Professor’s Comments November 20, 2015

Posted by OMS  at November 20th, 2015

Not much changed yesterday.  The Dow fell 4 points, closing at 17,733.  Volume was moderate, coming in at 91 percent of its 10-day average.  There were 53 new highs and 88 new lows.

The Dean’s List and Tide are neutral, and the Money Flow indicators are negative.

With mixed indicators the short term trading picture remains clouded.  It appears that the recent terror related events in Europe are causing foreign money to seek a ‘safe haven’ in U.S. stocks. This additional money flow will likely cause U.S. stocks to re-test the summer highs.  However once this re-test is complete, the markets should start a major sell off.

The two patterns that I currently have on the Board suggest higher prices.  However, it’s very possible that the patterns could truncate and NOT reach their upper targets.  So the market is in a kind of no man’s land.

Now I know that this is not what you want to hear.  My students always prefer when the patterns and indicators reflect more certainty.  But when you trade, there are times in when things happen in the world that change the technical picture of the markets.  This is what appears to be happening now.

As long as European money continues to flow into the U.S. markets, they should remain Bullish.  Also, the period after The Thanksgiving Holiday normally has a Bullish bias, so as long as the indicators remain neutral to positive, they will tend to support higher prices.

Of the two patterns, the Ending Diagonal is the weakest.  As long as the Dow stays below the 3 November high of 17,978, this pattern remains in effect.  However IF this high is exceeded, prices will likely test and then exceed the 20 May high of 18,350.

So with these two patterns on the Board, we need to pay close attention to our indicators and Lists.

Last night, TWM, the inverse ETF for the Russell 2K re-appeared on the Dean’s List turning it back to neutral.  However the Hi-Lo oscillator joined the Up-Down oscillator in positive territory, so two of the four indicators that make up The Tide are now positive.  So any rally today will likely turn both the Dean’s List and The Tide positive.  If this occurs, the Dow will likely test the highs of the Ending Diagonal pattern.

The reason I feel the market will start a strong rally today is because last night there was a small change in the A-D oscillator of less than 10 points.  So we need to be on the lookout for a Big Move within the next 1-2 days.

Also, when I ran the Professor algorithm last night, he had 29 longs.  And while this is still only about half of the 50 stocks required to generate a Professor Buy Signal, the algorithm continues to reflect a positive bias as the market moves into the normally Bullish Holiday period.

So short-term traders might want to look to trade the shorter-tern bars, as Wednesday’s Big Move followed by yesterday’s sideways consolidation could serve as a ‘Stick and Blade’ to propel the Dow 200 points higher.

BTW, IF the Dow makes its Big Move today and approaches the 17,978 level, I will not be holding those scalp positions going into the weekend.  The risk from the completion of the re-test of the Ending Diagonal would be too high.  I would rather take profits and then see what happens on Monday.

Looking to trade the shorter term bars.

BTW, attached is a chart that depicts the Hockey Stick Pattern I talked about earlier this morning. As you can see, the Hockey Stick I mentioned is part of a larger Head & Shoulders Pattern that projects higher prices IF yesterday’s highs are exceeded..

Anyhow I want you to become familiar with the set-up on this 60 minute chart because this weekend, I will be talking about how I use these indicators to scalp trade.

h

Market Signals for

11-20-2015

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.