Professor’s Comments October 1, 2013

Posted by OMS  at October 1st, 2013

The Dow fell 125 points, closing at 15,132.  By comparison, the NASDAQ only fell 10 points, closing at 3,771.  Volume on the NYSE was moderate on the decline, coming in at 95 percent of its 10 day average.  There were 67 new highs and only 37 new lows.

At one point in early trading yesterday, the Dow was down 189 points, but the strange thing was that the up vs.down volume was only 40 vs. 60 percent. So the decline in the overall market was not as bad as it appeared to be on the surface.

The SPX broke below the 1690 level at the open and got as low as 1674.99.  I had been thinking we would see the 1660-1665 level if the pattern morphed into a wave D down, which now appears to be the case.  But 1675 is only 10 points from my target, and with yesterday’s internal strength, there is a possibility that yesterday’s low was the bottom.

One of the reasons I say this is because when I checked in with The Professor last night, he was wide awake.   He surprised me.  On a day when the Dow was down over 100 points, The Professor was actually highlighting 42 stocks as entering Uptrends.  That’s a lot of stocks to highlight on a down day!  So today, IF the market starts to move higher, I will be running The Professor starting about 11am.  If he highlights more than 50 stocks as entering Uptrends, I’ll let you know.  Wave E up could be starting.

Remember back in early September, the last time he highlighted more than 50 stocks, the Dow gained over 700 points.  And in the 4 previous times before that, whenever he highlighted more than 50 stocks, it led to moves totaling about 4,000 Dow points so far this year.   So IF he highlights more than 50 today, he will get my full attention.

The Dean’s List is mixed with the positive index ETFs for the NASDAQ being present along with the inverse ETFs for the Dow and S&P 500.  The List is not negative.  If the market was getting ready to fall apart, the Dean would be completely negative by now.  But he’s not!  He’s telling us that NASDAQ stocks, mostly technology and pharma, remain strong.   And as long as he remains mixed, I cannot get too negative on the overall market.

Another thing that happened yesterday was that we just missed a set-up for a VIX Buy signals.  If you could have stopped trading about noon yesterday, the VIX would have closed above its Upper Bollinger Band.  However as things turned out, the rally off yesterday’s low caused the VIX to close at 16.60 which is slightly below its Upper Band of 16.82.   So we had a near miss.

An interesting way to look at this is IF we divided yesterday’s trading day in half, we could have generated the VIX Buy Signal Set-up in the morning and the actual Buy Signal in the afternoon.  I’m sure the rules for the VIX Buy Signal don’t allow this, but it’s an interesting way to look at it.  If you could do this, then yesterday’s morning low could be looked at as the low of Wave D down, and the ensuing 64 point rally could be viewed as the start of Wave E up. 

This is likely what caused The Professor to highlight his 42 stocks.

Anyhow, it is too early to speculate about a Wave D bottom being reached.  There are too many things going on now in Washington that could cause additional volatility in the days ahead.  So we need to let the hand play out.

On the other hand, IF The Professor starts to sing later today, I’ll let you know.  Trading is all about putting the odds in your favor, and based on what I’ve seen the past 5 times this year from The Professor, If he starts to sing, I’m going to start dancing.

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
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.