Weekend Strategy Review A Few More Thoughts 1/10/16

Posted by OMS  at January 10th, 2016

I’m in Williamsburg, VA this weekend and had some time to look at the market. What I saw was very disturbing and could impact the way things unfold during the next few weeks. So I generated a scenario on how the Dow might decline to retest the August lows.

One of the things that concerns me is that I’m not seeing any divergences between price and volume. None! This lack of divergences is not only happening on the Dow, it’s present on all of the major and minor market indexes.

This is very unsettling after a decline of over 1,000 Dow points. And because of this, it’s highly likely that the Dow will continue its current decline.

But as I said in previous Comments, the decline will not be straight down. The scenario I looked at this morning projects a fall to about the 16,200 level before minor wave 3 of 3 down completes. If this happens, I would expect the Dow to rally back to the 16,500 level before minor wave 5 down takes it significantly below 16,000. 

Then IF significant divergences start to appear with the Dow below 16,000, (It’s a BIG IF) I will start to look for a Major Wave 4 retracement rally.  But as of now, it’s way too early to be thinking about any significant Wave 4 rally.  Right now, you need to be thinking about protecting yourself.

I want to re-emphasize that as of this weekend, there is nothing in any of the indicators or the pattern that even remotely suggests that the Dow will bottom at 16,000 or even 15,000.

So IF the Dow continues to decline to 16,200+/- 100 points early this week, I would expect it to be followed by a short-term rally back to 16,500 +/-. If this happens, I will be looking to get short from these higher levels.

Remember, the odds are high now that he current decline could become significant. So any rallies should be looked at as shorting opportunities.

BTW, since the Dean’s List turned negative on 31 December the Dow has declined 1,079 points!

The Tide generated its Sell Signal on 4 January. Since that signal, the Dow has declined 864 points!

The Dean and The Tide do not give opinions. They just tell you what the market is doing. They are very good a what they do. When I talk about how the Dow might rally back to 16,500 and then decline below 16,000, please understand that this is my opinion. It’s an opinion based on Elliott Wave patterns. But as you know, these patterns can and do morph into other patterns. The Dean and The Tide don’t care about Elliott Waves. They don’t morph. They might turn neutral, which is my signal to move to the sidelines or lighten up. But when they are both in agreement, I follow them.

So IF the market starts to rally next week, please pay attention to The Dean and The Tide.

That’s what I’m doing,

h

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