23rd day of $QQQ short term up-trend

GMI

4/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

39%

Here comes the Fed!

22nd day of $QQQ short term up-trend

GMI

4/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

35%

Only 47 new 52 week highs in my universe of 6,000 stocks on Monday.  Time to be very cautious.

Market technicals weakening

The excitement about Apple and Alibaba may be diverting attention from the general market’s weakening.  The Worden T2108 Indicator, the percentage of all NYSE stocks that closed above their simple 40 day average price has peaked again and started down.  Look at this weekly chart of the T2108 (click on to enlarge):

T210809122014T2108 has peaked recently at 65%, indicating the last rise was not even strong enough to get the T2108 to the more typical 70-80% level.

In addition, interest rates on bonds are moving up, as reflected in the decline in IEF, an ETF composed of 7-10 year U.S. treasury bonds.  Falling bond prices  = rising rates.  (Think of it this way.  Current interest rate or yield= Constant pay-out/changing current price.  As the denominator–the current price of a bond falls, the value of this fraction, or the yield, increases.) Note that IEF has closed below its 30 week average and declined 1.09% last week.  The 10 year treasury bond now yields 2.61%. When the Fed meets this week, it could attract attention to rising interest rates.  Rising rates hurt the stock market because people will begin to sell their relatively more risky investments in stocks and invest instead in safer, higher yielding government bonds. If retirees can earn 5% or more by keeping their money in FDIC protected CD’s or governments bonds, why should they gamble in the scary stock market roller-coaster? Most bear markets are precipitated by rising interest rates.

IEFweekly09122014

This daily chart of the SPY (S&P500 ETF) shows some ominous patterns.  Note the high red volume spikes during the market’s decline in August, followed by the relatively low volume rebound to new highs in September.  Now note the large down volume (red) spike on Friday.  A break of Friday’s low of 198.56 would likely result in a larger near term decline. Then what?

SPYdalily09122014

This technical weakness in the general market is also reflected in the GMI-2, now at 3 (of 8). It is noteworthy that the GMI is at 4 (of 6) and still on a Buy signal since August 14.  However, the two components of the GMI that are negative are very telling.  Fewer than 100 stocks reached a 52 week high on Friday and less than 50% (only 28%) of the stocks that hit a new high 10 days earlier closed Friday above their closing price from 10 days earlier.  Failed break-outs in strong stocks can be an early sign of a weakening market. And this is the wonderful, famously weak September/October period.

GMI09122014

So what to do?  I am mainly in cash in my trading accounts.  I remain fully invested in mutual funds in my university 401 (K) accounts, pending further signs of weakness. I remain cautious in the midst of the Apple and Alibaba euphoria.

20th day of $QQQ short term up-trend; $UTHR–green line break-out

GMI

4/6

GMI-2

6/8

What is the GMI?
 

WORDEN T2108

49%

UTHR has had a green line break-out to an all-time high. Check  out  this weekly chart.

UTHRweekly

 

 

19th day of $QQQ short term up-trend; Biotech green line break-outs: RCPT, CMRX

GMI

4/6

GMI-2

5/8

What is the GMI?
 

WORDEN T2108

50%

The bond ETF’s continue to decline.  Interest rates are rising…….

Here are monthly charts of 2 biotechs that had green line break-outs to all-time highs on Wednesday. They may be worth researching.

RCPTmonthlyCMRXmonthly

As of Tuesday’s close, GMI declines to 5, GMI2 to 4.

GMI

5/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

50%

Sorry for this late post.  With the GMI2 at 4 (of 8) half of these sensitive indicators are now negative.  And with earnings out and the AAPL event completed, this market may have little to propel it higher until 3rd  quarter earnings come out. But let’s not forget the Fed’s impending tightening.

17th day of $QQQ short term up-trend

GMI

6/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

56%

$OILT– cup and handle break-out; 16th day of current $QQQ short term up-trend; $IEF signals interest rates to rise?

GMI

6/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

59%

OILT came up on my TC2000 scan for rockets bouncing off of their 10 week average.  When I looked at it, it appears to have broken out of a cup and handle base on Thursday on unusually high volume.  Check out this daily chart:

OILTcupandhandle09062014OILT closed Friday right at the pivot point.  If I bought it here and it trades back below 49, I probably would exit.

Meanwhile the market remains in an up-trend, with the GMI at 6 (of 6).

GMI09052014My biggest concern is that the Fed will start raising rates and kill this market.  This monthly chart of the 7-10 year treasury bond ETF (IEF) is very ominous.  Note that the 30 month average (red line) is now flat and could be starting to decline, after many months of advancing. IEF has now spent 16 months below this moving average. The IEF has not traded like this since 2005-2007, and we all know what happened to the markets after that. Are bond traders warning us of rising rates to come? (When bonds decline, their yields, (or interest rates) rise.)

IEFmonthly

 

15th day of $QQQ short term up-trend

GMI

6/6

GMI-2

6/8

What is the GMI?
 

WORDEN T2108

57%

14th day of $QQQ short term up-trend

GMI

6/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

62%



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