Professor’s Comments May 21, 2014
Posted by OMS at May 21st, 2014
The Dow fell 138 points yesterday, closing at 16,374. The decline was the Big Move predicted by the small change in the A-D oscillator. Volume was moderate, coming in at 97 percent of its 10 day average. There were 80 new highs and 39 new lows.
Yesterday’s decline stopped within a few points of the 28 April low of 16,313. The reason this low is important is because it is the interim low between the first two highs of wave 1 up, and therefore represents a natural target for corrective wave 2 down.
In other words, there is a better than even chance that the target for a Major bottom (wave 2 down) has been reached.
It’s too early to tell right now because all of my indicators are negative. However the Dean’s List remains pretty long and strong. The DIA has fallen off the List, replaced by the inverse DXD. But the QQQ, QLD, AAPL, SPY and SSO are still on the List keeping the List positive. Also, DIG and many other energy and healthcare ETFs remain on the List.
BTW, I hope you noticed how the energy and healthcare sectors help up during the past few days while many of the other sectors, like the financials and semiconductors, were getting clobbered. Healthcare and energy were on the List; the financials and semis were not. As a matter of fact, the Dean had the inverse financials (SSG) and inverse semiconductor (SKF) on the List. Hmmm?
Anyhow, on my way home last night I stopped by The Professor’s office to see if he saw anything that I should be concerned about after yesterday’s decline. His office was closed and the lights were out. But there was a sign on his door that said: ‘No Trend, only 7 to the downside’.
So after trading down to a natural target for wave 2 down with a positive Dean’s List and no downtrend underway, it could be time to start looking for a few stocks to trade.
Yesterday I picked up a few shares of UWM, the ETF for the Russell 2000. All of the indicators on UWM are still negative on the Daily charts. However as I mentioned a few days ago, the ETF is showing a positive divergence on its P-volume. I bought a tiny amount yesterday when the 5 minute bars turned positive at the 15:05 mark after a TLB pattern. I kept the shares overnight.
The reason I bought UWM was to see how this extremely volatile, 2:1 leveraged ETF acts. I have never traded UWM before and usually when I plan to take a larger position in a stock like this, I like to become familiar with it. So now that I have a few shares, I’ll continue to watch. If the 60’s start to turn positive, I’ll buy a few more shares. Then IF the ETF appears on the Dean’s List AND the PT indicators on the Daily’s turn positive, I’ll start to fill out my position. Right now, I’m only testing the waters.
IF you have been on the sidelines waiting for an opportunity to buy your favorite stock or ETF, you might want to think about doing something similar to the above strategy now. Remember, trading is an odds game. There are never any guarantees. All I try to do is trade when the odds are in my favor.
BTW, just for clarification… Yesterday I received an email from a student asking about what I meant when I said I was ‘heading for the sidelines.’ He wondered if this meant that I was selling all of my positions, going into cash. No. When I use the term, it simply means that I’m more than likely not trading on that particular day. In other words, I don’t see any particular ‘edge’. Even yesterday, when I saw a small change signal on the board, although I knew that there was a possibility of a Big Move coming, I really didn’t want to short the market. If the Dow started off to the upside, I would have traded the long side. But it didn’t and never really gave me a good entry point. So I waited.
I’m still holding all of my energy and Big Pharma shares, with some DUST. Together they amount to about 70-75 percent of my portfolio. If the markets start to firm, I’m still watching things like AMGN, which has a beautiful TLB pattern.
I’m not looking for a lot of stocks to trade now. Just one or two with nice patterns to fill-out my portfolio.
That’s what I’m doing,
h
Market Signals for 05-21-2014 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
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