I don’t trust a QQQ short term down-trend until it lasts 5 days. About 40% end before then.
Friday marked the first day of a new QQQ short term down-trend. Note, however, that many (about 40%) QQQ short term down-trends end in under 5 days. Both the QQQ, SPY and DIA remain in longer term Stage II up-trends. The QQQ, however, has now closed back below its 10 week average. These weekly charts of SPY and QQQ show important differences. SPY is climbing its 4 week average (red dotted line) which is above its 10wk (blue dotted) and 30 wk average (red line). SPY broke out of a multi-week counter-trend decline (purple line) 4 weeks ago.
In contrast, the QQQ is now below its 4wk and 10wk averages. I can even see signs of a possible head and shoulders top forming. A close below its 30 week average (near 114) would be a sign of major weakness. The disparity between the SPY, DIA and the QQQ is likely caused by the Trump rally’s focus mainly on the infrastructure and financial stocks, not dominant in the QQQ. Once the euphoria of anticipation under-pinning this rally comes up against the reality of Democratic governing, we could face major market weakness beginning in January. The QQQ will likely rally towards the end of December when mutual funds spruce up their portfolios for end of quarter/year reports to their shareholders. Such a rally may be a great time to exit positions or raise stops….
On Friday I tweeted intraday (@wishingwealth) that NFLX looked like it was breaking out of a consolidation, following its huge high volume spike in the third week of October after it released earnings. A close back below the declining trend line (purple), around 115, would indicate to me a possible failure of the break-out and a reason to exit the trade.
For those of you who signed up last week to access my Club on TC2000, I just published the scan that produced these 7 rocket stocks (all are above their last green line tops) this weekend. These are stocks with recent EPS change of at least + 90% that have advanced a lot this year and rose last week on above average weekly trading volume. See if your scan yields these too. (This scan will only yield stocks towards the end of a week because of its requirement for above average weekly volume.)
The GMI remains at 5 (of 6). The more sensitive GMI-2 is at 1 (of 8), reflecting the short term weakness in the QQQ. Note the huge decline to only 35% of NASDAQ 100 stocks above their daily 12.26.9 MACD signal lines. Time to be especially vigilant.
The divergence between the GMI and the GMI2 is troubling. While the longer term components of the GMI are all positive (6 of 6) only 1 (of 8) of the more sensitive components of the GMI2 are positive.The SPY and DIA were holding up but the QQQ was in a free fall on Thursday.The QQQ has now closed below its 10 week average. It is likely that the QQQ short term up-trend will end on Friday, after only 9 days. I am getting very defensive but am aware that early December weakness could set up a strong end of quarter surge fueled by mutual fund window dressing at the end of the month. Check out this daily chart of QQQ.
A number of you emailed me to request this link to get to my TC2000 Club. If you click on this link you can sign up to access in your TC2000 library some of my scans and watchlists. Note that the scan labeled 11262016weeklyconsolbrkout will produce results mainly near the end of the week because it requires a stock to have traded more than its average weekly volume. I typically use this scan on Friday or the weekend to find stocks breaking out of a consolidation.
I tweeted recently that I thought ESNT was having a GLB. It looks like this break-out to an all-time high is holding.
If you had problems on Monday signing up for my TC2000 Club to access some of my scans and watchlists, please email me at email@example.com. I will then send you the link.
As you know, I like to buy stocks breaking out of their green line tops (GLB) to an all-time high. On my site you can see the performance of a selection of recent GLB stocks. Here is the latest table:
I wrote a post last week about the benefits of focusing on weekly charts. Weekly charts, unlike daily charts, more clearly show me the trend and are less likely to make me exit a strong stock too soon. I spent some time this weekend trying to write a scan for TC2000 that would bring up growth stocks emerging from a multi-week consolidation. The scan required a minimum amount of weekly volume and the stock must have shown above average weekly trading volume on the week of the break-out. The company must also have shown an increase in the latest quarterly earnings of at least +50%. Four stocks out of approximately 4900 US stocks were selected by this scan. Given the strong market environment, many stocks have already broken out. After running a scan like this I can then research the stocks for possible entry, looking at both technicals and fundamentals.
This weekly chart of one of the four stocks, WB, is fully annotated so you can see how I have set up my charts to quickly show other critical information contained in the TC2000 database. Arrow A shows that WB had latest quarterly earnings up 500%. Arrow B shows the latest short interest ratio was 3.6 (This means that it would take about 3.6 days to cover all of the shares speculators have sold short, at the stock’s recent average daily trading volume. The higher the number, the greater the buying pressure from a break-out.) Arrow C shows that the stock price is currently 2.64 times its price 250 days ago. (I like to buy stocks that have already doubled in the past year. Stocks, like people, tend to repeat their past behavior.) Arrow D shows WB’s projected next earnings reporting date, a new feature in Version 16 of TC2000. The green oval shows last week’s break-out above a declining trend (purple line) on above average weekly volume. In fact, this was the highest weekly volume for WB since September 2014! It could signify the resumption of the up-trend or it could mean nothing….
Another stock that came out of this scan was SINA. I did not annotate the remaining stocks. If you have read this far I know you can interpret the remaining weekly charts using the above example.
I do not know if any of these stocks will keep rising. But the market has been strong and many stocks have already broken out to new highs. Only WB and HPP are flirting with their all-time highs, a valuable characteristic. Both are above recent Green Line Break-outs (GLB). I like to buy stocks that have advanced a lot, then rested for a few weeks, and then break out of their consolidation on unusually high volume.
If you have TC2000, I have started making some of my scans and watchlists available to my students in a TC2000 library (Club, Dr. Wish). If you want access to my library, provide your name and email below and receive the free link in your email.
If you do not already subscribe to TC2000, you can get a $25 discount (new subscribers only) by clicking here or going to: http://www.tc2000.com/bonus/WWB (Additionally, your sign-up will generate a small commission for us to keep the lights on, so, thank you.)
You might also attend one of the many Worden TC2000 free training workshops when they come to a city near you. Ask them for a schedule at firstname.lastname@example.org. That is how I began learning how to use TC2000 the past 20+ years. They also now post many video TC2000 tutorials on their site. If you follow me on Twitter I often tweet out interesting stocks intraday: @wishingwealth (no guarantees, of course, stocks I tweet about are for readers’ own education, further research and consideration).
Meanwhile the market remains strong with the GMI at 6 (of 6) and the GMI-2 at 7 (of 8). And the new QQQ short term up-trend has now reached its critical 5th day. According to my analysis of QQQ short term trends over the past 10 years, once a new up-trend lasts 5 days, it has a 75% chance of reaching 11-88 days. Take a look at the GLB tracker to the right of this page to see how well GLB stocks have been doing in this strong market up-trend. Nothing like a strong market to make everyone look like a genius!