Professor’s Comments September 26, 2013
Posted by professor at September 26th, 2013
The Dow fell another 61 points, closing at 15,274. Volume was moderate on the decline, coming in at 96 percent of its 10 day average. There were 111 new highs and only 20 new lows.
The A-D oscillator had another ‘relatively’’ small change of less than 12 points. This is not enough for me to turn on the ‘small change’ light on the cockpit, but as I have mentioned before, within the past 2 years I have seen Big Moves with small changes in the A-D oscillator of up to 17 points. Anyhow, I’m mentioning it today because there is a good possibility of a Big Move within the next 1-2 days.
One of the things that we need to be mindful of is the possibility of some type of compromise on the Continuing Resolution (CR) being reached in Washington this weekend. If this happens and Obamacare is delayed or modified as part of the compromise agreement, it will remove the current ‘cloud’ that is hanging over the markets, and trigger a rally next week.
In previous Comments, I have mentioned that the market is poised to rally. A nice Hockey Stick with Blade Pattern has formed on most stocks and indices during the past week. All we need now is for the ‘cloud’ to be removed.
I received a few more emails from students who were holding MAKO yesterday after it received a buyout offer from Stryker. Here’s the thing. Now that the stock has popped, it will likely be dead money until the tender is complete. If you were one of those fortunate enough to own MAKO, you might want to consider selling the shares now so you can use the funds to participate in the next rally leg of the market. In all likelihood, shares of MAKO will be limiter to the offer price of 30.
There is another lesson in MAKO that I want to talk about briefly today. And while the market and most stocks are currently in an uptrends, only a few short months ago, MAKO was is a well established down trend. During the past 18 months, it had fallen from a high of 43 to a low of 10. It was definitely a stock to consider as a short during that time. But as I talk about in Class, especially with small medical stocks and biotech’s, you need to be very careful when you short these type of stocks. That’s because a company like Striker could view the stock as something that could be used to expand its business base. They could make an offer to buy the company and your short could jump 14 points the next morning. Your nice profit could turn into a big loss overnight. So be careful.
On the other hand, we received plenty of warning with MAKO. The stock was consistently near the top of the Member’s Watch List and was highlighted by Emeritus on several occasions. This is not the first time that Emeritus has highlighted stocks that went on to receive take over bids, and it won’t be the last. It’s one of the advantages of being in strong stocks on the Member’s Watch List. These stocks are strong for a reason, and most of the time that reason is because they are being actively accumulated.
So in the days ahead, you might want to look for stocks on the Member’s Watch List that have traded sideways to slightly down as the market has been pulling back. Stocks that have formed small ‘Blades’ to put on the early September ‘Sticks. These are the stocks that will likely lead the market higher in the weeks ahead.
Also, continue to watch the Honor Roll. For the past 10 days, Emeritus has been relatively quiet. But remember how he was acting back in early September, highlighting 6-8 new stocks each night. That’s because he saw these stocks as entering the trend mode.
We also saw how effective The Professor was at identifying the Uptrend when he started to highlight over 50 stocks during a three day period. The Dow responded by moving up over 700 points!
So in the days ahead, while we wait for this wave 2 or wave D to complete, you might want to watch for the time when both The Professor and Emeritus start to become active again. When they do, it will likely signal that the next rally leg is starting. And this is one train that I want to be aboard.
BTW, the SPX got as low as 1691.88 yesterday. I have been looking for a target near 1690, so we’re close. As a minimum, I would expect the market to rally from these levels. But whether this rally is the start of wave 3 up or is only wave ‘b’ up within wave 2 down remains to be seen. That’s why I will be watching The Professor.
Watching, waiting. And planning.
That’s what I’m doing,
|Market Signals for 09-26-2013|
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Category: Professor's Comments