GMI: 5; GMI-R: 9; techs shine

The GMI rose to 5 (of 6) and the GMI-R to 90%.  There were 123 new highs in my universe of 4,000 stocks and 81 new lows on Tuesday.  While the SPY (and DIA) remain technically weak, the tech stocks, as reflected in the Nasdaq 100 index, remain very strong.  The tech leaders, AAPL, RIMM, GOOG, ISRG and AMZN were all big winners on Tuesday.  I retained my position in QLD and will begin to write covered calls on IBD100 stocks later this week. 

GMI: 3; GMI-R: 6; All eyes on AAPL

The GMI fell to 3, and there were 267 new lows in my universe of 4,000 stocks and only 43 new highs.  The QQQQ indicators remain positive.  In fact the GMI-R rose to 6, reflecting the strength in the QQQQ.  Let’s see if AAPL can hold last night’s extended market gains.  If it can’t, the QQQQ may follow the other indexes down.

GMI: 4; GMI-R: 5; Techs show strength; Mainly in cash

The GMI fell to 4 (of 6)  and the GMI-R is now at 50%.  There were more than twice as many new lows than new highs in my universe of 4,000 stocks (226/91) on Friday, an ominous sign.Gmi1019   Many of the new lows are banks, apparel companies and trucks, possible indications of a slowing economy. Less than one half (47%) of the Nasdaq 100 stocks closed above their 30 day averages, a level not seen since late last August.  I should have noticed earlier last week that there are now 3 times as many bullish advisors than bearish advisors in the latest poll, with over 60% being bullish–almost at the 5 year high.  Finally, the Worden T2108 indicator is now at 44%, down from 82% and suggesting to me that this market pendulum is falling out of the bullish range.  All of these may be signs of some type of a top in the market.

On the other hand, the tech stocks,  as indicated by the Nasdaq 100 index remains in an up-trend.  And the put/call ratio on Friday broke 1.00 (1.08) indicating that 108 puts were traded for every 100 calls.  This is a sign that options players are getting bearish, at least short term, a good contrary signal.  And we are approaching a seasonally strong end-of-year period for the market. This decline could set up a nice year-end rally. So, maybe Monday will bring a reversal to the up-side, after the hysterics and media pundits realize that 2007 is not 1987.

So what to do?  Almost all of my covered call stocks were exercised and bought out this weekend.  So, I am left with a lot of cash.  With the markets so volatile, I prefer to stay in cash and write more calls at the end of October.  I am willing to forfeit some additional premium in order to gain a little more clarity on where this market is heading.  I will also consider closing out my QLD position early this week if the QQQQ fails to show sustained strength.  I know the market climbs a wall of worry, but this wall appears to be lined with barbed-wire and land mines.

GMI: 6; GMI-R: 10; new lows climbing; COMV climbs

The GMI remains at 6 and the GMI-R at 10.  In spite these strong readings, it  is disconcerting to me that the number of stocks in my universe of 4,000 that are hitting new lows is climbing.  On Thursday, there were 157 new highs and 153 new lows.  It is strange to see the steady climb in new lows.  Many of these lows are regional banks that are in the midst of  large declines. As Judy said to me, this may be the reason the Fed reduced rates.  They may have foreseen the bank carnage.  Speaking of Judy, her stock pick, COMV, that I wrote about on October 10, at 35.01, moved up again on Thursday, to 38.46.

GMI: 6; GMI-R: 10; but a lot of new lows, especially among apparel stocks

The GMI returned to 6 and the GMI-R to 10, both are maximum readings. The rise in these indexes was caused by an increase in new highs on Wednesday, to 178 out of the 4,000 stocks in my universe. I am somewhat concerned, however, by the rise in new lows to 131, the highest number since the August market decline.  I examined the new lows and found that the industry with the most new lows (10) was apparel stores.  Stocks like JWN, GYMB, DSW, PSS, CHS and FL all hit new lows and appear to be in steady down-trends.  These stocks may be forecasting some type of decline in consumer spending. I am looking forward to option expiration on Friday.

GMI: 5; GMI-R: 8; QQQQ remains strong

The GMI fell one to 5, as there were only 97 new highs on Tuesday in my universe of 4,000 stocks.  The GMI-R fell to 8, losing an additional point because there were more new lows than highs (98 vs. 97).  The GMI-S has weakened to 63% because of short term weakness in the DIA, SPY and IJR.  All of the short term indicators for the QQQQ remain positive. 

