Weekend Strategy Review December 30, 2016
Posted by OMS at December 30th, 2016
The Dow fell 14 points, closing at 19,820. Volume was low again, coming in at 80 percent of its 10-day average. There were 50 new highs and 18 new lows.
Yesterday’s decline caused he first few inverse index ETFs to appear on the Dean’s List. So now not only is The Tide and VTI negative, but the Dean’s List is starting to turn as well. However, the VTI on the Dow is still in Up Trend territory and one of my key volume indicators also remains positive. So, without confirmation from the volume indicators, I still don’t have a Sell Signal. Be patient.
Today is the last trading day of the year. With one more day of positive seasonality bias remaining, and mixed indicators on the cockpit, I don’t expect to see much selling pressure develop. If investors haven’t sold by now, they’ll probably wait until early next year when the tax benefits will likely be more favorable. In other words, I don’t expect much action in the overall market today.
Except for gold.
Just after noon yesterday, I posted a ‘Heads-Up’ that gold was about to generate a Buy Signal. The VTI on GLD turned positive and all my volume and Money Flow indicators are confirming the signal. I bought a few shares of ABX, CDE, and PAAS yesterday anticipating the change in signal. This morning I will be adding to those positions and will make my first purchase in my new ETF trading program. I will be buying shares of GDX, GDXJ, and SLV.
Here’s the thing: If I’m correct about gold completing corrective wave 2 down and starting impulse wave 3 up, the rise in gold should be rapid. Impulse waves tend to be straight up, with few pullbacks. So, you must make your decision to participate early.
Last night, GLD closed at 110.29. My target for GLD is the 135 level. The low was 107. At 110, GLD is still very close to its low.
When I get a Buy Signal, I buy most of the shares (65-75 percent) that I plan to have in my portfolio. I don’t want the train leaving the station without me. I then add to this basic position if the ETF pulls back. There will be pullbacks. Remember, even impulse waves have pullbacks as they trace out their five sub-waves.
I’ll also be using my Rifle Trading Strategy to tell me when it might be a good time to add shares, buying when the 2-period RSI Wilder becomes over sold.
Right now, the 2-period RSI on most gold stocks and ETFs is overbought. But with the VTI turning positive, I can’t let an overbought RSI stop me from buying a basic position, especially with gold mining stocks and ETFs now leading the Dean’s List. Also, the pattern suggests that impulse wave could be starting. In other words, I like the odds.
Trading is a odds game, and when the odds are favorable, well…like Mary Chapin Carpenter sang to us in 1994, “I Take My Chances.” Gold, mining stocks and ETFs are my first pick in the new Sector Rotation Strategy.
U.S. markets will be closed on Monday, 2 January for the New Year Holiday. My next Update will be on Wednesday, 4 January.
I wish all my students a great weekend, and a Happy, Healthy, and Prosperous New Year.
That’s what I’m doing,
h
Market Signals for
12-30-2016
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | NEG |
COACH (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | NEG |
SUM IND | NEG |
VTI | NEG |
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All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments, Weekend Strategy Review