GMI: 1; GMI-R: 1; Worden T2108: 17%

The GMI and GMI-R remain at 1 and the Worden T2108 indicator is at 17%, in the area where bottoms are likely.  Last August 15,  this indicator fell to near 8% at the bottom of the summer decline. I am still almost entirely in cash.

GMI:1;GMI-R:1; QQQQ bounce off support?; Too many bears?; New leaders?

The GMI and GMI-R remain at 1. There were 268 new lows and 33 new highs in my universe of 4,000 stocks on Friday.  The number of new lows is much less than the number (519) on November 8 and suggests that most of the weakest stocks are not continuing to decline.  The Worden T2108 indicator is now at 22%, up from the low of 19% reached on November 12.  On Friday, 16% of the Nasdaq 100 stocks closed above their 30 day averages, up from 11% on November 12.  Only 12% of my universe of stocks are in an up-trend, near the low point reached on November 14%, but still above the low of 7% reached last August at the bottom of the summer decline.

The Nasdaq 100 declined really rapidly from November 7-12. The index was in a vertical free fall more characteristic of selling climaxes.  We would therefore expect some back and forth movement of this index as traders adjust to this collapse and place their bets on a continuing up or down trend.  The reason that the GMI and GMI-R still register 1 is that the Weekly QQQQ Index remains positive.  This index is my primary indicator of a longer term up or down move. Qqqq30weekaverage This weekly chart of the QQQQ (click on to enlarge)provides me with a clearer view of the market’s longer term trend. It is obvious to me that the major trend of the QQQQ remains up and that the Nasdaq 100 index has just found support at its critical 30 week average (red line).  I put a “?” next to the third test because it remains to be seen whether this support will hold.  It was the reversal of the 30 week average in Oct 2000 that caused me to exit the markets near the top.   Stan Weinstein (see his book to the right) alerted me to the importance of the 30 week average for detecting individual stock and entire market longer term trends. DISCERN THE TREND FROM WHAT THE MARKET IS DOING, NOT FROM WHAT THE PUNDITS ARE SAYING.

So where do I see the  current trend?  First, according to IBD, the put/call ratio was 1.19 on Friday.  Readings above 1.00 indicate that options players are placing more bets on a decline, a major contrary indicator suggestive of at least a short term bounce up.  Second, the media pundits are openly bearish and talk of an economic depression is creeping into their gossip.  Third, the percentage of market bloggers bearish in a sentiment poll I participate in has tripled, to over 60%. And finally, we are entering the strongest (bullish)seasonal period in the markets.  Given all of the above and the weekly chart of the QQQQ above, I remain mainly in cash and short the QQQQ in the QID.  But I am ready to reverse my stance immediately if this market  starts up.  The market will climb a wall of skepticism and it does not pay to marry a particular market scenario….

I love market declines because it is much easier to identify the next leaders.  Stocks that can remain close to their yearly highs or even break into new high territory in the recent market environment may be among the new leaders when the market turns.  So, I used TC2007 to scan the market for new highs on Friday and looked at the fundamental and technical data to select some possible winners for my watchlist.  These stocks hit new highs on Friday and had recent quarterly earnings increases of 100% or more: BITI and ATRO.  These stocks hit new highs and had recent quarterly revenue increases of 25% or more:  CSIQ, FCN, ATRO, EHTH, VMSI and ACO.  If we get a year end rally, these technically strong stocks with strong fundamentals may be where I look to place my bets.  Clearly, others (insiders?) are already accumulating them…..

GMI:1; GMI-R:1; Down-trend continues

Don’t fight the trend.  I am in cash or short the Nasdaq 100 by the QID.

GMI:1; GMI-R:1; Bounce or turn?

No changes from yesterday, both GMI’s at 1.  Still waiting to see if this bounce holds.  Mainly in cash and comfortable just watching.

GMI:1; GMI-R:1; Bounce or bottom?

The GMI and GMI-R each rose to 1.  Tuesday was the third day in the current QQQQ short term down-trend.  It will take a lot more time to determine whether Tuesday’s rise was the beginning of a real turn in the markets.  For now the QQQQ down-trend (as well as that of the DIA, SPY and IJR) remains intact.  I remain mainly in cash and short through the QID.

GMI:0; GMI-R:0; in cash and short in QID

The GMI is now zero, as is the GMI-R.  There were fewer new lows on Monday than on Friday (192 vs. 335) in my universe of 4,000 stocks.  The Worden T2108 indicator is at 19%, now in the area where prior market declines have bottomed.  Nevertheless, Monday was the second day in the current QQQQ short term down-trend and I have no idea how long this decline will last.  I remain in cash and short the Nasdaq 100 in the QID ultra short ETF.

