Professor’s Comments May 21, 2015
Posted by OMS at May 21st, 2015
The Dow fell 27 points, closing at 18,285. Volume was moderate, coming in at 94 percent of its 10-day average. There were 123 new highs and 29 new lows.
Yesterday’s Fed minutes suggested that a rise in interest rates was not imminent. In other words, it now appears that the Fed believes that the economy is NOT growing at the robust rate it thought it was which was enough to justify a rate increase. So apparently that GDP number of 0.24 percent is real. And if the GDP number is really real, (our government tends to stretch the truth about these things) it begs the question, “Why are stock prices so high?” Hmmm?
Anyhow, after an initial pop after the release, the Dow settled down to close 27 points lower. It should be very interesting to see if there is more downside follow through today.
The reason I say this is because three of the four positive breadth indicators that make up The Tide are very close to turning negative. The Hi-Low oscillator is already negative. So if the market continues to head south today, we could have a change in Tide. I ALWAYS like to trade in the direction of The Tide. ALWAYS.
The other thing that happened yesterday is that there was another small change in the A-D oscillator. This time it was a very small change…less than a point. So with the A-D oscillator now hovering close to zero AND a small change signal on the Board, we need to be extremely careful with our trading now.
The top that I have been expecting could be at hand. The pattern suggested a top would arrive somewhere between 18,300-18,350. Yesterday the Dow hit 18,350 on the nose before starting to decline.
All I will be doing today is watching for the downside action to start. It’s still very early to be getting aggressive with the shorts. But the breadth indicators are suggesting we could be getting close.
In the past, the breadth indicators have always been the first to signal a change in market direction. Right now, both breadth and money flow are still positive. BTW, both of my money flow indicators started to turn down yesterday. They’re still positive, but a good down day today could send them below the moving average and trigger a signal. If this happens, I will start to become aggressive.
Right now I’m only holding a few ‘trial’ positions in DXD and TWM. If the market starts to head down today, I will likely add to these inverse positions.
I want to be holding a few inverse positions going into this Holiday weekend, especially if it appears that The Tide is changing. I won’t be able to give you intraday breadth numbers because I’m still not getting intraday data. But it shouldn’t be that much of a problem. If the market has a Big Move down today, it’s a good bet that we’re going to have a Tide change.
Be extremely careful now.
That’s what I’m doing,
h
Market Signals for 05-21-2015 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
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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Category: Professor's Comments