Professor’s Comments May 13, 2016
Posted by OMS at May 13th, 2016
Stocks were mixed again yesterday. The Dow rose early in the day, then fell, only to rally into the close to finish up 9 points at 17,749. The NASDAQ had a tougher time as it finished down 23 points at 4,737. The NASADAQ is considerably weaker than the Dow at this point. Volume on the NYSE was moderate, coming in at 96 percent of its 10-day average. There were 132 new highs and 38 new lows.
The markets continue to form topping patterns. The Dow appears to be completing the right shoulder of a Head & Shoulders Pattern as part of an overall Rounding Top. A break of the 17,500 level would confirm the start of Major Wave 3 down. This wave may have already started in the NASDAQ.
Yesterday’s trading action caused The Tide to turn negative.
So now with a negative Tide, I will start adding to the ‘trial’ inverse index ETF positions I previously established at higher levels. This is my primary method for trading ETFs.
I simply wait for The Tide to turn either positive or negative, and then buy index ETFs that are moving in in the direction of The Tide as they start to appear on the Dean’s List. Right now, the only inverse index ETF on the Dean’s List is the QID, the inverse ETF for the NASDAQ-100.
BTW, my target for Wave 3 down on the NASDAQ is the 3,600-3,700 level. In other words, the pattern is projecting a 20+ percent decline in technology stocks.
Last night when I ran The Professor algorithm, he only highlighted 24 shorts to go with 9 longs. So he’s not giving me the high number of shorts that I would expect to see at the start a major decline. However, given the choppy trading that we have seen the past two weeks within the Rounding Top Pattern, it would not be unusual for the number of shorts to be on the low side. I should point out that in the past, large declines have started with as few as 28 shorts. If the market declines today, I would expect the number of shorts being highlighted by The Professor to increase significantly.
Besides the change in Tide, there was a small change in the A-D oscillator. So once again, we need to be on the lookout for a Big Move within the next 1-2 days. IF the move is to the downside, it could test the 17,500 -17,550 level. If this level is broken, the H&S pattern suggests the Dow should fall to the 17,000 level. Then once 17,000 is tested, another small retracement Hockey Stick should develop before the Dow starts its decline to even lower levels.
That’s what I’m doing,
h
Market Signals for
05-13-2016
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
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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Category: Professor's Comments