This market still looks to me like a Stage 4 down-trend. It will take more than a low volume bounce to convince me that the worst is over. I am in cash in my trading account and going to cash in my university pension. There is plenty of opportunity to profit by owning stocks when an up-trend is evident. The name of the game is to conserve one’s capital.No tags for this post.
The market is so oversold with 87% of NASDAQ 100 stocks trading at or below their lower 15.2 Bollinger Band on Monday. Futures portend a bounce this morning. But I am going to cash, given the GMI is now at a Sell. This weekly chart of the QQQ suggests an ominous Stage 4 decline. The 30 week average (red line) has clearly topped out.
Today’s bounce may be caused by the mutual fund window dressing at the end of the second quarter. Once the quarter ends, early July could be nasty as earnings come out and everyone blames Brexit for their reduced earnings expectations for the rest of the year.
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It is at times like these when it helps me to look at longer term charts for perspective. This monthly chart of the QQQ back to 2000 shows that the current market is not yet showing signs of a major decline. (The DIA and SPY charts look similar.)
The QQQ would have to decline below recent support levels reached last February, around 94, to make me think this might turn into a bear. (I dismiss the prior “flash crash” low of August, 2015 as a man-made, contrived aberration without technical significance.)
There are a few things making me think this market could bounce later this week. Bloody Fridays often lead to bloody Mondays as people look at their declining account balances over the weekend and sell stocks in a panic at the open. But three other signs make me think we may get a strong bounce: 1) the put/call ratio is at 1.17, a level denoting option traders’ extreme fear, which occurs typically at bounces/bottoms; 2) this week is end of quarter mutual fund window dressing when funds buy up the stronger stocks so their quarterly portfolio reports look good; and 3) on last Friday the most NASDAQ 100 stocks (66) traded at or below their lower 15.2 daily Bollinger Bands since the market bottom of last February. Do these indicators guarantee a strong bounce next week? No, but I would not start selling Monday morning…………
The GMI is now at 2 (of 6) and will issue a Sell signal at Monday’s close unless the markets strengthen.
While the GMI Buy signal still holds for now, my short term trend count for QQQ has turned down. I do not trust a change in the short term trend unless it lasts for a few days. But I did cut back on my long positions on Monday. I do not like the way the market weakened towards the end of the day. The QQQ and SPY closed near their lows for the day.
TIS had a GLB to an all-time high on Monday.