Professor’s Comments March 4, 2016

Not much changed after yesterday’s action.  Yesterday’s high was 65 points from the theoretical target for wave ‘c’ of Major Wave 2 up.

How the Dow reaches its eventual top will be very difficult to predict as almost anything can happen now. 

The odds for a wave 4 pullback to begin today are high.  The market is EXTREMELY overbought as evidenced by 6 straight days of A-D oscillator, readings over +200.  Yesterday’s reading was an EXTYREMELY high reading of +332, so unless the market is staring a Major Uptrend, the odds of a pullback are high. 

The odds of a Major Uptrend starting from current levels are low, as Uptrends do not start from Ending Diagonal patterns.  Down trends do.

But here’s the problem.  Now that the Dow has reached the 16,944 level, it could truncate.  It doesn’t need to have a wave 4 and wave 5 to complete the pattern. 

The Dow could start down today and continue to fall.  Or it could pullback about 100 points or so and then rise early next week.  There is no way to tell, and the odds for either event are now about 50-50.

I don’t like even money odds, so I’m on the sidelines.

Several energy stocks, including MRO, had nice pops yesterday.  I mentioned MRO yesterday because it was the highest ranking energy stock on the Dean’s List and moving up.  After yesterday’s 10 percent pop, it’s now the highest ranking stock on the Dean’s List.  An intraday scalp of MRO produced a nice gain.

DIG remains on the Dean’s List as we move into the favorable March-April time period for energy.  As long as DIG stays on the List, I will continue to scalp energy stocks. 

The dilemma ahead for energy is how will it reach going forward.  Right now, it appears that energy and gold are shaping up for nice moves higher.   But the overall market appears to be in the process of completing an Ending Diagonal Pattern.  The next week or so should be very interesting to watch.  It could be that commodities and equities are finally starting to go their separate ways.

Remember what I said several months ago.  The OPEC members and Russia do not benefit from low crude oil prices.  The Saudi’s were the ones who kept production levels high in an attempt to drive U.S. frackers out of the market.  This strategy has had some success, but it also produced a lot of unintended consequences.  Low oil prices are really hurting the budgets of the OPEC nations and others.  Even the Saudi’s are starting to borrow money now!  So even though the world is awash in cheap oil, DO NOT expect this situation to last. 

I would not be surprised to see crude oil trading near the 60-65 level by mid-summer.  And if this happens, all of the energy stocks currently on the Dean’s List and Member’s Watch List could be trading a lot higher.

Students might want to pull up a chart of OIL, the crude oil ETF.  Right now the ETF is trading about 60 percent lower from where the Saudi’s started their intervention.  The DMI and Money Flow indicators have turned positive.  If the momentum starts to kick in, energy could be a very nice place to be for the next few months.  

Scalping energy.

That’s what I’m doing.

h

Market Signals for

03-04-2016