Professor’s Comments September 22, 2016
Posted by OMS at September 22nd, 2016
The Dow rallied for 164 points yesterday after the Fed announced that they would leave interest rates unchanged. Volume was moderate, coming in at 100 percent of its 10-day average. There were 71 new highs and 18 new lows.
The rally was enough to turn two of the breadth indicators that make up The Tide positive. So now the Summation Indicator and the A-D oscillator are positive, while the Up-Down oscillator and Hi-Lo indicator remain negative.
The Dean’s List continues to remain neutral. The VTI on the Dow has turned positive, with the 2-period RSI showing a reading of 90.7. This tells me that the Dow is somewhat overbought at current levels, but not EXTREMELY overbought yet. In other words, the 2-period RSI suggests the market still has some room to move up.
When I ran The Professor last night, he had 30 longs and only 3 shorts. So while those 30 longs are not enough to generate a new Buy signal, they mean that for the short-term, the market has a positive bias that should last for another few days.
Looking at the pattern, it’s possible that the Dow could rally to the 18,450 level, with the SPX testing 2,180-2,185 before this rally wave completes. Then once complete, the pattern suggests that the SPX could fall below 2,000. In other words, I would not get too excited about the rally. The reward-risk is now about 20 S&P points to the upside vs. a potential 180 to 230 points to the downside. I don’t like those odds.
If the SPX starts to move up and approaches the 2,180 level in the days ahead, I will start looking to establish positions in inverse index ETFs. I will likely favor the DXD and SH because these ETFs have the best patterns.
Gold and mining stocks rallied hard on the Fed announcement. GLD rose 1.83 points to 127.27. The rally was enough to turn the VTI on GLD positive, generating a new Buy Signal. However, after yesterday’s rally, the 2-period RSI on GLD is somewhat overbought at 94.7. So it’s possible that GLD could pull back slightly during the next day or two. If this happens, I will look to add shares to my current position.
The next test for GLD should be a break of the 129 level, which is the upper trend line of the sideways triangle that has been developing since early July. If this happens, GLD should continue to rally toward the 135+ level.
BTW, even though I’m spending a lot of time talking about GLD now, I’m also trading and accumulating several mining stocks. But just remember, mining stocks are NOT gold. Mining stocks represent gold in the ground and a lot can happen before the metal is taken out of the ground and becomes usable. That’s why when I bet on gold, I like to have a position in the real thing. When you buy GLD, you actually own physical gold bullion held by a trust.
Same trading rational applies for mining stocks. As long as the VTI remains neutral, look to buy them on pullbacks when the 2-period RSI becomes oversold. Be patient and do NOT chase. Wait for them to come to you. Remember, I’m assuming that gold is in a Major Uptrend (Wave 5) that should take the metal close to the 1,500 level before the current leg (wave 3 up) completes. So anytime I believe that an impulse wave is starting or underway, I’m always looking to add shares when the 2-period RSI on the Daily Chart gives say so.
That’s what I’m doing,
h
Market Signals for
09-22-2016
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEU |
SUM IND | POS |
VTI | POS |
One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE
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.
Category: Professor's Comments