Professor’s Comments June 15, 2016

Posted by OMS  at June 15th, 2016

The Dow fell 137 points early in the session, then bounced back late to close down 58 points at 17,675.  Volume was moderate, coming in at 108 percent of its 10-day average.  There were 58 new highs and 46 new lows.  Students should note that the number of new highs is still exceeding the new lows, which is a positive.

Today is a Fed Day, where the central bank of the U.S. will be announcing its decision on interest rate policy at 2pm.  Given last month’s horrible Jobs Report, it’s likely that Ms. Yellen will keep interest rates unchanged.  But you never know for sure, and this is why I will be mostly on the sidelines heading into the announcement.

Going into today, markets are EXTREMELY oversold.  The 2-period RSI Wilder on the Dow was showing a reading of 4.13.  Also my two trend indicators, the VTI and CCI, were showing neutral trend readings of 53.3 and -51.5 respectively. So with no trend in place and an oversold 2-period RSI Wilder, the market should bounce going into the announcement.  What happens after the announcement is the big question?

Early in yesterday’s trading session, the VIX became extremely overbought. However, by the close it was less than a point from closing below its Upper Bollinger Band.  So given that today is a Fed Day, where the market usually rallies going into the announcement, there is a possibility that the VIX could fall below its Upper Bollinger Band during the day. If it stays below the Upper Band into the close, it could generate a VIV Buy Signal.  In other words, IF Ms. Yellen leaves rates unchanged, we could be setting up to have a pretty reliable VIX Buy Signal on the Board tonight.

At this point, the cockpit indicators are still mixed.  The Tide is negative but the Dean’s List is still neutral.  So with mixed indicators and a Fed Day, I’m going to stay on the sidelines and watch.  I did buy a few shares of DDM late yesterday anticipating a Fed Day pop, but will close this trade prior to the announcement.

Most gold stocks finished mixed yesterday.  GLD closed up 0.13 cents at 122.37, while ABX pulled back 0.43 cents to 19.79.  UUP remains on the Dean’s List, so the environment for gold is still mixed.  I believe we will continue to see mixed signals between gold and the Dollar until the question on Brexit is resolved.  BTW, my longer term charts for the Dollar continues to suggesting a decline to about 70, then 50.  But that’s longer term.  Short-term, if the Brits leave the EU, it should cause the Dollar to rally. So given that the ‘Leave’ vote has only surpassed the ‘Stay’ vote in the past week, I have to wonder what, if any, impact this will have on the longer term charts. 

Do not underestimate both the short and longer term impact of a potential Brexit.  The turmoil it could create in Europe and around the world, could present major trading opportunities in the months ahead. A strong dollar will likely create major headwinds for U.S. companies doing business abroad. Make sure you pay attention to what’s happening to the Dollar in the weeks ahead.

There were no Trigger Trades highlighted for today.

Yesterday’s Trades were basically non-events.  Both BSY and MTRN exceeded their low trigger points early, but both short trades were stopped out 1-2 bars later when the price moved back above the low trigger point.  The trades never got to a point where I could manage money to ensure the trades were profitable.  Both trades resulted in a loss of commissions.  MATX never exceeded its trigger points.

Waiting for the Fed announcement.

That’s what I’m doing,

h

Market Signals for

06-15-2016

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