• gmi: 0
• gmi-2: 0
• t2108: 16

Nevertheless, the QQQ daily 10.4 stochastic is at  oversold levels (just below 20, not shown) and this usually portends some kind of short term bounce in the underlying Nasdaq 100 index, perhaps back to the 30 day average. (The T2108, at 35%,  remains in neutral territory and suggests to me that the market is far from a real bottom.) If the QQQ rallies this week, I may take some of my university pension money off the table.  We have been taught that we must always be invested and cannot time the market—rubbish!!! All successful speculators found that there was a time to exit the market or to be short.  This, I believe, is one of those times. Once a market decline begins, no one knows, except by lucky guess, when and where it will end. Trend followers wait for signs of a turn before they act.

• gmi: 1
• gmi-2: 0
• t2108: 35

Most people feel they have to be in the market.  This is the result of years of brainwashing by those who benefit from people holding positions in stocks and mutual funds.  It is much more reasonable to be out of the market during times that appear weak.  One can always reenter the market when things look better, and hopefully, at lower prices.  However, in my university pension accounts, where money is being contributed each pay period, I continue to have new money invested in mutual funds , even after I have transferred the full balance into money market funds when I think we are headed for bad times. I don’t mind investing new money into  mutual funds on the way down, assuming that the market will eventually rebound. I never do so with individual stocks, because a company could go bankrupt, as was the case with GM and Enron and Lehman…..

The GMI is back to 2 and the GMI2 is at 0. With the GMI below 4 for two days, it has given a new sell signal.  The major indexes are back below their 10 week averages and the QQQ has been in a short term down-trend for the past 15 days.  We had a rare period when the GMI was above 4 within a continuing short term down-trend in the QQQ. The QQQ remains in a longer term up-trend, but I have gone to cash in my trading accounts.  My university pension therefore remains invested in mutual funds for now. The Worden T2108 Indicator is at 39%, in neutral territory. If it declines to below 20% I will begin to look for a bottom to the market weakness. This year, “Sell in May and Go Away” may work yet again.

• gmi: 2
• gmi-2: 0
• t2108: 39

Everyone would like to have profited from AAPL’s meteoric rise.  How might someone have identified AAPL’s potential for growth before it took off?  I went back and looked at AAPL’s performance from late 2011 on, just before the start of the December market rally.  On October 17, AAPL hit an all-time high of $426.70.  That high was broken on January 9, at $427.75.  On January 18, AAPL hit a new high of $429.47 and by the end of January it had hit a new high on 4 days.  The final new high that month was on January 31, at $458.24.  This collection of 4 all-time highs in January was a clue of things to come.  In February, AAPL hit a new all-time high on 13 days, or 65% of the trading days in that month!  By the end of February, AAPL had hit $547.61, a gain of about $90 per share from the end of January.  AAPL proceeded to hit a new high on 50% of the trading days in March, with the March top of $621.45. To date, AAPL has hit 4 more daily highs in April, topping out at $644.

There are some very important lessons from the above.  First, if you refuse to buy or hold a stock at an all-time high, you will never ride a wonderful stock like AAPL.  Second, if you want to find the next AAPL, begin by looking at the list of stocks that hit a 52 week high the prior day.  Then weed out the stocks that are not near their all-time high. Then research the remaining stocks’ fundamental and technical characteristics.

If my GMI has a buy signal, I concentrate solely on stocks at or near their all-time highs that have risen strongly for months and are now breaking out of multi-month consolidations.  The best way to see such stocks is to look at their monthly charts.  Here is an example of the type of stock that interests me. I bought some PSMT last week when it touched $80.  This monthly chart shows the stock breaking out of a 6-7 month consolidation, coming after a 7 month rise when it doubled in price.  I make a small pilot buy of such a stock and place a stop loss below the break-out level.  If the stock continues to rise, I will add to my position and raise my stop.  I love to pay more for a stock that I have already bought.  I never average down. I found PSMT simply by using TC2000 to scan for all stocks that hit a new high and then charting their monthly price patterns. The fact that the stock was flagged as having appeared on an IBD 50 or New America list increased my confidence in the stock. Other stocks that hit a new high last week and that had promising monthly charts were: CF, DSW, WPI, ECL, LKQX, CB, KMB, ULTI, FDO, SBNY, GEOI.  These are worth researching.  I always check out whether earnings are imminent–I stay away from stocks that will report earnings soon…..

