Professor’s Comments October 16, 2015

Posted by OMS  at October 16th, 2015

The Dow rallied for 217 points, closing at 17,142. Volume was moderate, closing right at its 10-day moving average. There were 51 new highs and 32 new lows.

Yesterday’s rally reversed Wednesday’s impulsive decline and took the Dow close to Tuesday’s high of 17,173. The rally was more than I expected, however it really did not change the overall pattern or wave count.

If you look at how yesterday’s rally developed on the 5 min bars, you can see a clear a-b-c pattern. This suggests the rally was a 3 wave correction of the 5 wave decline that started early Tuesday. In other words, it’s still possible that the Dow topped on Tuesday, and that everything since has been the preliminary waves of Major Wave 3 down. We’ll see.

The A-D oscillator closed with an overbought reading of 172.5. So once again the market is overbought and testing recent highs. It is not unusual for a market to re-test recent highs when it is forming a major top.

GLD pulled back slightly after Wednesday’s ‘Rope Jump’, but remained above its 200-day moving average. As long as GLD stays near or above the 200, it will continue to pull the 50 up toward the 200. This is what MUST happen in the weeks ahead if gold is to move significantly higher.

Remember, GLD has now ‘Jumped the Ropes’, which is the first requirement for a stock to start the turn around process. The fact that a ‘Rope Jump’ has occurred identifies the move up from the 11 September low as a wave 1 up. The next thing I want to see is a wave 2 pullback, during which the 50 will cross above the 200 putting the ETF into an uptrend.

I’m just watching now.

That’s what I’m doing,

h

Market Signals for

10-16-2015

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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