Professor’s Comments March 11, 2014

Posted by OMS  at March 11th, 2014

The Dow fell 34 points, closing at 16,418.  Volume was light on the decline, coming in at 86 percent of its 10 day average.  There were 99 new highs and 23 new lows.

Yesterday’s decline appeared to be part of a small consolidation wave required to push the markets higher.  The question remains how much higher?

While the Dean’s List and cockpit indicators remain positive, yesterday was the first day in over a month that the A-D oscillator had a minus sign in front of the number (-5.21). I saw the same thing from the two other indicators I use to measure breadth; the Summation Index and the Hi-Lo oscillator.  These indicators are usually among the very first to signal a market turn. So with breath starting to decline, we will need to be very careful now.

The Ides of March are quickly approaching, and it just so happens that there is another Fed Meeting scheduled for 18 -19 March.  The way things are shaping up, this could be a very important meeting.

The two scenarios that I have been talking about for weeks are still in play, and yesterday’s small decline fits slightly better into the ‘under 16,588 scenario’.  I’ll still give each about a 50/50 probability, but with the Dow now trading at 16,418, it means that the ‘under 16,588’ scenario has less than 170 points of rally left in it at best.  That’s not a lot of upside Dow points for me to be looking to establish a bunch of new positions.

For me to become serious about putting new money to work now, I would have to see something to make me believe that this market is going significantly higher.  And right now, that ‘something’ is sleeping.  When I checked in with The Professor last night, he was in a deep sleep.  The note on his door said  “Do not disturb, only 4 longs and  5 shorts’.

Same for Emeritus.  He too has been very quiet lately.  If you have been watching, he has not given us anything to trade for the past few days.  And before that, he’s only had one or two stocks each day.  This is a far cry from what he was doing in early February when he was highlighting several picks for the Honor Roll every day.  Do you think he’s trying to tell us something now?   Hmmm?

Most gold stocks were flat to down for the second straight day yesterday.  At this point, mining shares are starting to meet stiff resistance from their targets.  If you have time today, you might want to take a quick look at GLD, the SPDR Gold Shares Trust.  Notice where the current rally stopped.  What is it that I always say about stocks?  That they go to targets and not to heaven?  In the case of GLD, it’s target for the current rally was the 131 level.  The target was established on 28 October 2013 by the interim high between the first two lows of the TLB pattern.

So now that gold appears to have reached its target, I will start looking for signs that the miners are going to start their next leg down.  It’s still early, but as I mentioned this weekend, the effects of the Fed’s tapering program should start working against gold shares now.  They might hang in their for a bit longer, but if the Fed announces another ‘taper’ at its 18-19 March meeting, I believe most traders will throw in the towel.  Even the situation in Crimea won’t be able to save the metal from lower prices.

That’s what I’m doing,

h

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The Hockey Stick Pattern
The Creation of Waves and Trends
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