Professor’s Comments March 24, 2016

Posted by OMS  at March 24th, 2016

The Dow fell 80 points, closing at 17,503.  Volume was moderate, coming in at 92 percent of its 10-day average.  There were 63 new highs and 12 new lows.

Things could be changing.  For the first time since 16 February, The Tide has turned from positive to neutral.  That’s because the Summation Index and the A-D oscillator, two of the four breadth indicators that make up The Tide have turned negative.  If the Dow continues to decline today, there’s a good chance that the Up-Down Oscillator and the Hi-Low indicator will also turn negative.

At this point, the Dow has completed all five waves of its Ending Diagonal Pattern, so the pattern appears complete.  If prices start to break below the lower trend line of the Ending Diagonal, now located at the 17, 472 level, it would be significant.

Right now, I’m just waiting for more indicators to turn negative.  I’m not in any hurry to get short because I believe that once the market starts to roll over, there will be plenty of time to trade the downside.  Maybe years.

If I’m right about the next move down being a Major Wave 3 decline, it should drop the Dow below 15,450 as a minimum.  That’s over 2,000 points from current levels.  It will likely fall even lower.  If Major Wave 3 down really gets rolling, it could test the 14,000 level on the next move down.

This is why I’m being patient. 

I currently have a small ‘trial’ position established in the DXD and TWM.  If the Money Flow indicators and The Tide turn negative, I’ll add to this ‘trial’ position by buying additional shares of inverse index ETFs as they appear on the Dean’s List.

Right now the Dean’s List is still positive, so there’s nothing to buy.  That’s why I only have a few ‘trial’ positions.  I’m still waiting for a Tide change.  Once this happens, I’ll start implementing my primary strategy for trading index ETFs.

It’s a very simple strategy.  I simply go to the Dean’s List and buy ETFs that are moving in the same direction as The Tide.

BTW, now that two of the four breadth indicators that make up The Tide have turned neutral, you need to be careful if you’re still trading other sectors like gold and energy.  

Remember, the breadth indicators in The Tide measure the overall strength on the NYSE.  And a lot of energy issues that I have been scalp trading for the past month are listed on that exchange.  So if the overall market starts to head lower, it will likely put pressure on these energy issues.

Same for gold.  Yesterday’s decline in gold looked impulsive, so it’s likely that the move is the start of a wave 2 down.  If this is the case, gold should trade below the 1.200 level on this move, possibly reaching 1,150. 

As you know I have been patiently waiting for gold to pullback.  So IF gold starts to trade near or below 1,200, that’s where I will start looking to buy a few shares.  Not now.

That’s what I’m doing.

h 

Market Signals for

03-24-2016

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.