One more weak day will turn the GMI to a Sell signal. The QQQ is already in a short term down-trend. Time to be very defensive.No tags for this post.
A lot of rocket stocks bounced from oversold support on Monday. This may be a playable bounce.
For example, TFX, which I bought on Monday, has bounced from 1ts 15.2 lower Bollinger Band and retaken its 30 day average. I call this a low risk set-up. If the bounce fails to hold I exit and take a small quick loss. Note that TFX is above its recent green line top.
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I think my adapted GMMA charts of gold and the dollar tell the whole story. This weekly GMMA chart of the dollar ETF, UUP, shows a developing BWR (blue/white/red) decline pattern. The six shorter term averages (red lines) are now below the longer term averages (blue lines). The white space separating them is yet to clearly develop. Note the contrast of the current pattern with that from the prior two years.
And the gold ETF, GLD, now shows the opposite advancing RWB pattern with a white space developing between the red and blue lines. Again, note the long period the past 3 years when gold was declining and the red lines were consistently below the blue lines.
I will leave it to others to opine about why the dollar is declining. However, a weakening dollar might help international companies when they convert their foreign earnings into more dollars. But a weak dollar means higher commodity prices and therefore more inflation. Will higher inflation then lead the Fed to raise interest rates and to support the dollar? Such a scenario of higher interest rates would eventually hurt the stock market. It always has. Regardless, for now, with GLD in an RWB up-trend, it may be advisable for me to hop on the gold train….
In contrast, the GMMA of the SPY shows a gyrating market with the nice RWB pattern of 2014 to mid 2015 clearly over. At some point a persistent RWB or BWR pattern will develop and it will pay to be fully invested with that trend.
The tech stocks, measured by QQQ, look a lot more weak. A major decline will be likely if the short term averages (red lines) continue their decline below the longer term averages (blue lines.) A possible head and shoulders top formation is quite evident in this GMMA chart of QQQ. The downward sloping neckline, caused by the most recent decline having ended lower than the prior decline is considered by technicians to be a major sign of weakness. Regardless of whether a major decline materializes, it is obvious to me that the momentum of the tech stocks is quite different now than we had in 2014 and the first half of 2015. I need to be very careful. It is much easier to profit on the long side when the averages are in RWB up-trends….
And almost on cue, the GMI, at 3 (of 6) and the GMI2, at 1 (of 8) are telegraphing market weakness. And the QQQ has now closed below its critical 10 week average. With the beginning of the Sell in May period, a possible Fed interest rate hike in June, and a tumultuous election period on the horizon, this aging bull market may be about to be Trumped…….
It is embarrassing to see that one of the GLB stocks I posted in my new GLB tracker table , IPGP, fell 15% the next day. This brings up a very important lesson I teach my students. Always know the expected earnings release date for all stocks held or to be purchased. In these very volatile days, I usually sell my position before earnings day. Otherwise, I am merely gambling. On the other hand, those gamblers who held LNKD or AMZN through earnings were greatly rewarded!No tags for this post.
Wednesday was the 2nd day of the new $QQQ short term down-trend. The QQQ has now closed below its 10 week and 30 week averages. Maybe it is a major head and shoulders top? And here comes the dreaded Sell in May period. It is time to get defensive, at least with the tech stocks. Here is the foreboding weekly chart of the QQQ.
Check out the new GLB performance tracker to the right. It will enable me to see how well GLB stocks have performed. GLB stocks do well in an advancing market but do poorly in falling markets. Failing GLB stocks can also give advance warning of an imminent market decline.No tags for this post.