Professor’s Comments November 16, 2015

Posted by OMS  at November 16th, 2015

After looking at the past three days of impulsive decline, I tried to calculate a few targets to estimate how the decline toward 16,000 on the Dow might unfold.

Because the past three days have been impulsive, it’s likely that they were part or all of wave 3 down of Wave 1 down of Major 3 down.

So once minor wave 3 down completes, probably within 50 points of current levels, the Dow should develop a small wave 4 retracement followed by another impulsive drop to about the 17,000-17,100 level. This is where Wave 1 down should complete.

If this happens, you might want to do some money management because it would set up a retracement rally back to the 17,500-17,600 level for Wave 2 up.

Then once Wave 2 completes, it would set-up another impulsive decline toward 16,000 as Waves 3, 4 and 5 unfold.

In other words, short-term traders might want to look at the 17,000-17,000 level as an area to take a few bucks off the table. This is where I might take half-off and let the rest of my inverse positions ride. I’ll then look to re-establish the positions I sold if the Dow starts to move back toward 17,450-17,500 as Wave 2 up completes.

Remember the indicators are still not showing the start of a down trend. So it’s highly likely that last week’s decline was only part of Wave 1 of Major Wave 3 down. Also, the odds are high that the Dow will not drop straight down to 16,000. It will likely be a five wave stair-step decline, with several retracement rallies along the way. All of these declines and retracement rallies should provide students with opportunities to trade the shorter-tern bars.

That’s what I’m doing,

h

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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