Professor’s Comments October 3, 2013

Posted by OMS  at October 3rd, 2013

The Dow fell 60 points, closing at 15,130. Volume on the NYSE was moderate,  coming in at 97 percent of its 10 day average.  There were 119 new highs and only 33 new lows.

The SPX traded as low as 1680 yesterday, and appears to be developing a small bearish Blade for a test of the 1660-1665 level.  At this time, the pattern is starting to look more and more like a Wave D within an Ending Diagonal Patten.  If this is the case, the markets should experience a really nice rally once Wave D down completes and Wave E begins.  But we will need to exercise some patience and let Wave D down do its thing.

Because of this, I am holding off on any new buying decisions until Wave D plays out.

The Dean’s List remains positive and fairly long, with QQQ, QLD, SSO, UWM, and many positive sector ETFs on the List.  The only negative is DXD, the inverse ETF for the Dow.

Last week, I mentioned how the NASDAQ (QQQ) was a lot stronger than the Dow and was the place to be to ride out the current storm being caused by the government shutdown in Washington.  And yesterday, we saw this happen. Even though the Dow fell 60 points, the damage was mostly limited to the Dow, as the broader SPX only fell 1.1 points and the NASDAQ (QQQ) only dropping 0.03 points. 

This is just another way that the Dean’s List or Member’s Watch List can be used in your stock selection.

Currently a stock like Micron Technology, MU, is leading the MWL.  The stock has been among the leaders for the past month.  If you look closely at a daily chart, you can see that the stock has been rising off of a HSw/Blade pattern that completed in the late August-early September period.  And once it started to move, nothing, no threat of a government shutdown, no debt ceiling issues, nothing could get in its way preventing it from moving up toward its target.  Currently the stock appears to be getting a bit long in the tooth as it approaches its ‘Stick’ target of 18.  So I would not be looking to buy something like MU now.  I’m only using MU as an example of the type of stock that you should be looking for once wave D down completes for the next ride up.

In other words, it’s time to plan.  Now is the time to be looking for stocks near the middle of the MWL that have pulled back slightly or traded sideways during the past few weeks.  There are many that look just like MU did several weeks ago.  Stocks like CMI, GPOR, BIIB and F with its narrow Bands, are just a few.  Some of the stocks, despite the weakness in the Dow, are already starting to move higher.  Stocks like SNDK, RYL, MYL, CELG, and TSO have completed small Hockey Stick Patterns during the past few weeks and are now starting to move higher.   These are the stocks that The Professor is seeing as starting to enter the trend mode. If you are considering the purchase of these stocks, just be sure to measure the ‘Stick’ so you have a good idea as to what to expect for a traget.

BTW, last night The Professor highlighted 29 stocks as entering the trend mode.  So he’s certainly NOT negative.  He’s telling us that despite what you are seeing from the Dow, many stocks are starting to push higher.  That’s why we’re seeing this strength on the Dean’s List, and MWL.

Here’s the thing you need to know:  The HSw/Blade Patterns is a lot stronger than any temporary ‘cloud’ formed by the government.  It is the compilation of everything in the world’s market place, including the government shutdown.  The pattern develops because the price of a stock is constantly being evaluated by the wisdom and judgment of the best minds on the planet.  The price that forms the Blade is a true, undistorted value.  It is a pictorial representation of everything that is taking place in Washington, weighted against the value of the company and the risks of the marketplace.

That’s why I believe you should be looking for stocks with these patterns now.  All of the negative factors that are associated with the events in Washington are already baked into the cake.  A relatively flat ‘Blade’ tells me that the market place has already factored in what it believes are the risks and has weighted them against what it believes is the true value of the company.

So when a stock like SLB continues to push higher, despite a 60 point decline in the Dow, the stock is telling you that it doesn’t care about any government shutdown.  The stock went up because the market is seeing real value in the company.

I believe that once the temporary ‘cloud’ is removed, you will see stocks like SLB with well developed Hockey Stick patterns move significantly higher.  At the end of the day, patterns always win over temporary news events.  The news events, like the government shutdown, just get baked into the cake.  So ALWAYS look for Patterns!

That’s what I’m doing,

h

BTW,  I went to the Doctor yesterday, and was cleared to drive a car and do all of the other things I normally do, including teaching.  The only restriction I have is on lifting packages over 10 pounds.  So I’m still holding off on visiting my granddaughter. 

I did talk with Valerie yesterday, and she has rescheduled my next Basic Class at UNF to start on 16 October.  I’m really looking forward to getting back in the Classroom.  If you know someone who would like to take the next Class, please tell them about the new start date. Thanks.

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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