Professor’s Comments March 18, 2014
Posted by OMS at March 18th, 2014
The Dow rallied for 182 points yesterday, closing at 16,247. Volume was low on the rally, coming in at 84 percent of its 10-day average. There were 116 new highs and 16 new lows.
The low volume rally caused the DMI on the Dow and QQQ to turn positive. It also removed all of the inverse index ETFs from the Dean’s List, eliminating the ambiguity between markets. Now all of the index ETFs on the Dean’s List are positive.
I believe that one of the reasons for yesterday’s low volume was the fact that the FOMC Meeting starts today with the Fed announcement scheduled for tomorrow at 2pm. Major rallies usually do not start before traders have a chance to hear what the Fed plans to do with monetary policy. But in this case, I believe that another taper is already priced into the markets and the only thing that is holding them back is the unease in Crimea.
With the DMI turning positive during the day, I started running The Professor to see if he was going to verify the DMI turn. He didn’t. The final run of The Professor only had 44 new longs, which is 6 short of the 50 required to confirm the DMI change. But still, 44 new longs cannot be ignored, especially when the only two scenarios I have on the board call for higher prices. I believe that if we didn’t have a Fed announcement scheduled for tomorrow, yesterday’s trading action would have produced more than enough new longs to trigger the Buy Signal. There are a lot of stocks with nice patterns now, looking like they can’t wait to pop. Tractor Supply, TSCO is just one example of the many stocks on the Member’s Watch List that I find interesting now. However what I want to do during the next day or so is to find stocks in the strongest sectors to trade. Right now, there is no clear ‘Best Sector’ and I’m hoping that one or two will emerge in the next few days.
The VIX closed below its Upper Bollinger Band, generating the VIX Buy Signal we have been expecting. VIX buy signals are usually very reliable, but sometimes the markets continue to chop around before they take effect. Given that we won’t have the Fed announcement until tomorrow afternoon, I would expect slow choppy trading for the next two days. And if the market pulls back during the day today, I will be looking for opportunities to add to my energy positions.
During the day yesterday, I added to my position in HAL and established a new position in GPOR. I have been talking about buying additional shares of energy related issues and that’s what I did. HAL finished the day up 1.43 points, closing at 56.62. My target for the stock is near the 65 level. Almost all of the energy stocks I have been talking about have similar Hockey Stick Patterns with targets that can be estimated using the ‘Stick’.
In my comments above, I mentioned that the actual Fed announcement is scheduled for tomorrow. I have been doing a lot of research centered around the Fed announcement and how The Professor’s signals relate to it. This is one of the reasons that I decided to hold the Class About Nothing on Wednesday night, so we can talk the follow-on trade that usually results.
Valerie still had several seats for Wednesday night’s Class so if you haven’t registered yet, you might want to call her or one of her staff members at 620-4200.
I will be using the first hour of Wednesday night’s session to show you how to execute this follow on trade. I believe you will find the results pretty amazing. The trade is something that you will be able to use over and over again. I will also be introducing two new trend indicators that I use during this trade. So if you want to know how I use these indicators, come to the class. After we discuss the follow-on trade, I will use the second half of the session to answer questions on the Methodology and talk about specific stocks that you are interested in trading. Should be fun.
That’s what I’m doing,
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Category: Professor's Comments