Weekend Strategy Review August 25, 2013

Posted by professor  at August 25th, 2013

The Dow rose 46 points on Friday, closing at 15,010. It was down 71 points for the week. The Nasdaq rose 19 points on Friday, closing at 3,657. It was up 55 points for the week.  So the Dow was down for the week, but the Nasdaq has started to move up.  Hmmm?

For the past few weeks, I have been thinking that wave 2 down should bottoming below 15,000 on the Dow, possibly falling to the 14,850 level. The 14,850 level is where support came in from the interim low between the first two highs of wave 1 up. During the week, the index got as low as 14,880, only 30 points from the projected low.

So now that my target has been reached, I’m looking for signs that the next rally leg is starting.  Here’s a few of these signs:

During the week, the VIX generated two Buy signals.  That’s a start.

The next thing I saw was a change in the Dean’s List.  The inverse QID dropped off the List and was replaced by the two positive ETFs for the Nasdaq, QQQ and QLD.  However the two inverse ETFs for the DOW and S&P500, DXD and SDS, are still on the List.  So the Dean’s List is mixed, but appears to be in transition. 

So I’m waiting.

But while I’m waiting, I’m also watching for somebody to wake up.  Hmmm?  I wonder who that is?

As many of you know from my Classes at UNF, there is another Professor I check in with from time to time.  This Professor usually spends a lot of time sleeping.  He is completely useless most of the time, because he hardly ever does anything.  But when he wakes up and starts to highlight more than 50 stocks, I pay attention.  The Professor is very good at what he does, so I’m never bothered by his extended slumber. And when he wakes up with two VIX Buy Signals on the board, and a Dean’s List that appears to be changing, I really pay attention.

A new rally leg could be starting.

On Thursday, the Professor highlighted 29 stocks that were starting Uptrends. Then on Friday, he highlighted another 38 stocks.  When I saw this, I decided to stop by his office for a chat.  But it was apparent that he didn’t want to talk, and just pointed to a chart he had placed near his computer.  I was just about to ask him something, but when he dozed off again, I knew that we’re still not ready to rally.  But we could be getting close.  The Professor almost awake!

One of the things I have observed in the past is that whenever The Professor wakes up and starts to highlight over 50 stocks, it usually signals the start of a significant rally.  That’s because The Professor is a TREND algorithm.  And when he sees more than 50 stocks starting to trend, it usually means that the overall market is starting to trend.

I posted the chart he pointed to that shows what the Dow did after 2 January 2013, when The Professor highlighted 188 stocks that were entering Up trends.  During the next two months, the Dow gained almost 600 points.  Same for the 62 stocks he highlighted on 27 February. Then again on 23 April with 63, and finally the 93 he highlighted on 5 July that started the rally that took the Dow from 15,135 to 15,658.

So now with 28 on Thursday, and 38 more on Friday, I’m just waiting.

If the market starts to move higher on Monday, I’ll run the Professor about an hour after the open.  If he starts to highlight more than 50 stocks, I’ll let you know.   After that I’ll start buying stocks and index ETFs aggressively.

Have a great weekend.

That’s what I’m doing,

h

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