Professor’s Comments March 31, 2016

Posted by OMS  at March 31st, 2016

The Dow rose over 150 points early, pushed higher by Mutual Fund end-of-quarter window dressing.  However, weak internals caused the Dow to pull back and finish up only 84 points at 17,717.   Volume was low, coming in at 82 percent of its 10-day average.  There were 218 new highs and 5 new lows.

Not much changed after yesterday’s trading action. Except for the high number of new highs, the internals were actually pretty weak.  Advancing stocks only outnumbered decliners by about 800 issues, which is not what you would expect to see after an opening pop of over 150 points.

The Money Flow indicators on all of the indexes I monitor actually declined after yesterday’s trading telling me that once this window dressing is complete, the Dow should start to decline.

The Dean’s List, Tide, and the Money Flow indicators remain positive, so I have to respect them.  But the pattern tells me that the markets are very close to a top, and without a new Bullish pattern in place, I can’t trade the long side. 

Remember, whenever I look to trade ETFs from the Dean’s List, even when The Tide changes, there MUST be a pattern in place to support the trade.  And right now there is NO bullish pattern.  The Bullish pattern that started on 16 February, when The Tide turned positive, is nearing completion.  So now I’m just waiting for the markets to roll over.

We could start to see that happen today.  After yesterday’s initial pop, I really didn’t see anything that was trying to push the market higher.  So most of the window dressing could be complete. 

I’m very tempted to put on a few shorts now, but because the VIX did not penetrate its lower Bollinger Band yesterday, there is still a possibility that the market could pop one more time before it generated a set-up for the VIX Sell Signal.  So far the only thing that came close to generating a VIX Sell Signal was on 17 March when the VIX made an intraday dip below its lower Bollinger Band.  Given that I believe that the current rally is Major Wave 2, I would expect its completion to be marked by a well-defined VIX Sell Signal.  So far, this has not happened.

So I’m just waiting.

That’s what I’m doing,

h

Market Signals for

03-31-2016

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