Professor’s Comments September 20, 2013

Posted by OMS  at September 20th, 2013

The Dow fell 40 points, closing at 15,636.  After noting two days of EXTREME overbought conditions from the A-D oscillator, 201 and 236,  the decline was not entirely unexpected.  Yesterday’s A-D oscillator reading was also 201, so yesterday’s slight decline did not do much to relieve the current overbought conditions.

Volume was higher than normal, coming in at 115 percent of its 10 day average.  There were 340 new highs and only 14 new lows.

The market is taking a breather.  If you look at a few individual stocks, you can see that the rise since the early September lows, has been almost straight up.  Stocks do not go straight up; they go up in waves.  And now that they are temporarily overbought, they will need to pause or move sideways.  It is this sideways action that will form the Blade of our Hockey Stick Pattern, which will enable them to move higher.

I would expect this breather to last about a week to 10 days before wave 3 up gets underway.

One way that I can tell that the market is still in an underlying up trend is The Professor.  Last night, he continued to highlight 28 new stocks as entering Uptrends.  In other words, he’s definitely not sleeping.  It’s almost as if he’s in the idle mode, only highlighting enough stocks to keep the engine running. 

One of the ways that we will know that wave 2 of 3 has finished and wave 3 of 3 up has begun is when he starts to highlight over 50 again.  Waves 3 of 3 are fun waves to trade, so watch for this signal.  By the way, on the days that the market starts to move higher, I will be running The Professor during the day.  This way if he starts to highlight more than 50 stocks, you will be among the first to know on the planet that wave 3 of 3 up is underway.

The Dean’s List remains long and strong, telling me that we’re still in Major Wave 3 up of C up.  And all of the PT indicators on the major indices are positive.  This is the time to be holding, and buying good stocks from the Member’s Watch List on dips. 

This is definitely not the time to be involved with low priced stocks, hope stocks or stocks that have not participated in the current rally.  Remember, the institutions are putting a lot of money to work now, and this institutional money can not be used to buy stocks under $5.00.  Institutions like high priced stocks where they can put a lot of money to work.  So when you’re looking at something priced near 10 and a stock at trading at 85, remember this.  All things being equal the institution will choose the higher priced stock every time.

With the market overbought, I’m just waiting to see some of the indicators pull back a little.  One of the indicators that I will be watching is the 2-period RSI Wilder.  If it gives say so on a stock in an Uptrend, it will tell me that it’s a good time to consider buying additional shares.

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

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.