Professor’s Comments September 1, 2015
Posted by OMS at September 1st, 2015
The Dow fell 115 points, closing at 16,528. Volume was light, coming in at 83 percent of its 10-day average. There were 5 new highs and 42 new lows.
Not much changed with yesterday’s trading. As expected, the Dow fell early but did not produce much follow through. The light volume session was unconvincing. So the two scenarios I talked about yesterday are still in play.
My primary scenario is that wave 4 up has completed and the Dow is starting to enter its next major down leg, wave 5 down. This wave should drop the Dow another 1,000 to 1,400 points before it completes. Any impulsive move below 16,200 would confirm that wave 5 down is underway. The key word in the last sentence is ‘impulsive’. How do I define impulsive? Trust me…you’ll know.
For now, I’m gonna stick with my target of just under 15,000 for wave 5 down. But as you saw happen during wave 3 down, the move could be significantly lower IF panic sets in. Right now I’m using ‘close to 15,000’ for money management purposes. This is because IF the Dow falls below 15,000 on this next leg down, it will increase the odds for a wave 2 bounce back to 16,500. So we will need to be very concerned about money management once the Dow gets closer to 15,000.
The second scenario or pattern is that yesterday’s decline was all or part of wave ‘b’ down of an a-b-c move that will take the Dow back above the 17,000 level before wave the next major down wave begins. For this to occur, the Dow MUST move back above Friday’s high of 16,670.
With either scenario, the odds are overwhelmingly in favor of more decline. It’s just a question of whether the next move down starts now or later this week. The thing to remember is that this Bear Market is just starting. The only question that remains now is how the Bear will unfold. In other words, how low will each down leg go, how much of a bounce will each retracement leg produce and how long before it all ends. The only certainty is that the stair step decline is going to produce a lot of volatility.
So for today, I’m just gonna keep watching two levels. The first is for an impulsive decline that breaks 16,200. This would tell me the Dow is headed a lot lower. The second is the mental stop I have placed at 16,670 which if broken, would tell me that my alternate scenario is occurring. I still view this as a low probability scenario, but I want to mention it so you know what is likely occurring IF 16,670 is breached to the upside.
Gold (GLD) continues to hover near the 108 level. The thing to note about the current pullback is that the Money Flow indictor remains positive. So the pullback that I mentioned last week appears to be the rest period needed to prepare GLD for a ‘Rope Jump’. If the ‘Jump’ occurs, it will move GLD back above the 112 level which is what I want to see to initiate the reversal pattern that will push gold prices to significantly higher levels later this year.
BTW, the Money Flow indicator on GDX turned positive yesterday even though the ETF declined 0.14 cents. I view this as a very positive move.
Watching for an impulsive move below 16,200.
That’s what I’m doing,
h
Market Signals for 09-01-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEU |
SUM IND | NEG |
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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Category: Professor's Comments