I am willing to go long again because the GMI just issued a buy signal. I am slowly going long and have bought some QLD.  I also sold some weekly cash secured puts on SPY.  I am basically betting that the SPY will close next Friday above the strike price (140) on the put options that I sold.  If I am wrong, I will have to buy back the puts at a higher price, or buy the underlying SPY shares at the strike price.  I feel comfortable with these short term bets on the SPY as long as the GMI is bullish. Furthermore, the SPY is about the only thing I would be willing to have put to me.  I do not do this with individual stocks that can be much more volatile. If I can pocket a premium of 1/2 to 1% each week, it gives me a nice monthly return on my money….

The GMI is now at 5 and the GMI2 is at 6.  The GMI was >3 for two consecutive days, which is my criterion for a buy signal. So I am closing all shorts and going long in my trading account.  The  Daily QQQ Index component of the GMI will turn positive with an up or flat day on Monday.  I use a very stringent criterion for a change in the short term trend of the QQQ.  Thus, Friday was the 10th day of the QQQ short term down-trend, within a longer term up-trend.  I will be much more confident of the new up-trend once it lasts 5 days. The QQQ and SPY have now closed above their 10 week averages, an important sign of strength.  52% of the NASDAQ 100 stocks closed with their MACD above its signal line, another sign of a strengthening market. The Worden T2108 Indicator is in neutral territory, at 60%. IBD continues to see the market in a confirmed up-trend…..

Over the years I have investigated how well the IBD100, now IBD50, stocks perform versus other groups of stocks.  The stocks that meet the IBD growth criteria usually outperform other stocks in a rising market, but under-perform in a falling market. I replicated my past analyses by looking at the performance of the IBD 50 stocks published on 12/22/2011 at the beginning of this year’s rise, through last Friday.  The IBD50 stocks did much better than the NASDAQ 100 stocks or the S&P500 stocks.  The median change in the IBD50 stocks was +20%, compared with +15% for the NASDAQ 100 stocks and +10% for the S&P 500 stocks.  Moreover, the IBD 50 stocks really shined when looking at the likelihood of a larger ,+30% gain.  34% of the IBD 50 stocks gained 30% or more, compared with only 16% of the NASDAQ 100 stocks and 9% of the S&P500 stocks.  Clearly, the IBD selection criteria resulted in a lot more winners than one would find among the stocks in these other two indexes. That is why I focus largely on watch lists and scans containing stocks that have appeared on IBD 50 stock lists published every Monday.

• gmi: 5
• gmi-2: 6
• t2108: 60

In addition, AAPL, the market leader,  reports earnings on Tuesday and the stock’s reaction will tell me a lot about the market’s inclinations. If good earnings are met with a decline or flat response, then I will expect more weakness in the market.  I have learned that I can make money trading AAPL by being long only when it is above its 10 week average.  AAPL closed Friday at $572.98, just above its 10 week average of $570.79.  A close below that level after Tuesday would tell me to be out of the stock, assuming I were still in it. (I typically sell a growth stock if it looks like it will close below its 30 day average and AAPL has closed 2 days below its critical 30 day average.) See my discussion of Fibonacci retracement targets for AAPL at the end of this post.

The GMI is at 3 (of 6) and the more sensitive GMI2 is at 2.  The GMI sell signal from 4/11 remains in effect. The QQQ has now closed below its important 10 week average.  The SPY is weaker and has completed its second week below its 10 week average.  The T2108 is at 39%, in neutral territory. Only 28% of the Nasdaq 100 stocks closed with their MACD above its signal line, indicating little short term strength. I remain short  GLD by holding put options.  I could also have bought the inverse leveraged GLD ETF, DZZ.

