by Hank Swiencinski, AIQ
TradingExpert Pro client for over 20 years, founder of ‘The Professor’s One
Minute Guide to Stock Management’. AIQ will be hosting a full day seminar with
‘The Professor’, March 9, 2013 in Orlando, FL. More info CLICK
HERE

The Dow rallied up to 14,149, then fell into the close, finishing down 20 points at 14,054. Volume was low again, coming in at 92 percent of its 10 day average. There were 214 new highs and 28 new lows.

The combination of low volume and a late day sell-off is not something you want to see if you’re short term Bullish. Institutions are usually the ones that trade late the day, and when the market sells-off in the last hour, it’s usually because the smart money knows something. If the market starts moving higher in the weeks ahead, watch how the market trades during the last hour. If we start to see more late day sell offs, it will be another warning sign that a we could be approaching a top.

There was a small change in the A-D oscillator yesterday, so we need to be on the lookout for a Big Move in price within the next 1-2 days.

It appears that yesterday’s early rally was the completion of wave 1 up of 5 up. If this is the case, then yesterday’s late day decline was the start of wave 2 down. This wave should have an a-b-c pattern to it, and it should complete within the next few days. After that, I would expect the markets to put together enough strength to test the June 07 high of 14,198.

I posted the Dean’s List two times yesterday to show how the List was changing by dropping QID and RWM, the two inverse ETFs that were on the List. But yesterday’s late day decline change all that, and both ETFs stayed on the List, producing mixed signals. So once again, I would call the List a cautionary yellow. The Dean is likely telling us that a wave 2 down is starting.

Yesterday I mentioned that I was only going to scalp trade, and that’s what I did during the rally. Five of the six stocks highlighted by Emeritus produced winning trades on the 5s. HAL and HP were both up over a point intra day.

The DMI on the Dow(DIA) and Nasdaq (QQQ) remains positive. However the Coach, my main Money Flow indicator, remains negative. The P-volume is also negative and diverging on both indexes. So we have mixed signals from the cockpit. In other words, we need to be cautious again with any trades we make today. BTW, after the wave 2 completes, we will need to watch the volume indicators during the wave 3 rally. If they don’t turn positive, it will be another major sign that the rally will be met with stiff resistance.

If you get a chance today, you might want to look at the P-volume on a Daily Chart of the DIA. Note how during the past year, as the Dow (DIA) made each successive rally high, the P-volume did not. Look at the rally going into last March, then into October, and finally how the indicator continues to diverge into the current rally. The P-volume is warning us that each new high is being supported by less and less volume. It’s warning us that the tank could be getting close to empty. It’s not a major problem now, but it could be in the future.

I won’t be doing a lot today. I really want to see how this likely wave 2 develops. If I see something that I want to scalp, I’ll post it during the day,. But otherwise I’ll be on the sidelines.

One thing we need to remember is that we have a small change in the A-D oscillator on the Board. So we could see a move of 100+ points within the next 1-2 days. I don’t believe we will see the Big Move today. But IF we do, I don’t want to be holding a lot of stock IF that move is down. On the other hand, IF the market does move a bit lower today, in preparation for a Big move up early next week, I want to have a few candidate stocks at the ready so I can get into them IF the market starts to move up. Remember, the next move up should be an impulse wave. And if the wave has enough strength to push through 14,198, we could easily see 14,500. on the Dow, possibly higher.

So today, I will be trying to identifying stocks for the next rally leg. Remember, when we see a retracement wave coming, we always plan so we can take advantage of the next move higher.

That’s what I’m doing,

h

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.