Professor’s Comments may 10, 2016

Posted by OMS  at May 10th, 2016

Stocks were mixed yesterday.  The Dow fell 35 points to 17,706 while the NASDAQ rose 14 to 4,750.  Volume on the NYSE was moderate, coming in at 94 percent of its 10-day average.  There were 232 new highs and 25 new lows.

It still appears that the indexes are forming the right shoulder of a Head & Shoulders sub-pattern as part of an overall Rounding Top.

If I’m correct about the pattern, the Dow should rally to the 17,900 level before starting a significant decline. 

There was a relatively small change in the A-D oscillator last night of 13.5 points.  This change is slightly outside of the 10-point range I use to turn the cockpit light Green.  However, because the value is only 3.5 points outside the 10-point limit, we still need to be on the lookout for a Big Move within the next 1-2 days.

Last night, The Professor had 37 stocks highlighted as longs vs. only 8 shorts.  So even though the indexes were mixed, a lot of stocks are still strong as they complete the final waves of their topping patterns. 

Like I said in yesterday, IF the Dow rallies during the next 1-2 days and approaches 17,900, I will be looking for opportunities to establish a few ‘trial’ positions in inverse index ETFs from that level.  I believe the reward-risk for trades from 17,900 is favorable as the target for the pattern is the 17,000 level.

Also, if the Dow rallies, gold could pull back to complete wave ‘c’ of an a-b-c corrective pattern for Wave 2.  My indicators are showing that while GLD is still in an up-trend, the Money Flow indicator has turned negative.  So IF Wave 3 up in gold has not started yet, the metal could decline from where it closed yesterday at 1265 to below 1200.  If this happens, GLD could retest its 200-day moving average near 113. 

Students should note that UUP, the positive ETF for the U.S. Dollar has replaced UDN on the Dean’s List.  A strong dollar is usually not something you want to see if you’re long gold.

The other thing I noticed last night was that DUG has finally replaced DIG on the Dean’s List.  Students should note that we are now entering the second week in May, so the favorable period (March-April) for trading energy is over.  Last May when DUG replaced DIG on the Dean’s List, DIG fell from the mid-50s to below 30. 

Pay attention to these ‘Sticks in the Sand’.  If you are trading energy stocks or gold, you might want to place a stop order to protect profits. 

That’s what I’m doing,

h

Market Signals for

05-10-2016

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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