Weekend Strategy Review January 19, 2014 More Weekend Thoughts

Posted by OMS  at January 19th, 2014

If you have been paying close attention to my posts lately, you probably noticed that I have been placing a lot of emphasis on The Professor algorithm.

The primary reason I’m doing this now is because I’m very concerned about the strength of the next rally, IF we get one.

For the past week, The Professor had been silent as the markets have consolidated to form the Blade of the Small Hockey Stick Pattern shown in Yellow. 

If I’m correct about the next move, the markets should rally above the 31 December high of 16,588 as a result of this Small Hockey Stick pattern..  However after that things start to get dicey.

That’s one of the reasons I’m posting a chart of the Dow this weekend, so you can see the wave count I have been using.  The chart  clearly depicts two Hockey Stick patterns that are currently in play.

While both patterns project the Dow above the 16,588 level, the target for the one shown in Yellow is only slightly higher than the 31 December high.  This is the ‘truncating’ scenario that I talked about several weeks back.  The second Hockey Stick pattern, shown in Red, is the scenario that I used to project a target for the Dow just under 17,000.

The thing you should take away from the attached chart is that with both patterns, a top could be very close at hand.  I’m no longer talking months away for the top.  It could be weeks.  And IF the Dow starts to break above 16,588, it could be days.

This is why I want to see what the Professor says about the strength of the next rally. 

It’s also why you should be thinking about how you are going to manage your money in the event that the Professor starts to show weakness..

There’s another reason too.  The 31 December high was the second high in the sequence.  If the Dow does rally above 16,588, it will be the third high of a THT Pattern.  That’s why I have circled the DMI in Green.  As long as it stays Green, I’m not worried.  But IF the DMI starts to turn Red after the next rally, I will start to get very concerned.

I just wanted you to understand the possibilities.

Have a great weekend.

That’s what I’m doing,

h

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