GMI: 0; 100% cash

The GMI is still zero and a long way from turning positive.  There were 23 new highs and 257 new lows on Tuesday in my universe of 4,000 stocks.  Gmi0718 54% of the Nasdaq 100 stocks, 52% of the S&P 500 stocks and 73% of the Dow 30 stocks advanced.  The 50 day average of the IBD mutual fund index is about to cross below the 200 day average, indicating that managers of growth stocks funds are doing poorly.  When that happens, I also do not do well holding growth stocks.  With the major indexes below their 30 week averages (never mind their 30 day averages) the markets remain in sustained down trends.  Tuesday was the ninth day (D-9) of the current QQQQ short term down trend.  However, the QQQQ has closed below its 10 week average for nine weeks.  I typically make profitable long trades when the QQQQ  remains above its rising 10 week average.  The GMI indicators have kept me out of all major market declines since 1995.  I remain 100% in cash as I prepare to go on vacation until early August.

Please send your comments to:  ewish@comcast.net.

GMI: 0; Indicators deteriorate; On biased market indexes

The GMI is still zero, as the markets weakened a lot more than was reflected in the major indexes. 50-54% of the stocks in the Nasdaq 100, S&P 500 and D0w 30 indexes advanced on Monday, but only 36% of my universe of 4,000 stocks rose, along with just 23% of the stocks in the IBD 100 list on 5/15.  Thus, it was the large cap stocks reflected in the big indexes that were most likely to rise on Monday.    There were only 16 new highs and 195 new lows in my universe of stocks.  Gmi0717 Only 19% of the 132 stocks that hit a new high 10 days ago closed higher on Monday than they closed 10 days ago.  Buying stocks at new highs has not been profitable.  Tuesday was the eighth day (D-8) in the current QQQQ decline.  I would have expected a much larger rebound after the considerable declines of last week……

The deterioration in many of my indicators is evident in the chart of the performance of my universe of 4,000 stocks versus the IBD 100 stocks of 5/15.  Ibd0717 Only 23% of my universe and 29% of the IBD 100 stocks of 5/15 remain in a short term up-trend.  Only 18% of the IBD 100 stocks of 5/15 are above their 10 week averages and only 14% (14/100) of them closed higher on Monday than they closed on the day this list of the IBD 100 was published on 5/15.  More telling, 48% of the IBD 100 stocks posted on 5/15 are down 15% or more from the day that list was posted on 5/15……..

My intent is not to question the value of the IBD 100 list in bull markets.  IBD 100 type growth stocks tend to do very well in rising markets. However, I am trying to protect my readers from impulsively buying the IBD 100 list growth stocks when they are listed in weak markets.  IBD itself cautions readers to buy these stocks only in a rising market and after careful analysis.  In addition, I want my readers to know that IBD’s practice of replacing underperforming stocks in the IBD 100 index with better performing stocks obscures the performance of any complete list of stocks they publish.  That is why I arbitrarily selected  the IBD 100 stock list published on 5/15 and track its performance. Anyone who bought stocks on that list on 5/15 and held them had a 14/100 chance of having a winner, through yesterday’s close. In a few months I will select a new IBD 100 list to track.

IBD is not alone in replacing underperforming stocks in an index.  All of the major indexes follow the same practice, thus providing the brokerage industry with a very misleading tool for convincing  investors of the  wisdom of buying and holding stocks for the long term.  (For example, only one original Dow Industrial stock, GE, remains in that index.)  Anyone who bought and held the stocks that have been dropped from these indexes might have seriously harmed their financial health, and wealth. Statistics based on the performance of these "corrected" indexes are therefore heavily biased towards gains and do not accurately represent the risk of holding stocks over time…….

Please send your comments to:  ewish@comcast.net.

GMI: 0; IBD100 performance; Cash balances earning 4.8%?

