GMI:0; GMI-R: 0; Tech bounce?

The GMI and GMI-R remain  at zero.  It does look like a RIMM inspired bounce may occur on Friday.  Options expire Friday.  I still do not trust this market. IBD says put/call ratio on Thursday was only .49–a bearish omen.  It hasn’t been this low in months.

GMI:0; GMI-R: 0 Third day of QQQQ down-trend

My indexes remain at zero.  Wednesday was day 3 (D-3) in the short term down-trend of the QQQQ.  This is not the time to be brave. 

GMI: 0; GMI-R: 0; Decline continues; QID and puts

The GMI and GMI-R are both zero.  The decline continues. Accumulating QID and buying puts in my IRA.

GMI: 0; GMI-R: 0 New QQQQ down-trend

The GMI is at zero and Monday was the first day in the new QQQQ short term down-trend.  I am accumulating QID.

GMI: 0??; GMI-R: 0??; GMI-L: 31%; Why fight the odds?

The GMI and GMI-R are back to zero.  The ?’s are there because two indicators are too close to call, but given the majority of negative indicators, I counted them as negative in the index totals.  Gmi1214 (Click on table to enlarge.) There are a number of additional ominous signs for the bulls.  The GMI-L, my longer term measure of  weekly trends is showing 31% positive, the lowest since it hit 20% in August, 2006, near the bottom of that four month decline.  The point is that in the two declines in 2007 (March and August), the GMI-L never fell below 50%.  Another negative sign is that the pendulum of the market, the Worden T2108 indicator, bottomed out at about 13% in November, climbed to near 55% on December 10, and now is back down to 28%.  Almost always this pendulum recovers to around 80% after a large market decline.  So the rebound that we have just had appears puny and half-hearted. I think the only thing keeping this market from a huge decline is end-of-year rally hopes.  I have seen a number of tops occur in January over my trading career……………

So, I say as I did a few posts ago, it takes a masochist and a gambler to stay long in this type of market.  THE KEY TO SUCCESS IN TRADING IS HOW LITTLE ONE LOSES DURING MARKET WEAKNESS.  Most people profit during market rises. The sine qua non is to conserve capital during declines so as to be able to trade long again during sustained market advances.  It is critical to know when to get out of the market.  Why should I bet when the odds are so against me?

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GMI: 4; GMI-R: 5; Trying to be patient.

The GMI and GMI-R fell a little as the IBD growth mutual fund index fell back below its 50 day average.  One good down day will tip my indicators to the negative side.  The key is to be patient and not jump the gun.

GMI: 4+; GMI-R: 5+ Tipping point?

The GMI moved up to 4+ and the GMI-R stayed at 5+.  None of the additional very short term indicators that I added to create the GMI-R improved on Wednesday.  Too many of my other indicators are sitting right on support.  A drop tomorrow would tip the balance to the negative.  Given the extreme volatility recently, I am mainly in cash but poised to jump into the short side (QID) and into gold (GLD) or oil stocks if a down-trend is confirmed.  In spite of the strength in the GMI, the recent market action makes me feel worn out and tired.

GMI: 3+; GMI-R: 5+ Be careful

The GMI fell back to 3+ and the GMI-R to 5+.  Rarely have I seen such volatility.  Time to be defensive, and not take big chances.  The IBD Growth Mutual Fund Index is now back below its 50 day average.  This means that the professionals who manage growth funds are not doing well.  The QQQQ is also back below its 10 week average.  I cannot consistently make money on the long side when these indicators are weak.

GMI: 6; GMI-R: 10; Impact of Fed?

The GMI and GMI-R are now at their maximum values.  Monday was the second day of the new QQQQ up-trend.  The Worden T2108 indicator is now at 55%. It will be interesting to see how the Fed’s actions affect the trend.

GMI: 5; GMI-R: 9; New QQQQ short term up-trend

The GMI is now 5 (of 6), for the first time since November 7 and the GMI-R is now 9.  (Click on table to enlarge.) Friday was the first day in the new QQQQ short term up-trend (U-1). Gmi1207  There were 144 new highs and 47 new lows in my universe of 4,000 stocks on Friday.  52% of the Nasdaq 100 stocks are back above their 30 day averages.

A trend follower never hits the top or bottom, but identifies the change in trend after it has occurred.  So, it has taken this much time since the low on November 12 for the QQQQ to turn positive.  The November bottom looks technically very similar to the bottom last  August.  That bottom was followed by a 50 day up-trend.  Time will tell if this new up-trend will last as long.  It is important to be cautious and to wade into long positions, for the trend can end abruptly at anytime.  The odds have just shifted for me, however, toward the long side.

The psychology of trend changes is interesting. When a new up-trend occurs, everyone is skeptical and the news is negative.  As the trend continues more people jump on board and there is a time when most everyone agrees that the trend is up and they stress the positives.  Confidence in the up-trend grows until the top occurs and the psychology goes into reverse.

I have written a few covered calls on growth stocks, bought some QLD, and taken small positions in a few stocks.  I am still largely in cash, however.   

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