Professor’s Comments March 27, 2014

Posted by OMS  at March 27th, 2014

The Dow rose early testing last week’s high, only to fall 99 points at the close.  The index got as high as 16,466, where significant selling pressure started to come  in dropping the index to 16, 269 at the close. Volume was moderate, coming in at 102 percent of its 10 day average.  There were 91 new highs and 29 new lows.

The up-down day did nothing to change any of my Lists, patterns, or indicators.

Short term, it appears that the NASDAQ finally reached the bottom of its small Declining Wedge pattern for wave ‘b’ down.   The technology rich index has been struggling for the past two weeks, and has been largely responsible for keeping the other indexes down.  Last night the NDX closed at 3,583 which is very close to where I thought it would bottom.  If I’m right about this, the NDX should now move from being the weakest index to the strongest.  I would not be surprised to see it rally from its current level of 3,583 to over 3,800 in the weeks ahead.

Right now the NASDAQ 100 ETF, QQQ, is missing from the Dean’s List.  If it re-appears on the List during the next few days, it would likely confirm the start of the next rally leg in all of the major indexes.

The Dean’s List and cockpit indicators are still mixed, so all I’m doing now is watching and waiting as the indexes work to complete their consolidation patterns.  If you’re starting to feel frustrated about the lack of direction in the markets, don’t be.  It’s perfectly normal.  As I have been saying, it’s all part of what happens after a Fed announcement as traders try to make up their minds about the next major move in the markets.

Just remember, the longer the market trades sideways, the stronger the next move will likely be.  The Bollinger Bands are really starting to tighten now on the Dow, SPX, and on most energy related stocks.  Remember too that the move after a consolidation pattern is usually in the same direction that stocks entered the pattern.  And in this case, that move was up.

Also, we are now starting to enter the Bullish end-of month, end of quarter trading period where mutual funds will adjust their portfolios. This could help sustain any rally that starts in the next few days.

So sit tight, be patient and let the market do its work.  You might also want to take advantage of yesterday’s pull back to pick up a few shares of the stocks you have been watching.  Especially NASDAQ stocks that are in solid uptrends with an oversold 2-period RSI Wilder.

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

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