Professor’s Comments October 15, 2015

Posted by OMS  at October 15th, 2015

The Dow fell 157 points, closing at 16,925. Volume on the NYSE increased to 98 percent of its 10-day moving average. There were 19 new highs and 32 new lows.

Yesterday’s decline was impulsive and could be the start of Major Wave 3 down. It’s still too early to tell if it is, but at least it was the type of impulsive trading action that I was looking for.

It’s a start. I’m still looking for the Dow to break moving average support at the 16,800 level before testing 16,502.

The stock that led the Dow lower yesterday was Walmart Stores (WMT), dropping 6.7 points to 60.03. I watched four Walmart executives try to explain the decline. What a farce! If I owned WMT before today, I would have sold immediately after listening to these guys speak. They were pathetic!

Last week, I talked about how Alcoa usually sets the tone for the earnings season. So after AA declined after its announcement, it was no surprise that other companies would be having similar experiences. But in Walmart’s case, it was even more likely that earnings would disappoint, mostly because of the fact that the company chose to raise its minimum wage last February. Hmmm? Raising wages increase costs, and unless these higher costs can generate additional profits, earnings have to decline. Do you mean to tell me that these four executives didn’t know this? They tried to sell these increase wages as an ‘Investment’ in their ‘sales associates’. Say what? Anyhow, all they had to do was look at the inverse Hockey Stick Pattern that had been forming in WMT for the past 5 months. That’s all the explanation that was needed. The other thing that was disturbing to me about WMT’s management was that for the past 6 months, these same guys had initiated a share buyback program. So now, a good part of the money (millions) they spent buying back stock, at a time when it was clear that earnings would suffer, has been lost in one day of trading. Makes me wonder how guys like this keep their jobs?

BTW, you might take a close look at the Hockey Stick pattern on WMT’s chart and what happened yesterday. Then compare it to the the pattern you see on the bank stocks Cramer was talking about yesterday. Do you still want to be long bank stocks?

Yesterday’s decline caused the Dean’s List to turn neutral as TWM, the inverse ETF for the Russell 2K, re-appeared on the Dean’s List. Its DMI and Money Flow indicators have turned positive. TWM is now the first inverse index ETF to re-appear on the List since it last turned positive. So now, if The Tide starts to turn negative, I will consider adding to my inverse shares.

Gold had a Big Day yesterday as GLD “Jumped the Ropes’ to close up 1.95 points at 113.81. The ‘Rope Jump’ move was important because it confirms that gold ( the metal) is in the process of reversing its 2+ year down trend.

GDX also had a nice day, closing up over a point at 16.9. The 200-day moving average on GDX is at 17.32, so it still has some work to do before it completes its ‘Rope Jump’. However its extremely positive Money Flow indicator suggests this should happen in the next 1-2 days.

Here’s the thing with gold: Now that GLD and several of the gold “rabbits’ like AU have ‘Jumped the Ropes’, the move is likely part of Wave 1 up of a five wave sequence for Major Wave 5 up in gold. So once Wave 1 up completes, we need to be watching for a Wave 2 pullback that will start to pull the 50-day moving average above the 200 and put gold and gold stocks into an uptrend.

Right now I’m still holding my ‘trial’ positions in GDX and other mining stocks. However once wave 1 completes and I see a two wave pullback for wave 2, I will start looking to increase my gold shares to a Full Basic Position.

That’s what I’m doing,

h

Market Signals for

10-15-2015

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

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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