General Market Index (GMI) table

$FLWS to bloom for Valentine’s Day? 63rd day of $QQQ short term up-trend; GMI is Green and I added a component to GMI2

@ 11:56 pm
GMI6/6
GMI-27/9
T210869%

FLWS (1-800 Flowers) popped up in my scan for promising oversold stocks this weekend. With Valentines Day coming and people afraid to visit stores, is this business primed to blossom? Note it had a recent retest of its GLB to an ATH after it broke through its 1999 top and may now be getting ready to grow from oversold, as the green and black dots suggest. If one had bought the stock when it cam public, s/he would have had to wait 20 years to get their investment back! That is why I only buy IPOs when they have a GLB. It also had a WGB, not shown. Note also in the monthly chart below that it had increasing trading volume the past year.  Buying an up-trending stock that may bounce from oversold levels can be a minimal risk strategy if one sells quickly if the stock breaks its nearby support. FLWS’ earnings are projected to grow +66% in 2021 (MarketSmith). Next earnings are expected 4/29/2021……..

I have added a 9th component to the GMI2. The GMI2 table exists to remind me each night to check its components. I do not use the sum of positive components as a signal, the way I do with the GMI.  So don’t worry about the change. The new component measures if  the 10.1 daily stochastic is <= 20, designating a very short term oversold level. The 10.1 moves faster than the other stochastic component, the daily 10.4. I have found that in a market up-trend, when the major indexes or individual stocks correct, they often bottom or bounce when these stochastic indicators become very oversold. My green and black dot indicators on my charts rely partially on these daily stochastic indicators. The stochastic indicators help me to time my entrances, but their overbought signals do not work well for timing my exits…….

The GMI remains Green and at 6 (of 6). The SPY has closed back above its 10 week average, after a one week detour.

Blog post: $QQQ short term up-trend may end Monday; Is GME debacle decoying attention from impact of virus? Failed GLB: $NFLX, $AMD

@ 10:13 pm
GMI3/6
GMI-23/9
T210841%

I told you I went to cash more than a week ago when I did not like the action of my stocks and I saw that David Ryan and Mark Minervini tweeted that they expected a decline. It is easy to blame the market’s weakness on the GME shorting saga. However, could it be that we are about to suffer a resurgence of the virus leading to market weakness like we had last March? Maybe it is both causes, but regardless, it looks like the market could be in for a significant decline. Being in cash in my IRA trading account is comfortable because I can always reenter when the dust settles. I prefer to risk missing out on some new gains in order to avoid the greater risk of giving up my gains from the past year. I wait to transfer my university pension out of mutual funds  to money market funds when my longer term indicators turn down. We are not there yet, but I am watching closely.

The indicators I follow are weakening. The Investors Intelligence poll of investment newsletter writers now registers 61% bullish. A contrarian indicator, market tops occur when this poll shows 60% or more bulls. SPY closed below its 10 week average for the first time since the end of October. DIA also enjoys this dubious distinction and QQQ is only 3.5 points above its critical 10 week average. The daily RWB up-trend pattern is gone for SPY and DIA. IBD, on investors.com, has just reduced  their market pulse to an “uptrend under pressure.” T2108 has now fallen to 41% and important market  bottoms occur when it reaches single digits. Many of my former students are writing to me about their large gains, another sign of a frothy market. Other indicators I watch suggest that the market is closer to the beginning of a decline than to an end. The GMI is at 3 and could turn to 2 with a weak day on Monday. Two consecutive days with GMI readings below 3 would turn it to an ominous Red signal. Finally, my QQQ short term trend indicator may signal a new down-trend  by Monday’s close after 58 days of an up-trend. If the short term trend turns town, I will slowly accumulate SQQQ, the 3x leveraged inverse ETF that goes up three times as much as  QQQ falls. However, it will decline 3X as fast as QQQ rises.

Failed break-outs are another sign of a weak market. Look at the recent failure of NFLX to hold its green line after its large volume earnings related green line break out (GLB) to an all-time-high.