TC2000 has a tool for drawing  Fibonacci levels. The daily chart below of AAPL shows the Fibonacci retracement levels of the advance that began in December. Stocks sometimes find support at these numbers (23.6%, 38.2%, 50% and 61.8%) which indicate the percentage of the preceding rise that the stock gives back. AAPL recently found support at the first level of 23.6%, but this level did not hold.  The next projected levels of support, in order, are approximately 547, 518 and 488. Like with charts, these numbers sometimes work because people think they do and buy at these levels. So, if AAPL breaks below its 10 week average this week, the next support may come in around $547 per share. Click on chart to enlarge.

• gmi: 3
• gmi-2: 2
• t2108: 39

1. Worden will produce the videos of my sessions and of the entire seminar series.  Call:  1-800-776-4940 or email: support@worden.com.  It will take at least 30 days before they have completed editing my sessions.

2. A number of people asked me about selling covered calls.  I think writing covered calls is a great strategy for us boomers, once we have a systematic way for selecting appropriate stocks. I think that the best simple sources for learning this technique are the books and videos of Allan Ellman.  The books I like have been added to the books at the lower right of this page.  You can check him out at his site:  thebluecollarinvestor.com.  He has a simple book written a few years ago, Cashing in on Covered Calls, which is a terrific primer.  His latest book is much larger and comprehensive.  Once you understand the strategy, look at the chapter on covered calls in Lee Lowell’s book. I am teaching myself to write the new weekly covered calls on the SPY and QQQ.

3. Some people were confused about how I use the GMI signals.  The present market situation provides a good example.  The QQQ weekly chart is in a Stage 2 up-trend.  As long as the weekly pattern remains in a Stage 2, I keep my university pension invested in mutual funds.  There are limits to how often I can trade the mutual funds. I only sell my pension funds when the 30 week average curves down.  I am short or in cash with my more short term IRA and speculative money, however, because the GMI gave me a sell signal last week (2 consecutive days below 3). Other indicators I monitor to guide my short term trading are the patterns of the 30 day averages of the SPY, DIA and QQQ, their daily 10.4.4 stochastics readings, the WordenT2108 Indicator and IBD’s market pulse (currently “in a correction.”).

Remember what I said at the seminar, however,  Every person must design a systematic set of entry and exit rules that fit with his/her tolerance for risk.  Without such a set of rules, it is preferable to forego individual stocks and to buy some index ETF’s like SPY or QQQ and to just ride the major market trend. If you want to teach yourself some safe strategies, read my blog daily and the books to the lower right of this page.  I will continue to share my experiences here, and please feel free to post a comment for everyone or to send me an email………

The GMI remains at 2 (click on table to enlarge). The SPY and DIA have now closed below their 10 week averages, a sign of weakness.  The QQQ is showing more strength and has closed above its 10 week average for 15 weeks. However, another down day in the QQQ could send the GMI to 1 and begin a new short term down-trend in the QQQ.  The QQQ short term up-trend reached 75 days on Friday.  It is rare for QQQ short term up-trends to last much longer than this. Only 12% of the Nasdaq 100 stocks closed with their MACD above their signal lines, a sign of short term weakness.  The Worden T2108, at 28% is still in neutral territory.  The only real positive sign of technical strength is that  the 10.4 daily stochastics for the QQQ is nearing oversold levels, at around 22. With a lot of key earnings to be released this week, volatility will be high.  This is a good time for me to be safely on the sidelines in my trading accounts.

• gmi: 2
• gmi-2: 3
• t2108: 28

Meanwhile, the GMI is back to 6 (of 6) even though the futures indicate a rocky start on Monday.  I am a little worried that last week, IBD labeled the market in a correction.  They have a very good track record on calling the market trend.  I remain long, however, until the GMI shows major weakness. But I may cut back a little in the holdings in my trading account. The Worden T2108 Indicator remains at 41%, in neutral territory.  By my count, Thursday was the 70th day of the current QQQ short term up-trend.  This is quite long for an up-trend to continue.  I am also concerned that only 26% of the Nasdaq 100 stocks closed with their daily MACD above its signal line. This indicates short term weakness.