GMI: 6; GMI Revised; EDU – another one of Judy’s picks

The GMI is still at a maximum reading of 6, and the number of new highs in my universe of 4,000 stocks rose to 216 on Monday. Monday was the 32nd day in the current QQQQ short term up-trend. Gmi1015 Note that the Worden T2108 indicator has now declined to 67%, down from a high of 82% on October 5.  (Click on the table to enlarge.)

After much thought, I have revised the GMI by adding 4 new indicators, signified by an "*". The GMI-R  ranges from 0-10 and may provide a more sensitive measure of the trend of the general market.  For the time being, I will post the original GMI and the revised GMI-R in the table for the benefit of readers who use the original index…….

Weeks ago, my talented stock picking friend, Judy, urged me to buy EDU.  Her research indicated it was the "Kaplan" of China, helping the Chinese population to excel in prep-type exams to progress to higher educational levels . Edu She bought the stock in early July and August in the low to mid 50’s. Well, I told her Sunday night that I would not write about EDU then because earnings were expected Monday.  So, earnings came out and the stock shot up 12.56% on Monday in a sloppy market. (Click on chart to enlarge.)  I need to follow Judy’s advice much more often and post more of her picks.

See my disclaimers at the bottom of the prior post.

GMI: 6; IBD100 stocks out-perform Nasdaq100 and S&P500 stocks

The GMI is still at a maximum reading of 6.  Gmi1012 But there were only 125 new highs in my universe of 4,000 stocks on Friday, down from 484 on Thursday and over 200 each other day last week.  And the Worden T2108 indicator is now at 74%, down from a high of 82% on October 5.  This Worden indicator can take a long time to top out as it remains in the 70-80 area.  The QQQQ completed the 31st day of its short term up-trend on Friday.  The last two recent large up-trends lasted 80 days and 86 days, suggesting that this QQQQ up-trend could have further to go.  I have learned over the years that it is futile to try to anticipate market turns.  It is far better to wait until my GMI signals the turn has occurred.  Of course, this means that I lose some profits as the top is formed.  However, I prefer to take this approach over  trying repeatedly (and mistakenly) to predict the turn….

People often tell me that the IBD 100 stocks under-perform the market because once they are added to the list they top out or recede.  Unlike most people with answers, I have data.  And the data indicate the absurdity of this assertion, at least in recent weeks.  Ibdperf101507 This table (click on to enlarge) shows the performance of select IBD 100 stock lists published in the past year.  A larger percentage (82-93%) of the stocks in each list the past six months closed Friday above their 30 day average than did the Nasdaq 100 (73%) or S&P 500 stocks (76%).  Similarly, the last 3 lists contained more stocks likely to be within 5% of their 52 week highs.  Finally, all of the IBD 100 stock lists over the past year had higher median changes (+9-20%) during the past 30 days than the Nasdaq 100 (7%) or S&P 500 stocks (6%).  (A median chnage of 6% means that one half of the stocks advanced more than 6% and one half less than 6% during the past month). Of course, the median chnage of +20% seen in today’s new list is influenced by the fact that  IBD adds to the list and retains each week only the strongest stocks, also reflected in the fact that 93% of the stocks in today’s list closed above their 30 day average. So, looking for winners among recent IBD 100 stocks might be a good strategy.  The past few months I have had considerable success selling near month covered calls on up-trending IBD 100 stocks and have been achieving 3-5% profits each month.  This Friday, options expire and I cash in again….


GMI: 6; 30th day of QQQQ up-trend

The GMI is still at a maximum 6, and there were 484 new highs in my universe of 4,000 stocks.  The QQQQ completed the 30th day of its short term up-trend.

GMI: 6; COMV breaks out and PAY hits new high; 29th day of QQQQ up-trend

The GMI is still at a maximum of 6, and there were 322 new 52 week highs in my universe of 4,000 stocks on Wednesday.  Judy’s stock pick, COMV, broke out on Wednesday and closed at 36.14, up 3.2%.  Judy’s other pick that I wrote about, PAY, hit a new high on Wednesday. The QQQQ completed its 29th day in its short term up-trend.  The last short term up-trend in the QQQQ ended in late July and lasted 80 days.  So, the current up-trend could have many more days to go….

See my disclaimers below.

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