Professor’s Comments November 5, 2015

Posted by OMS  at November 5th, 2015

The Dow fell 51 points, closing at 17,868.  Volume was moderate on the decline, coming in at 99 percent of its 10-day average.  There were 100 new highs and 30 new lows.

Once again, even though the Dow fell yesterday, there wasn’t any change in the cockpit indicators.  It still appears that the current rally is nearing completion, but we won’t know for sure until the lower trend line of the Ending Diagonal Pattern is broken.  That trend line is now located just above the 178 level on the DIA.  So from a trend line perspective, we’re getting close.

There are two things on the immediate horizon that could start to change the direction of the market.  The first is tomorrow’s Jobs Report, which the BLS will be releasing before the market opens at 8:30 tomorrow morning.  Last month’s report was terrible, but yet the market rallied after the announcement.  Apparently traders felt that the report was so bad that there was no chance that the Fed would be raising rates anytime soon.

But yesterday, Janet Yellen talked about the possibility of raising rates at the next FOMC meeting in December.  This tended to put a damper on stocks for the day.  So it appears that the market is still concerned about the possibility of a rate hike. 

At this point, I still don’t see a rate hike coming.  But if tomorrow’s Job’s Report is another disappointment, it could change the way traders perceive the current slow growth economy.

Company earnings for the past quarter have been a mixed bag, mostly dependent on the amount of business a company is doing oversees. The strong dollar continues to pressure the bottom line of large cap internationals. Europe and China remain in a slow growth environment and continue to stimulate their economies, so a rise in rates by the Fed would be contrary to what central banks around the world are trying to do.

Anyhow, because tomorrow’s Jobs Report will take on added significance with respect to the the Fed’s policy on interest rates, I expect that most traders will be on the sidelines today waiting for tomorrow’s report. 

The market didn’t react much from Tuesday’s small change in the A-D oscillator, so the Big Move signal is still on the board.  If things stay relatively quiet today, there is a good possibility that another small change signal will be generated tonight.  This would increase the possibility of a Big Move on Friday.

Yesterday the gold ETF, GLD, fell 1.01 points to 105.97.  The DMI has turned negative and one of my trend indicators is getting very close to entering the trend mode.  If this happens, there is a good possibility that gold will re-test the 24 July low of 103.43, even dropping to 100 before moving higher.  The move down would likely be the final ‘e’ wave of its Ending Diagonal Pattern.

BTW, if this final move down is starting, it should NOT be straight down.  GLD should rally from current levels to about 108.  This will be a critical level to watch as it will form the Blade of a small inverse Hockey Stick.  Then If GLD starts to decline from this pattern, it will project a target near the 100 level.  I would view this level as a major long-term buying opportunity for gold.

That’s what I’m doing,

h

Market Signals for

11-05-2015

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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