Professor’s Comments November 3, 2015

Posted by OMS  at November 3rd, 2015

The Dow rose 165 points, closing at 17,829.  Volume was moderate, coming in at 94 percent of its 10-day average.  There were 104 new highs and 29 new lows.

Yesterday’s rally was the Big Move predicted by Friday’s small change in the A-D oscillator.  The rally took the Dow to within 20 points of the 17,850 level that I talked about last Friday as the likely target for where Major Wave 2 up should end.

Yesterday’s rally also appeared to complete all 5 waves of the Ending Diagonal pattern.  There is always a chance that an additional sub-wave or two can develop for yet another a-b-c move within wave ‘c’ up, but if it does, I would not expect these waves to exceed yesterday’s high by very much.

I mention these small sub-waves because we are now in the first week of a new month.  And this Friday, the BLS will be announcing the results of the October Jobs Report.  So it’s possible that the market will tread water until then.

However from a pattern and target perspective, wave ‘c’ of Major Wave 2 up appears to be very close to completion.  All I’m doing now is waiting for the indicators to turn negative.

The first indicator to turn negative will likely be the Money Flow.  Even though yesterday’s rally pushed the Dow to a new rally high, the Money Flow indicator stayed below the previous day’s reading.  This negative divergence is a classic sign that the rally is weakening. 

If the market starts to pull back today, it will be interesting to see what happens to the Money Flow indicator.  The next time it turns negative will be a strong signal that Major Wave 3 down is about to start. 

Shares of IYT, the transportation ETF, rose over 2 points yesterday but are still below the 5 August retracement high.  In other words, the transports continue to show a significant negative divergence with the Dow Industrials.  My ‘trial’ short of CNI actually fell 0.17 cents yesterday, closing at 60.92.  The Daily Money Flow indicator on CNI turned negative on 28 October after the stock reached a rally high of 62.74.  Since then, the negative MF indicator has caused the stock to pull back almost 2 points

I mention this negative MF divergence on CNI this morning so you can compare it to what’s been happening on the Dow (DIA).  Yesterday was the first time the Money Flow indicator on the Dow has shown any significant divergence since the current rally began on 29 September.  Again, IF it turns negative after today’s trading, you might want to pay attention.

Waiting.

That’s what I’m doing.

h

Market Signals for

11-03-2015

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