Roll. After forming a THT Pattern, the stock has formed an inverse HSw/Blade. If it starts to break below 110, it would be a clue that wave 3 of 3 down is beginning. All of the stocks mentioned are showing negative volume accumulation. And right now, I’m just looking at them as possible Position Trades IF they turn negative on the 60s.

That’s what I’m doing,

h

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