Professor’s Comments March 9, 2016

Posted by OMS  at March 9th, 2016

The Dow fell 110 points, closing at 16,964.  Volume was moderate, coming in at 97 percent of its 10-day average.  There were 79 new highs and 4 new lows.

Yesterday’s intraday decline of 153 points was the Big Move predicted by the small change in the A-D oscillator.  In yesterday’s Comments, I mentioned that the market would likely decline about 100-200 points, before starting its final rally to a top near 17,100.

So IF yesterday’s decline was wave 4 down within the Ending Diagonal for wave ‘C’ of Major Wave 2 up, the final wave of the pattern or wave 5 up should be next.

The Ending Diagonal pattern suggests that the Dow and all of the other major indexes should be very close to a top.

Yesterday’s early decline was NOT impulsive. If you were watching the Money Flow indicators on the short-term bars, it was pretty obvious that Major Wave 3 down was not starting. 

So today, assuming that wave 4 down completed yesterday, I will be watching for the final wave up of the pattern to begin.  BTW, I have to assume that wave 4 down completed yesterday because there isn’t any room in the pattern for it to decline without breaking the lower trend line.  See the attached chart.

Yesterday’s low was right on the lower support line of the Ending Diagonal. If the Dow starts to move below this lower trend line, it’s likely that Major Wave 3 down is underway.

One of the things to note from the chart is that the Chaikin Money Flow indicator on the 60 min chart has turned negative.  Also note how the Bollinger Bands have narrowed.  Narrow bands usually mean that a Big Move is coming.  Given where we are within the Ending Diagonal Pattern, I have to believe that this Big Move will be to the downside.

This is not the time to be buying stocks. 

I’m on the sidelines watching for signs that the final top has arrived.

If the Dow starts to approach the17,100 level, I will be using the shorter term bars to establish a few preliminary short positions using inverse index ETFs.

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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