My indicators have weakened and the indexes are sitting directly on support. We should know in the next few days whether this bounce that began in mid-July will hold. I am mainly in cash and will wait for the outcome. Many stocks have broken down recently and in the last six days there have been only 6 to 23 daily new highs in my universe of 4,000 stocks. This is not a market to profit from buying stocks at new highs.
Month: August 2008
GMI: 3; GMI-R: 5; 13th day of QQQQ up-trend; bottom in?
The GMI remains at 3 (of 6) and the GMI-R at 5 (of 10). There were 23 new highs and 31 new lows in my universe of 4,000 stocks on Friday.
The Worden T2108 indicator is now at 53%, in neutral territory. It appears to me that the QQQQ, SPY and DIA have all successfully tested short term support. The QQQQ has closed above its critical 10 week average for three weeks. A lot of stocks appear to me to be finding support. So, I am inclined to nibble at QLD again and to look for stocks breaking to new highs. I remain heavily in cash and will slowly wade into this market if stocks strengthen.
GMI: 3; GMI-R: 5; 12th day of QQQQ up-trend; still cautious
One of my readers questioned my last post. How can I be in cash or short when the QQQQ is in an up-trend, now in its 12th day? Well, for one thing, many of the stocks with break-outs have been failing. Also, one of the GMI components measures whether the IBD growth mutual fund index is above its 50 day average. Well, this index has been below its 50 day average since mid-June, and I have never consistently made money trading growth stocks when this indicator is negative. Finally, instead of having the 100 new highs each day that are required by the GMI, we have been having only 10-14 the past few days. If only 14 stocks out of 4,000 can hit a new high each day, then it is unlikely that stocks are strong. So, the QQQQ remains in an up-trend, but I am unwilling to trade the QLD right now. I think it better to stay in cash for now. If the QQQQ up-trend strengthens, I may wade in again.