Professor’s Comments May 6, 2016

Posted by OMS  at May 6th, 2016

The markets were mixed to flat yesterday as traders waited for the BLS to release the April Jobs Report.  The Dow rose 9 points to 17,661. The NASDAQ was off 9 points to 4,717.  Volume on the NYSE was light, coming in at 102 percent of its 10-day moving average.  There were 162 new highs and 26 new lows.

Students should note that the number of new highs is still exceeding the number of new lows by a significant margin. This will need to change before a major down trend can start.

From a pattern perspective, it appears that the Dow is forming a Rounding Top.  This is a classic topping pattern that usually takes several months to develop. And during this time, stocks tend to make several down-up-down waves before it completes.

The pullback we’ve seen during the past week has still not caused my trend indicators on the Dow, SPX, and RUT to enter a downtrend.  And right now, the 2-period RSI Wilder on these indexes is in oversold territory.  So it’s still possible that the recent pullback is only corrective wave 4 within the pattern with another wave 5 up to go.

With the Dow moving up slightly yesterday, the pesky Hi-Lo indicator remained positive, so there was no change in The Tide.  It remains neutral.  And as long as The Tide remains neutral, there is still a chance that the markets could push higher.

There was a small change on the A-D oscillator yesterday, so we need to be on the lookout for a Big Move within the next 1-2 days.  The Big Move could start at 8:30 today after the Jobs Report is released.

Bottom Line: With mixed indicators on the cockpit and a pattern that probably needs more time to develop before it starts trending, I’m just going to wait to see how the market reacts to the Jobs Report.

BTW, continue to watch the 2045-2050 level on the SPX.  A break of this level would project a move down to 2020.  A break of 17,500 on the Dow would conform that Major Wave 3 down is underway.

That’s what I’m doing,

h

Market Signals for

05-06-2016

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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