Professor’s Comments March 15, 2016

Posted by OMS  at March 15th, 2016

The Dow rose 16 points, closing at 17,229.  The NASDAQ was flat and the S&P was down 3 points.  Volume was extremely low, coming in at 79 percent of its 10-day average.  There were 44 new highs and 8 new lows.

Closing prices on the Dow have increased to a 21 day high but the breadth as measured by advances and declining issues is declining.  This non-confirmation, coming near the end of an Ending Diagonal Pattern, is a weak Bearish signal.

All I’m doing now is waiting for wave ‘C’ up of Major Wave 2 up to complete, and Major Wave 3 down to begin.  From a timing perspective, Major Wave 3 down could start at any time now.

So how will we know if Major Wave 3 down is starting? Hmmm?

Right now, all of the cockpit indicators and Lists are positive.  But remember, all indicators and Lists only reflect the price movement that has already occurred.  If I waited for them to turn, I wouldn’t catch the early move down.  This is why I have been watching both the volume and breadth for signs of divergence.  And yesterday, the divergence in breadth continued along with the lowest trading volume of the year.

So with the Dow at levels where I believe the final ‘through over’ wave of the Ending Diagonal Pattern will complete, I have established small ‘trial’ positions in the DXD and TWM.  Again, these purchases were based on the divergences in the indicators.

I did not add to these positions yesterday.

What I’m looking for now is conformation that Major Wave 3 down is starting.  We know that major wave 3’s are impulse waves.  They are not wimpy moves.  So with an Ending Diagonal Pattern looking like it’s nearing completion (it has all of 5 waves necessary to complete the pattern) and major divergences occurring in the breadth and volume indicators, all I’m looking for now is an impulsive move down.  It could start today.

Last Thursday, we saw how the Dow dropped almost 190 points to the 16,821 level. At the time I said that thing we should be watching is to see if it would continue lower.  If it did, it would mean that Major Wave 3 down was likely starting and the pattern had truncated without a final ‘through over’ wave.  But as things turned out, the decline stopped, meaning the decline was part of a small wave 4 to be followed by the final ‘through over’ wave.  This is what actually happened.

So today, now that all five waves of the pattern are complete, we need to be watching for an impulsive wave down.  If this happens, it will likely start to turn some of the cockpit indicators negative.  And with negative indicators, I will start adding to my ‘trial’ short positions.

Remember, for me to establish a major position, I wait for The Tide to turn and then buy index ETFs from the Dean’s List that are moving in the same direction as The Tide.

Right now The Tide and Dean’s List are still positive, so all I have on is a ‘trial’ short position.

This is why I’m watching for an impulse wave down to change The Tide.

That’s what I’m doing,

h

Market Signals for

03-15-2016

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The Hockey Stick Pattern
The Creation of Waves and Trends
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