AMD also had a failed GLB. If I buy a GLB, I must always sell as soon as a the stock closes below its green line.

A bull market makes us all look like geniuses. As the saying goes, you don’t find out who is swimming naked until the tide goes out.

 

Blog post–In the 60s, I used to receive a book containing monthly charts of stocks. I noticed that stocks that reached an all time high (ATH), declined for a few months, and then went on to a new ATH were often big gainers. I therefore created my green line break-out (GLB) strategy many years later. I describe GLB in this post and provide 6 recent examples: $JMIA $GM $PGNY $KC $MGNI $CSIQ

@ 6:53 pm
GMI6/6
GMI-27/9
T210870%

I decided to draw a green line on a monthly chart at the highest price bar reached, the all time high (ATH), that was not exceeded for at least 3 subsequent price bars (i.e. 3 months). Conceptually, the green line indicates an equity that has traded at an ATH and then went sideways or down below the ATH for a minimum of 3 months. In other words, the stock formed a peak and then entered a period of consolidation. A green line break-out (GLB) occurs the first time the equity finally closes above the green line. The GLB is most significant if it occurs on above average daily trading volume.

Why should a GLB be a bullish sign? People who bought the stock near the peak price and watched it go down or nowhere for months often only want to get their money back by selling if the stock rises back to near where they purchased it. This constitutes over head supply or selling pressure all the way back up to the green line. If a stock can overcome this overhead  supply and break out to an ATH it is showing considerable buying interest and technical strength. That is why GLBs often prove promising.

GLBs are even more significant if they occur in a recent IPO. The great trader, Jesse Livermore, spoke about the terrific set-up of buying a recent IPO that consolidated and then broke out to an ATH. And Nicolas Darvas wrote that he liked to buy stocks that had already doubled in the past year and that were trading at an ATH. For a very recent IPO, I might draw the green line after only 1-2 months of consolidation. A GLB on an IPO is often bullish because most people are not aware of this new security or many figured they missed it as it consolidated after coming public. As the stock climbs to new highs there will be many new buyers who notice and want to accumulate it.

There are several ways I find GLBs. All involve using the TC2000 software program for analyzing stocks which I have used for over 20 years. All of my students receive academic accounts so they may learn to use TC2000. (You can receive a discount coupon for trying it at the top of this site.) I can scan for stocks hitting a 52 week high with this formula (H=maxh52 on a weekly setting or h=maxh250 on a daily setting) and then review their monthly charts. Many of these stocks may be at a yearly high but remain below their ATH. I do look back 20 or more years because I want only ATHs. I then draw in their green line at the top of the peak monthly bar that has not been surpassed for at least 3 months and then with a simple right click of the mouse on the green line, set an alert to tell me anytime in the next year that the stock trades above the green line. TC2000 sends out alerts on screen, text and email. I can also see if any stocks hitting a new high have just crossed their green line top. Once I draw in the green line it appears on all charts I pull up for the stock.

After I buy a GLB, I must follow it to make sure it closes above the green line. Stocks often retest the break-out and will trade flat above the green line, or even below it. I do not set a stop loss for a GLB to avoid being sold out when a stock trades intraday below the green line only to close the day above it. If near the end of the day it appears that the stock will close below the green line I immediately sell and take a relatively small loss. When any buy set-up fails, I must exit. Most great traders who speak the truth say they are wrong  50% or more of the time but succeed because they sell their losses quickly while they are small and let their gains grow larger. After a loss, I console myself with the thought  that every loss brings me to the next gain.

I sometimes tweet out a new GLB intraday (@WishingWealth) but it is important to remember that it is impossible to know in advance which ones will work out. I also may check the company’s fundamentals on investors.com or MarketSmith before buying. In a strong market up-trend like the present, GLBs often work out. In addition, one of the rules I teach my undergraduate students is to buy only stocks in an up-trend that are trading above their last green line top if they missed the break-out. Here are some weekly charts of examples of recent GLBs.

 

The GMI remains at 6 (of 6) and on a Green signal. SPY remains in a daily RWB up-trend pattern.