Professor’s Comments June 28, 2016

Posted by OMS  at June 28th, 2016

The Dow fell another 261points, closing at 17,140.  Volume was heavy, coming in at 138 percent of its 10-day average.  There were 131 new highs and 142 new lows. Students should note that the number of new lows are now exceeding the number of new highs.  This is a very Bearish development.  However, for the very short-term, we also got a Bullish signal late yesterday, so the market should rally today.

Last yesterday, the VIX started to decline and closed below its Upper Bollinger Band.  By closing with a reading of 23.85, the VIX generated a VIX Buy Signal.

Also, the 2-period RSI Wilder on the Dow closed with an oversold reading of 10.03.  This occurred with a VTI reading of only 33.37, which is still above 30 and NOT in the Trend Mode.

So with an oversold market that is not in a trend (yet), the market should rally for a few days to relieve the oversold conditions.  However, because the Dow closed below its 19 May low of 17,331 pretty convincingly yesterday, I would have say that Major Wave 3 down has started.  In other words, the best I can expect from any short-term rally is a few days of bounce to develop a ‘Blade’ to put on the past two days of down ‘Stick’ before the market resumes its decline toward the February lows.

I will use the rally to establish short positions in inverse index ETFs from the Dean’s List. I will also be looking to trade shorts from the Honor Roll.

Yesterday’s Honor Roll short picks all produced nice winning scalp trades.  My late posting of RCL, resulted in the biggest winner, as the stock was down 4.13 points.  It was down 2.93 points from the open.  So with the market showing a negative bias at the open, if a student sold short 500 shares of RCI at the open, and covered the shares at the close, he would have realized a minimum profit of $1,465, less commissions.  Maximum profit on the trade would have been $1,700 less commissions.

The other shorts highlighted by Emeritus for the Honor Roll resulted in the following closing gains:  1.57 points for AXP, 1.15 for EMR, 0.42 for CHKP, and 1.47 for TKR, assuming the short position was entered at the open and covered at the close.

Remember, these positions are being evaluated because the VTI on the Dow changed direction two days ago.  One of the things I have found in my research is that stocks from the Honor Roll tend to perform exceptionally well as short-term trades after the VTI changes direction.  You be the judge.

Anyhow, with a VIX Buy Signal on the Board and an oversold market, I’m mostly going to watch today.  Also, with Emeritus only highlighting one stock for the Honor Roll, DDD, it’s not like he’s making a convincing case to trade the short side.  I like it a lot better when he highlights several stocks or several from the same sector.  When I only see one, I’m always cautious.

Also, IF the market rallies today, I would expect gold to pull back given the weak money flow indicators I’m seeing.  Students should continue to watch for oversold conditions on the 2-period RSI Wilder on the Daily Charts of GLD and other gold stocks. 

Remember, gold is now in an Up Trend with its 50 above the 200.  So anytime the 2-period RSI becomes oversold, it presents us with a potential buying opportunity.  For example, last Thursday, the 2-period RSI Wilder on GLD had an oversold reading of 8.98.  The stock had also formed a nice Hockey Stick Pattern and was trading at 120.11.  Yesterday, two days after being oversold, the stock closed at 126.68. 

This is why I will be paying attention to any pullback in gold.  My next target for GLD is the 133+ level.  But like any stock or ETF, it will not go straight up.  That’s why as long as GLD remains in an uptrend, I’ll be looking for buying opportunities. 

Also, remember too that once the 2-period RSI moves into overbought territory, like GLD did yesterday with a reading of a 90.61, it’s time to take profit on any shares you bought to trade.  This is all part of my strategy to have my ‘cake’ (my basic position), and eat it too (my trading position). 

That’s what I’m doing,

h

Market Signals for

06-28-2016

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

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The Hockey Stick Pattern
The Creation of Waves and Trends
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