Window dressing caused dead cat bounce? GMI issues Sell signal

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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 2 decline. The 30 week average (red line) has clearly topped out.

Screen Shot 2016-06-28 at 6.05.06 AMToday’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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Bloody Fridays lead to bloody Mondays; GMI on verge of Sell but markets very over-sold

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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.)

QQQmonthly09262016The 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.

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Start of $QQQ short term down-trend; GMI steady; GLB: $TIS

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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.

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$Z, $ATVI, $QQQ short term up-trend in jeopardy

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Now that I have returned from CA,  I want to review two stocks I have tweeted  about, Z and ATVI. This daily chart of Z shows that it broke through its green line top (GLB)  on Friday, on higher than average trading volume. Arrows show high volume, likely fund buying.

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This monthly chart shows that the green line was drawn at the peak reached in October, 2015. A recent IPO (initial public offering) that forms a top, consolidates for months and then breaks out to an all-time high can prove to be a rocket stock (For example, FB did a GLB at $45 at month 17). It is critical, however, that the break-out hold and that Z not fall back below its green line.  If it does, I will sell and then monitor the stock for support back above the green line. I like to re-enter a stock that rises after a failed break-out.

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Another stock that I tweeted about was ATVI. This daily chart shows that ATVI  failed its recent attempt at a GLB and found support at its lower 15.2 Bollinger Band and 30 day average (red line). With the weak market on Friday, ATVI closed below its 30 day average. I will exit if it closes below its lower Bollinger Band, around 37.

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Meanwhile this market is getting very weak. Without a strong up day Monday, the QQQ short term trend (U-17) will turn down and the GMI may issue a Sell signal. The only thing keeping me in this market is my expectation for a strong end of month and end of quarter rally with mutual fund window dressing. Also, the market indexes look very short term oversold to me. However, we may have to first get through the vote in Great Britain and that may totally destroy the chances for any end of quarter rally. So this is time for me to be very vigilant and to have an exit strategy in place.

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