The long and short term market trends are down. I remain mainly in cash in my trading accounts. Many of the stocks I follow are very oversold, suggesting that we could get a bounce.No tags for this post.
Friday was the 4th day of the current QQQ short term down-trend. Only 29% of the Nasdaq 100 stocks closed with their MACD above its signal line and both the SPY and QQQ have closed below their critical 10 week averages. I am in cash in my trading accounts and will start moving out of mutual funds and into money market funds in my university pension. The longer term averages appear to be continuing Stage 4 declines. The weekly chart of the SPY (S&P 500 ETF) shows it to be back below a declining 30 week average (red line). This is a very ominous pattern. The QQQ has a similar bearish pattern.
With the GMI at 0, I am totally hedged and in cash. Another flat or down day will give me a second day with GMI less than 2, a major sell signal. I did not wait for this confirmatory signal to lighten up, however, because with the GMI at 0, I am ready to get defensive. I may start to transfer money in my university pension from mutual funds to money market funds. I do not like the current market pattern.No tags for this post.
Markets looking ugly again. IBD still sees correction. With new QQQ short term down-trend I am getting defensive again. Not looking for longs. I ran my scan looking for possible shorts, stocks that have climbed a lot in the past year and are beginning a possible Stage 4 decline. TC2000 came up with four stocks: CF,BIDU,FOSL,HLF. This weekly chart of HLF shows a stock that is breaking below its 30 week average (red line) with a pattern of high volume down weeks (red spikes). Click on chart to enlarge.
The QQQ short term up-trend reached the 5th day but another down day on Tuesday could turn the short term trend down. Only 4 stocks were found by my scan that looks for stocks that hit a new 52 week high and have good fundamentals: DG, GNRC, OKS, ASPS. ASPS hasn’t closed below its 10 day average since October 21! The 10 day average in this daily chart is the blue dotted line. Click on chart to enlarge.
If the market holds on Monday the new QQQ short term up-trend will have reached 5 days. At that point I will add to my position in QLD. It is also the 7th day since my GMI based strategy flashed a buy signal. While I am not ready to release our recent analysis of how this strategy has worked since late 2006, I can tell you that the strategy outperformed a buy and hold strategy while keeping me out of the market during market declines. While past results do not guarantee future results, I am confident enough to go long QQQ or QLD when the GMI has flashed a buy signal and remains bullish.
Meanwhile, the GMI remains at 6 (of 6) and the GMI-2 is at 5 (of 6). The Worden T2108 is at 59%, in neutral territory. 78% of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term strength. Both the SPY and QQQ have now closed above their 10 week averages for two weeks. The QQQ daily stochastics reached an overbought level and recently that has led to a rapid decline. The fact that the market held on Friday is a very positive sign. Continued strength would signal to me a change in trend and a break out of the trading range it has been in.
My scan of stocks with good fundamentals that hit a new high on Friday yielded 13 out of more than 5,000 stocks: ORLY,ARG,DCI,HIBB,QCOR,CRMT,FICO,HSNI,SWI,DXPE,GNRC,HPY,SMP. Four of these also came up in my DARVAS scan: QCOR,FICO,SWI,DXPE. These stocks are worth researching for possible buys. As this weekly GMMA chart shows, QCOR has been a powerful RWB rocket stock for some time. Click on chart to enlarge.