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Weekly Strategy Review

Weekend Strategy Review 091314 - Sat, Sep 13th, 2014 -:- 9 : 16 : 23

During the week, I received several emails from students with questions about the market. Because most of these concerned Strategy, I thought I would share a few of them with you.

The first was from Rachel B, who asked about my projections for the overall market. She said, "In class you said the market would trade in the 17,000’s then start a serious decline to the 6,000-8,000 range. Then in your Comments you said that we are in a corrective wave, that the market should rally back up slightly (and now, I’m implying what you said from class) then fall hard. Am I reading this right? Where are we now?"

In my recent Update Class at UNF and in my daily Comments on the web site, I talked about the Dow falling from current levels down to about 16,300. IF this occurs during the next month or so, I would expect it to make one more final rally to the 17,400 level. This move would then complete all of the waves of the Ending Diagonal Pattern setting up the possibility of a major decline, possibly to the 8,000 level or lower. But this decline would take years. I do not believe it is in the immediate future. We still have to complete ALL the waves of the Ending Diagonal Pattern.

Rachel also asked about the Chandes Trend Score. She noted that I had mentioned it in precious Comments, but it isn’t on my charts and wasn’t mentioned in my recent class. She wondered if I still use it. I told her that I still use the T-Score, but I’m not talking about it now because I’m slooowly trying to get my students to understand how to use Breadth as a trend indicator. I told her that I have a webinar next week, (18 September) and as I’m putting together the material for that presentation, I’m trying to focus my student’s attention on Breadth.

BTW, you saw how the market fell 61 points on Friday as The Tide continues to recede. The Dow was down 150 points for the week. That’s why we don’t fight The Tide.

I also received an email from Mike N. asking about using various ETFs as a ’Sticks in the Sand’. This is also something that I will be talking about during the webinar.

He cited TBT, the inverse 20+ Bond ETF as an example. It’s on the Dean’s List, with a TLB pattern and all Green indicators. The Aroon Oscillator is positive. Mike is a very observant student :>)

A few weeks back, when PBE was dominating the Dean’s List, I talked about how I used it as a ’Stick in the Sand’ to trade AMGN one of the biotech sisters. I reasoned that industry specific ETFs, like PBE, have lots of stocks in them. Some good, many average, and some bad. So IF a specific sector ETF can make it to the Dean’s List with all those average and bad stocks in it, maybe I can make some money IF I just traded one good one. I do the same thing with the Transports. Whenever I see IYT, the DJ Transportation ETF on the Dean’s List, I always look to trade Canadian National (CNI) which is not only a great railroad, I believe it is one of the best managed companies in the world! BTW, IF you have some time today, take a look at a weekly chart of CNI. Then take a look at its monthly chart. Hmmm? How long have I been talking about CNI?

Anyhow as Mike pointed out, TBT, the inverse 20+year Bond ETF is now on back the Dean’s List. It turned Green on 11 September after a TLB Pattern. So now this ’Stick in the Sand’ is telling us that things could be changing for Bonds.

The question is should we run out and Buy TBT now? Hmmm? The Fed will be meeting on 16-17 of next week, and a discussion of interest rates is sure to be at the top of the agenda. So I’m not in any hurry to buy TBT now especially after it popped 1.2 points on Friday. The pop caused the price to jump above the 50-day moving average. However the ETF is still in a downtrend with the 50 still well below the 200.

If Bonds have topped, and the Fed is going to start increasing interest rates, there will be plenty of time to get aboard the TBT train. But we don’t know that Bonds have topped yet. By appearing on the Dean’s List , all we know at this point is that TBT is a ’trade’. And a very risky one at that.

I’m still not convinced that Bonds aren’t going higher! If the market starts to decline to the 16,300+ level as I expect, a lot of folks will start moving out of equities and into Bonds.

Last year, when most of the commentators on CNBC were talking about rising interest rates, I said that the talk was pure nonsense. I talked about the poor economy in Europe and how it would likely impact the US economy, keeping US interest rates low. I also talked about a potential war in the mid-East and how this would cause foreign money to flow into US equities and Bonds. When the long Bond was trading near 130, I said that my charts were saying Bonds could trade to the 160-170 level before the rally was over. Bonds closed near 136 on Friday, and the longer term pattern on my chart has not changed.

So before I start buying TBT, I need to see a lot more evidence that Bonds have turned the corner. Besides, I hate to buy something when the 2-period RSI Wilder is overbought. I’ve learned that there are always opportunities to buy things on-sale. You just have to be patient. Have a great weekend. That’s what I’m doing, h If you want to stay on the right side of the market, learn how to Trade With The Tide. Trust me...IF you didn’t attend my last Update Class, you need to see the results of my Breadth research so you can understand why it is so important to your trading. Sign up today!


As always, the Professor never makes recommendations. The information is provided on an educational basis so you can have informed discussions with your financial advisors and/or accountants about your individual investment decisions.

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.