The GMI is still at zero.  There were 300 new lows and just 16 new highs on Friday.  The last time we had more than 300 new lows (324) in my universe of 4,000 stocks was October 12, at a near term bottom.  However, many of my indicators, while low, are not at extreme lows.  For example, 14% of the Nasdaq 100 stocks closed above their 30 day average, compared with 9% on June 13.  Gmi0714 The GMI-S is now at 19, reflecting weakness in almost all of my short term indicators for the four major stock indexes.  The GMI-L is only a little better, at 31. 21-27% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Friday. Friday was the seventh day (D-7) in the current QQQQ down-trend and the ninth week that the QQQQ has closed below its 10 week average.  The IBD mutual fund index is below both its 50 day and 200 day moving averages and the 50 day is close to crossing below the 200 day.  Thus, the professional growth fund managers are suffering in this market, another indication to stay away from growth stocks now.

The IBD 100 stocks continue to be slaughtered.  Ibd0714 I think that the way IBD tracks  the performance of the IBD 100 is very misleading because they keep replacing underperforming stocks with better performing stocks.  When you look at the performance of the IBD 100 list published on a  particular date (5/15) we get a more accurate indication of how these types of stocks have performed.  Since 5/15, only 19% of the IBD 100 stocks have advanced, compared with 27% of the 4,000 stocks in my universe.  Only 26-27% of the stocks in each group closed above their 10 week averages.  None of the IBD 100 stocks and less than 1% of my universe of stocks hit a new high on Friday.  Need any more evidence that growth stocks have been a dismal investment since mid-May?

I am  100% in cash now, given my coming vacation.  Since mid-May it has  been almost too easy to trade profitably on the short side.  Buying deep in the money puts in my IRA has been a wonderful strategy for this market.  I urge all readers to get a copy of O’Neil’s book on shorting and to study the charts.  A current scan of the market using TC2005 yields 7 rocket stocks and 422 submarines.  Riding submarines down or staying in cash has been the best way for me to ride out the current market.  With Fidelity Cash Reserves paying me about 4.8% for the cash balance in my account, it is nice to be on the sidelines.  What is your brokerage firm paying you for your cash balances? You may be surprised/disappointed……….

Please send your comments to:  ewish@comcast.net.

GMI: 0; In cash or short

The GMI returned to zero on Thursday.  Between 10-16% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced.  Only 13% of my universe of 4,000 stocks advanced, as did only 9% of the IBD 100 stocks listed on 5/15.  Gmi0713 There were 24 new highs in my stock universe and 249 new lows.  On June 13 there were 13 new highs and 292 new lows, so we are approaching the depths of the decline in mid-June.  18% of the Nasdaq 100 stocks closed above their 30 day averages. Put another way, only 18 of the Nasdaq 100 stocks closed above their average closing price over the past 30 days.  Only 29% of my universe of stocks are in a bullish Stage 2 up-trend, as defined by Stan Weinstein (see his book, listed on the right). 17% of my universe of stocks are within 5% of a new low, while just 9% are that close to a new high.  Approximately 3 of every 4 stocks closed on Thursday below the price they closed on 5/15…….

With the GMI at zero, I hold no stocks in any account.  There will be plenty of time to buy stocks again after the inevitable real turn occurs, sometime in ………………………

Please send your comments to:  ewish@comcast.net.

GMI: +2; GMI-S: 44; Cash and short

The GMI remains at +2.  While few stocks rose on Wednesday (18% of the Nasdaq 100, 17% of the S&P 500 and 7%of the Dow 30 stocks), my market readings are not as low as they were in June.  There were 127 new lows in my universe of 4,000 stocks on Wednesday, compared with 292 on June 13 and 173 on June 28.  Gmi0712_1 The short term indicators measured by the GMI-S has now fallen to 44; the GMI-L is 31.   14% of stocks are within 5% of a new low and 12% are within 5% of a new high.  Wednesday was the fifth day of the QQQQ down-trend (D-5) and the QQQQ has been below its 10 week average for nine weeks.  I have found that I profit from owning growth stocks when the QQQQ remains above its 10 week average.  In my opinion, anyone holding stocks in the current market should examine their strategy.  The markets of 2000-2002 should have taught everyone the folly of a buy and hold strategy.  Only 28% of the IBD 100 stocks from 5/15 and 33% of the 4,000 stocks in my universe closed higher on Wednesday than they did on 5/15.  Since mid-May, the odds of success have been on the side of those who are in cash or short.  That is the side I am on.

Please send your comments to:  ewish@comcast.net.

