Weekend Strategy Review October 25, 2015

Posted by OMS  at October 25th, 2015

During the week, I received an email from Shannel T. asking about how I use the Aroon Indicator.  As many of you know, I discussed the indicator during my last Update Class and have been waiting for an opportunity to talk more about it.  So this weekend as I continue to wait for the overall market to roll over, I thought it would be a good time to talk more about the Aroon.

The first thing you should know is that it is a very complicated indicator.  It provides information on both trending and non-trending markets.  It also provides directional information, so it can use in place of the DMI.

Like any other indicator, the Aroon is subject to periods of confusion.  And because of this, I always use it to supplement what I’m seeing on the price chart.

So this weekend, because I haven’t talked about gold in a while, I will use a chart of GDX to talk about gold and the Aroon.

As you know, I have been watching gold for the past few months as it has been completing its Major Wave 4 pattern.  So when GDX made its third low of a TLB pattern on 11 September, I became very interested. 

If you look at the Aroon going into August, you’ll notice that the Red line was above the 70 level, telling you that a strong down trend was in place.  The 70 level is key with the Aroon.  When either the RED or the GREEN indicator is above that level, it’s telling you the direction and bias of the overall trend.  Green for uptrend, Red for down.   You should also note that going into August, the down trend was supported by a negative Money Flow indicator.  So we had to wait.

But then on 17 August, things started to change.  The Aroon moved below the 70 level, telling us the down trend was over.  About a week later, both the Aroon and the Money Flow turned positive, but the thing that was missing was the pattern.

Remember, in my Classes I always talk about the importance of having a pattern.  No pattern = no trade.  So even though the indicators turned positive, there was NO PATTERN to trade.  All we had in early August was one low.  In the Professor’s Methodology, we need to see either a Hockey Stick or a Three Lows to a Bottom (TLB) Pattern. 

So we had to be patient and wait.  If you look at the chart during the August time period, you’ll see that there was a lot of confusion in the indicators.  The indicators produced several false alarms.  The reason for this is because the TLB pattern was not finished forming.

But then on 30 September, AFTER the ETF completed Three Lows to a Bottom, the Green line on the Aroon crossed above the Red line indicating that a new uptrend was starting.  Major Wave 4 down (the Yellow IV) was over and a new Uptrend, Major Wave 5 up was starting.  Also, the positive Money Flow indicator was telling us that money was now flowing into gold.

OK, so where are we now? 

Well, if you look at the trading action of GLD during the past month, you will see that GDX has formed 4 waves up of a potential 5 wave sequence.

The ETF has still not completed its ‘Rope Jump’, but the sideways movement of the past few days suggest that the ‘Jump’ will likely occur sometime next week.  If GDX moves above its 200-day moving average to complete the ‘Jump’, it would be a strong indication that the move is a wave 1 of a major turn-around process.

Then IF GDX continues to trade near or above the 200, it will start to pull the 50 above the 200 and move the ETF into an Uptrend.  If/when this occurs, the Aroon and Money Flow indicators should be telling us that a strong uptrend is starting.  BTW, as this is happening, the Dean’s List should be loaded with gold and silver related issues to trade.

When all three elements of the ‘SIGN’ are satisfied, I’ll be looking to add to my current positions by Buying mining shares from the Dean’s List, with a pattern and positive indicators.

Always look for a PATTERN first…then use the indicators to trigger the trade.  Gold continues to form a very nice long-term pattern!

BTW, Friday’s pop in the Dow appeared to be the ’through-over’ wave of the Ending Diagonal Pattern for Major Wave 2 up.  This ‘through-over’ wave usually marks the completion of the pattern. We’ll see.

There was another ‘small change’ in the A-D oscillator on Friday, so we need to be on the lookout for another Big Move within the next 1-2 days. 

Have a great weekend.

That’s what I’m doing,

h

Market Signals for

10-26-2015

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