Professor’s Comments September 24, 2015
Posted by OMS at September 24th, 2015
The Dow fell 51 points in lackluster trading, closing at 16,280. Volume was moderate, coming in at 90 percent of its 10-day average. There were 12 new highs and 239 new lows.
During yesterday’s action, I was focused on two small patterns that have developed since 8 September. Actually the patterns are a pattern within a pattern. They can easily be seen on the 30 min chart of the Dow. The larger pattern is a Head & Shoulders pattern with its ‘Head’ at the 16, 933 level on on 17 September. This high is also the start of the ‘Stick and Blade’ pattern that formed the right shoulder. The important take away from this is that IF the Dow starts to break below the 16,200 level now, it should fall about 250 points, then trade sideways for a bit before eventually falling to the 15,500, possibly a lot lower.
How much lower will depend on whether the decline is part of wave 5 down of Major 1 down or Major Wave 3 down. Right now I’m assuming that the decline is part of Major Wave 3 down. However once we get closer to 15,500, if the trading action is NOT impulsive, and the decline starts to look more like a wave 5 of Major 1 down, I’ll look to take a few bucks off the table. But not now.
That’s because The Tide has turned negative.
And when The Tide turns negative, I always look to add to my inverse index ETF positions. Remember, this is my primary strategy for trading index ETFs. I wait for a Tide change and then buy index ETFs that will move in the direction of The Tide. But right now, I already have all the inverse index ETFs I want, so I’m just holding the positions I have.
All I’m doing now is waiting for a break of the 16,200 level. If I’m right, the break should happen within the next day or so.
For those traders who like to live on the edge, this might be a good time to consider an options trade. If the market pops early today, the 20 November 180 PUT on the SPY would look interesting if it could be bought under 2 bucks. Just remember that IF you do trade options, you MUST take your profit (if you get one) during the decline. That’s when the premium will be the greatest. If you wait for the decline to complete and the market starts to rise, you will give back a lot of the gain you made. Options are extremely volatile instruments and should only be used by experienced traders who can afford the risk.
The other thing I continue to watch is gold. GLD rose 0.43 cents yesterday to close at 108.22. The ETF appears to be right on track for a ‘Rope Jump’ at the 112.50 level. If the ‘Rope Jump’ happens, you’re going to see a lot of interest in gold and mining stocks.
Also, I’m hearing a lot of talk about lower crude prices. One large Wall Street firm recently came out with a forcast of $20 crude. Hmmm? I’m not too sure about this. If you look at the curent Dean’s List you will see that both OIL and DUG are now on the List. DUG has been on the List for months as energy prices have declined. But now that OIL has appeared, things could be starting to change. I’m just watching now, but IF DUG falls off the List and DIG starts to appear, I don’t care what that large Wall Street broker is saying. I’ll go with the Dean. I don’t doubt that there’s a lot of crude oil supply out there now, but if things start to get hot in the mid-east, like hot in a shooting war, oil prices could move significantly higher. The Wall Street broker is probably only looking at the available supply. But the Dean always looks at the bigger picture. And right now I’m guessing that the reason he put OIL on the List is because of its potential bottoming pattern. Take a look at the move off the 24 August bottom and you’ll see what I mean.
That’s what I’m doing,
h
Market Signals for
09-24-2015
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
COACH (DIA) | NEG |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
SUM IND | NEG |
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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Category: Professor's Comments