GMI: +2; Weakness continues; in puts or cash

The GMI is still at +2 as my internal indicators, especially for tech stocks,  continued to weaken on Monday.  Gmi0710 Only 26% of the Nasdaq 100 stocks advanced, compared with 61% of the S&P 500 stocks and 63% of the Dow 30 stocks.  There were only 67 new highs in my universe of 4,000 stocks and only one new high (PMTI) in the IBD 100 list from 5/15.  Since the IBD 100 list was posted on 5/15, 25% of those stocks have advanced, compared with 35% of the stocks in my universe.  With odds  like these it makes no sense to chase the IBD type of growth stocks, unless one is partial to casino action that favors the house.  The key to survival in the market is to play only when the odds are in one’s favor.  In this environment my IRA remains short with put options or in cash.  There will be plenty of time to jump upon this train when it finally sets a northerly course.

Please send your comments to:  ewish@comcast.net.

GMI: +2; Holding cash

The GMI is +2 and we are in the second day (D-2) of the new QQQQ down-trend. I will wait to commit funds Gmi0707 until after earnings season.  Since 5/15, only 27% of the IBD 100 stocks listed on that date and 34% of my universe of nearly 4,000 stocks have advanced at all.  With odds like these I should only be short or in cash.  My scan of the market yielded 16 rocket stocks and 384 submarines.  Only 2 IBD 100 stocks (PMTI, CME) from the list on 5/15 hit a new high on Friday.  It would be insane to chase growth stocks and anticipate new highs in this market.

Please send your comments to:  ewish@comcast.net.

GMI:+2; D-1?; Staying in cash

The GMI fell to +2, with the initiation of a possible new short term down trend in the QQQQ.  Gmi0706 48% of the Nasdaq 100 stocks rose on Thursday, along with 54% of the S&P 500 and 63% of the Dow 30 stocks. However, there were only 80 new highs and 49 new lows in my universe of nearly 4,000 stocks.  39% of the stocks in my universe and 78% of the IBD 100 stock list on 5/15 are in a bullish stage 2 up trend.  However, 83% of my universe of stocks (93% of the IBD 100 list) closed above their MACD signal line, suggesting an upward trend in most stocks. Only 55% of the IBD 100 stocks from 5/15 advanced on Thursday compared with 58% of my universe of stocks.  Only four of the IBD 100 stocks from the list on 5/15 hit a new high:  EZPW, HOC, HANS and PMTI. Only 31 of the IBD 100 stocks from 5/15 closed higher Thursday than they did on 5/15.  The market has not yet tipped its hand.  I think this is a time for staying in cash.

Please send your comments to:  ewish@comcast.net.

GMI: +3

GMI fell one to +3 on Wednesday.  Gmi0705

GMI: 4; GMI-S: 81; U-2; New IBD 100 leaders

The market continued to strengthen during the brief pre-holiday session. The GMI is at +4 and very close to +5 when/if the IBD growth mutual fund index turns positive.    The GMI-S is now 81, reflecting strong short term up-trends in the major indexes.  73% of the Nasdaq 100 stocks rose on Monday, along with 72% of the S&P 500 stocks and 83% of the Dow 30 stocks. Gmi0703There were 117 new highs and only 19 new lows in my universe of nearly 4,000 stocks.  13/16 stocks that hit a new high 10 days ago closed higher on Monday than they did ten days ago.  Thus, buying stocks hitting new highs has likely to have been profitable again.  35% of stocks are in an up-trend now, up from 9% on June 20. Monday was the second day in the current QQQQ up-trend.

IBD 100 growth stocks are now out-performing other stocks.  Ibd0703    81% of the IBD 100 stocks from the list on 5/15 advanced, compared with 72% of other stocks.  81% are in a bullish stage 2 up-trend and 81% closed above their critical 30 day averages.  34% of these stocks are now above their closing price on 5/15 when they were listed among the IBD 100.  Eight of these stocks hit a new high on Monday:  OII, EZPW, CLDN, XPRSA, HOC, FORM, LIFC, EXPD (I own one of these).  William O’Neil writes that the first stocks to break out of bases to new highs often become the leaders of a new bull move.  I am watching these stocks very closely….

Please send your comments to:  ewish@comcast.net.



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