Professor’s Comments October 9, 2013

Posted by OMS  at October 9th, 2013

The Dow fell another 158 points, closing at 14,777. Volume on the NYSE was heavier than normal, coming in at 118 percent of its 10 day average.  There were 43 new highs and 61 new lows.

The SPX traded as low as 1655.05, almost 5 points below my lower target. The markets are now EXTREMELY oversold, with an A-D oscillator reading of 191.59, so we should see some type of bounce from these levels. It will be the trading action associated with this bounce that will determine how and IF a bottom forms at these levels.

As far as the technical picture is concerned, not much changed with yesterday’s decline. It still looks to be part of a normal Wave D down.

It also appears that the pattern is being ‘artifically’ generated because of the ‘cloud’ assiciated with the government shutdown and negotiations on the debt ceiling. If you recall, before the current stalement in Washington started, I was expecting a normal wave 2 correction. However because the discussions have taken on a more nasty tone, the correction has worsened and appears to have morphed into a Wave D. I still believe all of the above is part of the normal corrective process, and that the rally will resume once the ‘cloud’ is removed. However the ‘cloud’ will likely be with us for a few more days. Because of this, I plan to hold off on any new buying decisions until Wave D completes. 

The VIX rose to a very high reading of 21.01 before settling in at 20.34. The high close on the VIX was over a full point above its Upper Bollinger Band, so it might take a day or so of up or sideways trading action before another VIX Buy Signal is generated. Be patient.

Last night, after months of speculation, the White House announced that Janet Yellen will be the next chair of the Federal Reserve, succeeding Ben Bernanke. The official announcement is scheduled for today at 3pm, right after the Fed releases the minutes from its last meeting.

Waiting and watching,

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

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