Professor’s Comments March 28, 2014

Posted by OMS  at March 28th, 2014

The Dow fell 5 points, closing at 16,264. Volume was moderate on the decline, coming in at 112  percent of its 10 day average.  There were 51 new highs and 31 new lows.

Yesterday, the DMI on the Dow (DIA) turned negative to join the three other indicators on the cockpit showing Red.

When this happens, the first thing I want to know is if a new downtrend is starting.  So during the day yesterday, I was busy running The Professor.  The largest number of stocks he had trending to the downside was 7, so he certainly is not spotting a new downtrend.  And with no downtrend starting, it’s likely that the current consolidation will continue.

However, I do not expect that this consolidation will continue for much longer.  Last night, the A-D oscillator came in with a ‘relatively’ small change of 14 points.  In other words, we need to be on the lookout for a Big Move within the next 1-2 days.  I believe that this move will be up.

The Dean’s List remains positive and as long as it does not turn negative, the odds favor an upside breakout.

At this point, it’s hard to tell if the next upside move will be the actual breakout thrust.  The two most likely mini-scenarios are (1.) for an immediate move to re-test the 16,450 level and then thrust higher toward 16,588.  However the more likely mini-scenario is for the Dow to make a run at 16,450 and then pull back for several days before testing and then breaking above 16,588.  The second scenario has a much better chance of supporting a move to take the Dow toward 17,000.

Yesterday we got a ‘sneak peek’ at what some of the energy stocks that I have been talking about might do on a rally.  Gulfport Energy (GPOR) was up over 2 points before pulling back to close up 0.82 cents.  Same for Schlumberger (SLB) which was up over a buck.  Halliburton also participated in the early rally, but then pulled back to close off 0.28 cents.  When I saw HAL pullback to 57.36 with an oversold 2-period RSI Wilder, I bought a few more shares.

I still do not see any strong sector emerging besides energy.  However this could change within the next few days, so I’m still keeping about 20 percent of my funds in reserve.

All I’m doing now is waiting.  Waiting for the next rally leg to begin.

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
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