Professor’s Comments March 25, 2014

Posted by OMS  at March 25th, 2014

The Dow fell 22 points, closing at 16,276. Volume was moderate, coming in at 101 percent of its 10 day average.  There were 65 new highs and 19 new lows.

The Dow appears to be completing a corrective ’Blade’ wave that should take prices toward the 17,000+ level during the next month to six weeks.  This is the time to be watching a few key levels for a break-out.  Yesterday’s high was 16,380.  Last week’s high, made on Friday, was 16,456. and the recent ‘Blade’ high was 16,505.  If the market starts to approach these highs, look for the next rally leg up to begin.  This wave should be wave ‘c’ up, the final wave of the Ending Diagonal Pattern.

Right now, all of the cockpit indicators are negative.  However the Dean’s List remains positive, and as long as he remains positive, I will maintain my positive bias.

Because of this, I took the opportunity to add to my energy shares yesterday. While the RS ratings on the Dean’s List have been falling for the past week, the fact that so many energy related issues are currently on the Dean’s List tells me that energy shares should be among the market leaders when the next rally leg begins.  Right now, about half of the top 20 issues on the Dean’s List are energy related.  Usually when this happens, it’s a sign that the Dean is trying to tell us something.

Gold got clobbered yesterday, with Royal Gold, RGLD, dropping over 4 points.  All of the gold related shares that have dominated the top of the Dean’s List and Member’s Watch List for the past two months have disappeared.  It appears that the decline that I have been looking for in gold and mining shares has begun.  I would expect this decline in gold to continue for the next few months, probably reaching the 1150 level or lower.

One of the things I did note last night was that EWZ, the Brazil ETF has moved to the top of the Dean’s List.  Also, Petrobras, PBR, was highlighted by Emeritus and placed on the Honor Roll.  For the past few years, I have not been a big fan of Brazil or Petrobras, mostly because of government interference in the company. However, now that the stock and ETF have turned Green after a TLB Pattern, it might be time to look at both as low risk trades.  For all practical purposes, the stock and ETF have the exact same chart, with PRB trading for about one quarter the price of EWZ.

I’m now about 70 percent invested, with most of my funds in energy related issues.  If the market starts to move higher in the day’s ahead, I plan to put the remaining 30 percent to work in non-energy related sectors.  But right now, I don’t see any particular sector wanting to distinguish itself, so I’m keeping this money in reserve.

That’s what I’m doing,

h

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.