Professor’s Comments November 24, 2015

Posted by OMS  at November 24th, 2015

The Dow fell 31 points, closing at 17,793.  Volume was moderate, coming in at 91 percent of its 10-day average.  There were 81 new highs and 120 new lows.

Not much changed with yesterday’s trading.  The two Bullish scenarios I talked about during the weekend are still on the Board.  However by pulling back yesterday, the larger five wave pattern for wave ‘e’ up may have given us some clarity on how the final moves to 18,350+ could develop.

Here’s why:  Recall that in my Comments last Friday, I said that I was looking for a Big Move because of the small change in the A-D oscillator.  And that IF we got the Big Move on Friday, which we did, I would be taking some money off the table going into the weekend.

The reason I wanted to take profits is because I felt the market would be pulling back early this week in either scenario.   If the Ending Diagonal scenario was occurring, then the market would continue to pullback.  And IF the five wave scenario was occurring (most likely), the Dow would pullback early in the week, probably to the 17,500+ level, and then start a series of stair-step moves that would re-test the 20 May high.

The period just before and immediately after the Thanksgiving Holiday is usually very Bullish.  So IF yesterday’s pullback was the start of the final stair-step waves to the top, we could see a continuation of the pullback today, followed by a strong rally either tomorrow or after the Holiday.   BTW, the markets will be closed on Thursday for Thanksgiving, and will only be open for half a day on Friday. 

One of the reasons we could see a 100+ point decline today or a 100+ point rally tomorrow is because the A-D oscillator came in with another small change signal last night.  So If the Dow declines hard today, it would set up a nice post-Holiday rally, probably to 18,100+ on the next leg higher.   Then IF this rally happens, the Dow should make a small pullback, before re-testing the 18,350+ level.

Of course this assumes that the five wave scenario is occurring.  If this is not happening, then the Dow should not exceed the 3 November high of 17,978. The Dean’s List and The Tide should start to turn negative and prices should start to fall hard toward 16,000.

However given that the Dean’s List is still positive, I have to make the five wave up or ‘e’ wave scenario my primary scenario.  So If the Dow trades down to the 17,600 level or below during the next day or so, l will be looking to enter a trade for the final rally to the top.

Here’s my logic:  With a Dow near or below 17,600, I can establish a position using the DDM for a potential move to 18,100 -18,350.  If I place a mental stop at the 18,500 level on the Dow, the position would have a very favorable 5:1 reward-risk ratio (minimum).  I’ll take those odds, especially given the Bullish post-Holiday bias.

That’s what I’m doing,

h

Market Signals for

11-24-2015

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.