I am not going to highlight promising technically strong stocks today, and will wait instead until the markets show more strength.

• gmi: 6
• gmi-2: 6
• t2108: 41

• gmi: 6
• gmi-2: 6
• t2108: 54

Meanwhile, the GMI buy signal from 12/23  remains in place. All of my indicators are positive.  Friday was the 61st day of the current QQQ short term up-trend.  Prior up-trends rarely go past 80 days.  The top could appropriately happen around late April, when we reach the, “Sell in May,” period. So, I will watch the charts very closely for any sign of a meaningful top in late April.  The Worden T2108 Indicator remains in neutral territory, at 54%.  50% of the Nasdaq 100 stocks closed Friday with their MACD above their signal lines, an indicator sensitive to short term strength. The SPY has closed above its 10 week average for 12 straight weeks.

The weekly  GUPPY chart of the SPY shows this index to be in a strong accelerating up-trend.  It shows no signs of any top, with the short averages (red) rising well above the longer term averages in a RWB rocket pattern. Weakness will show up first in a decline of the red averages.

One of Judy’s picks from a long time ago showed considerable strength on Friday.  As this weekly chart of MAKO shows, it broke out of a base to a new high on increased volume last week. Judy selects stocks first by their concept and bought MAKO around $7.  MAKO is a leader in the field of robotic surgery. Many boomers are going to need knee and hip repair……

Judy’s other  pick, INVN, also broke to an all-time high on Friday.

• gmi: 6
• gmi-2: 6
• t2108: 54

There is a site, dark-liquidity.com, that has now posted the GMI performance since January 1 by applying it to the QQQ and trading the QQQ or QLD.  Using the GMI to trade the QLD has greatly outperformed all other strategies on the chart. The strategy employed uses the same decision rules that my student and I backtested to 2006 with incredible success. I, of course, will post when the GMI gives a new sell signal. The GMI has done so well because the up-trend has been rising steadily since 12/23, and is now in its 51st day.  Leveraged ETFs, because of daily compounding of results, can be extremely dangerous when a decline sets in.  The success of the GMI strategy is based on the idea of going to cash when a sell signal occurs.  Riding a decline down could wipe out all of the gains and more……

The GMI is only at 5 (of 6) because the Successful New High Indicator is negative.  Stocks that hit a new high 10 days ago are just not likely (at least 50%) to be above where they closed 10 days ago.  This is an important indicator because I buy stocks at new highs and want to know that  stocks that achieved a new high are continuing to rise. The Worden T2108 Indicator closed at 69%, and is now in neutral territory.  When it was near 80% I wrote that that is where advances tend to end or stall.  Only 26% of the Nasdsaq 100 stocks have their MACD above its signal line, indicating little short term strength. Keep in mind, however,  that we are approaching the end of the March quarter when mutual funds will scoop up the strongest stocks, like AAPL.

The dollar(see ETF, UUP)  has turned and is now in a beginning Stage 2 up-trend.  This may be bad news for gold.  I am posting below the weekly chart of the gold ETF, GLD.  I have placed red arrows by a number of technical signs of weakness.  Among them are, a close below the critical 30 week average, which itself is starting to decline; big red volume spikes on down weeks; and a weekly stochastics indicator  that is heading down. For those of you in my class who wanted to see  Fibonacci numbers at work, note the weekly chart below.  (Click on chart to enlarge.) The recent rise from near 148 to 174 is near a 62% retracement of the decline from September through December. A failure to close above 167 could signal a significant decline in GLD. This might also be consistent with William O’Neil’s suggestion that one short leaders 4-6 months after the peak price was reached.

• gmi: 5
• gmi-2: 6
• t2108: 69