Professor’s Comments July 29, 2016
Posted by OMS at July 29th, 2016
The Dow fell 16 points, closing at 18,456. Volume was moderate, coming in at 113 percent of its 10-day average. There were 217 new highs and 15 new lows.
Not much changed after yesterday’s trading.
Even though the Dow was down for most of the day, it was not enough to produce a momentum shift in the VTI. The indicator continues to move down, but it is still not out of the Up Trend Mode. The VTI on the NASDAQ continues to move up and remains in the Up Trend Mode. So until both of these indicators start move down, the market will likely continue to chop around forming their respective topping patterns.
Same for the Money Flow indicators. They continue to remain strong. As long as money continues to flow into the market, it will be difficult for the market to start any sort of sustained move to the downside. At this point, there is no doubt that the internals are starting to weaken, more so on the Dow (NYSE) than on the NASDAQ. But starting to weaken and starting a major move down are two entirely different things.
Yesterday the Dow was down over 100 points intraday before it recovered to close down only 16 points. At one point just before the close it actually moved into positive territory. These large price swings are happening because traders have still not seen the momentum shift that I’m expecting. So whenever the market moves lower, like it did early yesterday, bargain hunters step in and push prices higher. It’s likely that this will continue for a few more days until it becomes evident to traders that the market has topped. When this happens, the bargain hunters will stop buying the dips and the momentum will shift to the downside.
There was a small change on the A-D oscillator yesterday, so we need to be on the lookout for a Big Move within the next 1-2 days. A Big Move to the downside could produce the momentum shift I’m looking for.
Gold pulled back from oversold conditions yesterday. Going into the day, the VTI on GLD was positive but not in the Trend Mode, and the 2-period RSI Wilder was showing an overbought conditions (RSI reading of 85.79). The pullback caused the RSI to drop to a reading of 67.96. I mention this today to show you the importance of checking the 2-period RSI Wilder before buying a stock.
Four days ago, the 2-period RSI Wilder on GLD was showing oversold conditions (23.76) with the VTI showing No-Trend. Remember: Oversold with No Trend usually produces a short term bounce. In the 2-days that followed, GLD rose 2.56 points, which made the ETF temporarily overbought. So yesterday GLD pulled back 0.37 cents. This is what stocks do when the VTI is showing No-Trend. With No-Trend in place, stocks simply bounce between oversold and overbought conditions. Understanding this can be EXTREMELY useful to short term traders AND for students looking to establish longer term positions.
Here’s the thing: The larger overall pattern for GLD shows that it is in a Major Up Trend with well defined ‘Railroad Tracks’. The short-term pattern suggests that the ETF is breaking out of a small Hockey Stick pattern that could take it to the 135 level. Two days ago, the VTI started to turn up (positive) suggesting that the short-term momentum has shifted to the upside. But the VTI on GLD is still only showing a reading of 60.68, still 10 points shy of entering the Trend Mode. So IF gold continues to move higher from its HS Pattern, the thing I want to see is for the VTI to move into the Trend Mode. If this happens, I’ll hold my gold shares. But in the meantime, as long as the VTI continues to move up, I’m watching the 2-period RSI on the Daily Chart to identify short-term buying opportunities.
That’s what I’m doing,
h
Market Signals for
07-29-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | NEG |
VTI | NEG |
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
FAQ
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Category: Professor's Comments