GMI: 1; GMI-R:1; Trend is down; in cash or short

Don’t try to fight the tide.  The GMI (and GMI-R) is now one and the QQQQ is in its first day of a short term down-trend (D-1). Gmi1109 (Click on chart to enlarge.) The QQQQ as well as the SPY are now below their 10 week averages.  I rarely make money trading growth stocks when the QQQQ is below its 10 week.  In addition, the Worden T2108 indicator is now at 26%, in bearish territory but not low enough to be in bottoming territory. The major indexes are now all in down-trends.  And it looks to me like this decline is just beginning, not near its end.

This chart shows changes in the GMI over the past few months.  Gmiperf1109 (Click on chart to enlarge.)  Note that the QQQQ has just broken below its 30 day average (red line) and that the 10 day average (blue dotted line), while declining, has yet to close below the 30 day.  Looking back to the decline last August we can see a lot more damage then than now.  While there is no guarantee that the current decline will last as long as the one last August, it could be worse.  Under these conditions it makes no sense to be long stocks.  Look how long we had last September to jump on board the up-trend, well after the August bottom.  It makes much more sense to wait for a bottom to be in place before committing funds.  Trend followers follow trends, they do not, cannot, anticipate them.  To fight this down-trend by owning stocks is to be reduced to the level of gambling.  Much better, and more likely to profit, is to wait and jump on the train once it has turned.

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GMI:3+; GMI-R: 4+; BEGINNING a major decline?; Mainly in cash

Well, the QQQQ finally got in synch with the rest of the market on Thursday.  There were 519 new lows and 89 new highs in my universe of 4,000 stocks.  The last time we had as many new lows was on August 16 (556) at the bottom of last summer’s decline.  But wait a minute.  The QQQQ is just about to break its up-trend–Thursday is its first close below the critical 30 day average since August 28.  I usually wait for one more such close to turn my Daily QQQQ indicator negative, hence the GMI  and GMI-R readings with a "+. " And the IBD growth mutual fund index has just closed on its 50 day average and could pierce it today.  In addition, the Worden T2108 indicator is still above bottoming territory (now 31% versus 11% last August) and 26% of the stocks in my universe are in an up-trend compared with just 11% at the bottom in August. 

All of these indicators are clearly above the extreme low readings that we had last August, suggesting to me that this new decline in the QQQQ may turn vicious and do a lot more damage than we experienced during last August’s decline.  I therefore sold everything on Thursday and bought a little of the QQQQ inverse ETF, QID, that rises twice as much as the QQQQ falls.  This is the time for me to be on the side-lines, mainly in cash.

GMI: 5; GMI-R: 60%; QQQQ breakdown coming?

Well, the split market we have been talking about may be about to end–but not yet.  The GMI is still 5 but the GMI-R is at 60%.  Gmi1107 The QQQQ is right on support and another decline could turn my indicators negative.  Tuesday was the 49th day of the current QQQQ up-trend.   The QQQQ has closed the past 10 weeks above its critical 10 week average, but the SPY is now below its 10 week average.  Only 13% of my 16 short term indicators for the QQQQ, SPY, DIA and IJR are positive.  The Worden T2108 indicator is now down to 31%, in bear territory for NYSE stocks.

So, what to do?  I took some funds off the table today.  Why try to be a hero when so many of the banks and large financial stocks and the dollar are in trouble? Look for a put/call ratio (1.03 Wednesday in IBD) well above 1.0 for a short term bounce.

GMI:4; GMI-R: 6; Strongest stocks

The GMI fell one, to 4 and the GMI-R to 60%.  There were 101 new highs and 381 new lows in my universe of 4,000 stocks on Monday.  The QQQQ continues to resist the down-trend in the non-tech markets.  Silver, gold and commodities are hitting the new high list. The QQQQ is in its 47th day of its short term up-trend.  You can cut the negativity espoused by CNBC pundits with a knife, and yet the markets rebounded from their lows on Monday.  This market therefore looks like it wants to rally.  Key growth stocks (GOOG, AAPL, CMG, RIMM, BIDU) are holding up.  On the other hand, the Worden T2108 indicator is now at 36%, reflecting a lower market for NYSE stocks.  Among the 101 stocks in my stock universe that hit a new high on Monday and that have recent quarterly earnings increase of 100% or more are:  ENZN,NDAQ,HAE,RIG,PSEM,HL,VCP,BIDU,FLS,CELL,ATRO,

ANSS,NEM,RIMM,ITC FMCN.  If the market does rally, these stocks may be among the new leaders.

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