Weekend Strategy Review March 8, 2014

Posted by OMS  at March 9th, 2014

The Dow rose over 80 points early Friday in response to a stronger than expected Jobs Report.  However after rising briefly to over 16,500, the index started to experience strong selling pressure which caused it to pull back under 16,400.  The large intraday move was predicted by Thursday’s small change in the A-D oscillator.

The Dow finished the day up 31 points, closing at 16,452.  It was up 131 points for the week.  The NASDAQ actually had a pretty rough day of it on Friday, dropping 16 points to 4336.  It spent most of the day looking at Red numbers. So the best one can say about Friday’s market reaction to the Jobs report was that it was met with mixed reviews.  While the somewhat positive report was enough to start the markets higher, it wasn’t enough to keep them higher.  And because of this, we still have two possible scenarios on the board. , Friday’s trading action did nothing to tell us which one to favor.

This is why we will need to pay strict attention to our Lists and indicators now. As long as the Dean’s List and the PT indicators remain positive, I will remain in the markets.  However I do not plan to do any new buying until I get the OK from The Professor.  And right now, he’s not saying much.

The one area that showed the greatest response to the Jobs Report was gold.  Shares of GLD dropped over a buck on Friday. This caused the CCI on GLD to fall below the +100 level for the first time in over a month.  So now that GLD is no longer in an Uptrend as defined by the CCI, the question is will gold start its next leg down?   Right now, it’s too early to tell.  But you have to start somewhere.

After Friday’s stronger than expected Jobs Report, it’s likely that the Feb will not discontinue its tapering program anytime soon.  And with less and less stimulus coming from the Fed, it’s hard to make an argument for holding gold shares.

This is one of the reasons I still believe that gold will start to fall in the weeks ahead testing the 1150 level. My other reason is that the current Major Wave 4 pattern in gold does not appear to be complete.

Right now, all of the PT indicators on GLD are positive.  However IF they start to turn negative, I will start looking for a few shorts in the yellow metal and in mining shares.  Not now.

I also noted that the PT indicators on Royal Gold finally turned negative on the 60s.  As you know I have been watching for these indicators to turn negative for the past week or so for a possible short on RGLD.  But with gold now being driven by both a pattern AND by unrest in Crimea, I decided against the short.  I didn’t want to be short gold over the weekend with Putin still moving troops around.  Also, the PT indicators are still way too positive to be even thinking seriously about the short side…at least for now.   All I’m doing now is watching.

Friday’s pullback in the NASDAQ was caused by weakness in several of larger technology issues.  If you have been holding large cap technology shares for the past month, you might be wondering where the rally’s been?  Shares of Apple, AAPL, were trading in the 550s in late January,.  Now AAPL is at 530.  Same for shares of several other big name issues like HPQ, CSCO, JNPR, NTAP, IBM and XRX   Where’s the rally?

The answer is Biotech and Pharma.  But on Friday, many of these issues got whacked!  Biogen, BIIB, dropped over 11 points, AMGN was down almost 2, with Gilead, GILD, dropping over 3 bucks in the past two days.  These declines have cause the CCI in the Biotech sector to drop below the 100 level, telling me that the uptrend in this group could be over.  And because this weakness is coming at a time when large cap technology issues have already started to weaken, we need to be careful.

On Friday, I received an email from John B. asking that BIS, the ProShares UltraShort  Biotech ETF be added to the data base for the Member’s Watch Lost.  I added it to the data base last night, but don’t look or it to appear on the Dean’s List anytime soon.  The performance of this inverse ETF has been absolutely horrible for the past two years, falling from 100 to 15, as biotech stocks have rallied hard.  But here’s the thing:  IF BIS does start to appear on the MWL during the next few weeks, you probably should pay attention, especially if you own stocks like AMGN, BIIB, and others.

Have a great weekend.

That’s what I’m doing,

h

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