Professor’s Comments September 30, 2016

Posted by OMS  at September 30th, 2016

The Dow plunged 196 points, closing at 18,143.   Volume was heavy again, coming in at 120 percent of its 10-day average.  There were 103 new highs and 25 new lows.

Yesterday was the seventh consecutive day where the Dow had a 100 point (or near 100 point) move.  Once again, the financial media blamed the decline on Deutsche Bank and congress grilling  Wells Fargo’s CEO.  But we know better.  No, yesterday’s decline was simply caused by an overbought market that was showing NO Trend conditions.  We expected the market to decline from overbought conditions and it did. DB and WF were just excuses conjured up by the media.

So now what?

Well, once again, we have a market (Dow) that is still showing No Trend conditions, (VTI of 38.6).   But after yesterday’s decline, the Dow is no longer overbought. The 2-period RSI is now showing a slightly oversold reading of 29.6.  So we’re kind of in no man’s land.  With the VTI now negative and close to the 30 level, there’s a possibility that another down day or two could send it into the Trend Mode. 

I need to respect the fact that the VTI is now heading down and close to 30 for another reason.  Right now there are two negative patterns on the board.  We still have the small Hockey Stick pattern that suggests a move below 18,000.  And then IF 18,000 is broken, we have another larger pattern that suggests another 5-10 percent move down.  So we need to be careful now, especially as the Dow approaches the 18,000 level.

Yesterday’s decline turned The Tide back too negative again.  So with a negative Tide, I don’t really want to trade the long side from here, even though the 2-period RSI is slightly oversold.  The conditions are similar to what we saw earlier in the week where we looked to fade a small rally.  That’s what I plan to do today. 

With the Dow in a trading range between 18,650 and 18,000, this strategy of buying and selling overbought-oversold conditions has produced some really nice trading profits for me.  As long as the Dow stays above 18,000, I will continue to use the VTI-RSI combination as my primary indicators.  However, IF the Dow starts to move below 18,000, it’s likely that the VTI and all of the other trend indicators on the cockpit will start to move into trending conditions.  If this happens, I’ll simple hold the inverse (short) trading positions that I established.

When I ran The Professor last night, he had 14 longs and 19 shorts.  So while the shorts are now outnumbering the longs, he is still several stocks shy of seeing a new down trend developing.  If he starts to highlight 40 or more stocks to the short side, he’ll get my attention.

Gold didn’t do much of anything yesterday, continuing to develop its sideways triangle.  I had some fun trading Royal Gold (RDLG) on the short term bars while I was watching the market decline.  And even though the stock finished down 0.83 cents at 78.82, it produced some nice trading (scalping) profits intraday. 

The reason I’m interested in GLD and mining stocks like RGLD and ABX now is because of the patterns.  Right now RGLD remains near the lower trend line of its sideways triangle pattern.  The 2-period RSI is close to being oversold.  So as long as RGLD stays above the lower trend line of its pattern and doesn’t break 76.82, I’m interested.  I’m simply treating it as a trading vehicle now, buying and selling oversold-overbought conditions on the short term bars.  I’ll continue to do this looking for the stock to test the upper trend line of the triangle near 86.93.  Then if the stock starts to move above 86.93 end enters the Trend Zone, I’ll start holding my positions.

Remember, the pattern on Royal that I’m looking to trade is a large Hockey Stick that started on 5/19 at the 51.72 level.  The ‘Stick’ finished on 8/2 at the 87.74 level.  So there’s 36+ points in the ‘Stick’. Everything since 8/2 has been associated with the development of a ‘Blade’, which in this case appears to be a sideways triangle.   So if RGLD can move above 86.93, those 36+ points on the ‘Stick’ should start to come into effect.  Those 36+ points are the reason I’m interested in RGLD now, not the 7+ points within the triangle.

That’s what I’m doing,

h

Market Signals for

09-30-2016

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
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