Professor’s Comments May 22, 2014
Posted by OMS at May 22nd, 2014
The Dow rose 159 points, closing at 16,533. Volume was moderate, coming in at 93 percent of its 10 day average. There were 99 new highs and 36 new lows.
Yesterday’s impulsive action was exactly what I wanted to see after Tuesday’s decline to an apparent wave 2 bottom.
So IF wave 3 up is underway, which appears to be the case, the Dow should continue to move up steadily toward or slightly above 17,000. The rally should last about two weeks, after which a fairly significant retracement should take place.
Right now it’s not clear just what sort of retracement will be in the cards, but it’s likely that it will retrace a good portion of the move to 17,000. But let’s not get ahead of ourselves. Right now, let’s focus on the rally.
Ok, so where are we? Yesterday all of the PT indicators on the NASDAQ (QQQ), including the P-volume, turned positive. The DMI on the Dow and S&P500 (SPY) is still negative. All of the PT indicators on the Russell 2000 are still negative. So the indexes are mixed.
The Dean’s List remains positive and continues to gain strength. All of the positive ETFs for the major indexes are back on the Dean’s List.
The Healthcare Sector is starting to generate some steam and has replace Energy as the top sector. Other sectors that are gaining strength are Transportation, Media, and Leisure. The weakest sectors are the Banks and Financials. If you want to see why, just look at a chart of Bank of America (BAC). With that awful P-volume, it’s hard for me to see how a stock like this will participate in any sustainable rally. And IF BAC and other Banks don’t participate…when they should be leading, I have to question where the Dow will get the strength to move beyond 17,000.
I noticed that Emeritus highlighted Royal Caribbean (RCL) for the Honor Roll last night. The previous day he highlighted Carnival (CCL). The PT indicators on RCL are positive and the stock has a nice HS Pattern with relatively tight Bollinger Bands. The stock also has a very strong and positively diverging P-volume. In other words, it’s on the List, with a pattern and positive indicators. Hmmm?
It’s still early in the process. The indicators on the Dow, S&P, and Russell still have work to do before the overall market starts to roll. But a few sectors are starting to show their hand. In times like this, I like to focus my attention on stocks from the strongest sectors. This is no time to be dealing with junk!
Here’s the thing: If you’re holding junk now, like BAC, all of your PT indicators are negative. You have to hope and pray that they will turn positive. But more importantly, you don’t have anything to tell you when to get out If the stock does start to rally. The indicators are already negative.. They turned negative on 4 April when the stock was over 10 percent higher.
This is why you should only focus on stocks with positive indicators now. So you know when to get out!
For example, you all know that I’m holding shares of Halliburton. I bought the stock when the Energy Sector started to strengthen.in late February –early March. It was on the Member’s Watch List, had a pattern and had positive indicators. In other words, it had all of the elements of the SIGN.
Since I purchased the stock, the PT indicators have remained positive. There was a time last week when 2 of the 3 PT indicators turned negative, but the MACD never did. So I continued to hold the stock. IF the PT indicators turn negative, I know when to sell.
This is what I want in my stocks IF the market starts to move higher. I’m not too worried about picking stocks that will go higher. No, what I really want to see now is positive indicators that will tell me when its time to get out.
And the best way to do that is to start with positive indicators in the first place. In other words, it’s time to use the SIGN. List, Pattern, and Indicators.
That’s what I’m doing,
h
Market Signals for 05-22-2014 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
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