Patience is a Virtue, Waiting for Markets to Dictate Next Move February 19th, 2016

U.S. Equity Markets I am currently on the sidelines in the U.S. equity markets. I am waiting for the U.S. equity markets to get to an extreme oversold or an extreme overbought condition. At an extreme oversold condition I would be looking to buy the exchange traded funds which mirror the U.S. equity markets and at an extreme overbought condition I would be looking to short the exchange traded funds which mirror the U.S. equity markets. These exchange traded funds include DIA (mirrors Dow Jones Industrial Average), QQQ (mirrors NASDAQ Composite), SPY (mirrors S&P 500), and IWM (mirrors Russell-2000). I posted a chart in yesterday’s report depicting the three gaps below on the exchange traded fund SPY. These gaps go down to the 182.86 level, equivalent to about 900 points below today’s close on the Dow Jones Industrial Average. I believe these gaps will be filled sometime between now and the next 10 weeks. The U.S. equity markets were met with heavy selling when they opened at 9:30 this morning. Early this morning the Dow Jones Industrial Average was down over 100 points. By mid-morning the Dow Jones Industrial Average started to pare the losses. The Dow Jones Industrial Average closed down 21.44 (0.13%) at 16,391.99, the NASDAQ Composite closed up 16.89 (0.38%) at 4,504.43, the S&P 500 closed down 0.05 (0.00%) at 1,917.78, and the Russell-2000 closed up 5.30 (0.53%) at 1,010.01. Follow Steve on Twitter at @stevekalayjian Crude Oil I am currently on the sidelines in crude oil. Crude oil keeps hitting heavy resistance in the 31.30-31.80 range. There is a glut of crude oil and the oil producing countries continue to pump out oil at high capacities. If crude oil gets down into the 18-22 range I would then be looking at crude oil and the oil stocks. I think from that point we would see a significant snapback rally fueled by short covering as I believe OPEC would then be looking to cut production. I would not be expecting this snapback rally to bring crude oil prices back up into the 40-50 range. Crude oil was down 0.94 (3.07%) today, closing at 29.72. Follow Steve on Twitter at @stevekalayjian Gold I would be looking to buy gold if it pulls back into the 1168-1188 range. I have a buy signal on gold on the weekly chart. I will be

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