GMI: 5; GMI-S: 44; 2nd day of QQQQ down-trend; buying QID

The markets continued to weaken on Thursday, but the GMI remains at 5.  The GMI-S, however, fell 19, to 44.  None of my four short term indicators for the QQQQ remain positive.  Gmi1221_1 Only 28% of the Nasdaq 100 stocks advanced on Thursday, along with 32% of the S&P 500 stocks and 20% of the Dow 30 stocks.  Only 28% of the IBD 100 list from 12/18 rose and only 28 closed above their close when the list was published.  Growth stocks are clearly hurting.  There were 163 new 52 week highs in my universe of 4,000 stocks.  Only 42% of the Nasdaq 100 stocks have now closed above their 30 day averages, the lowest since last August 9, during the market decline.  Many of my indicators are the weakest they have been since the decline last summer. In view of the developing down-trend in the QQQQ, I am slowly accumulating the ultra inverse QQQQ ETF, QID, which goes up as the QQQQ falls.  This is the first time my IRA can make a good profit from a market decline without the need to purchase put options on individual stocks or indexes.  The QID is leveraged so that it will rise twice as fast as the QQQQ declines.

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GMI: 5; new QQQQ down-trend; Dow theory warning?

NOTE:  THE PROSHARES ETF’S WENT EX-DIVIDEND YESTERDAY AND THEIR PRICES WERE REDUCED BY THE DIVIDEND.

Well, the GMI weakened 1, to 5 on Wednesday.  Only 34% of the Nasdaq 100 stocks rose, as did 51% of the S&P 500 and 33% of the Dow 30 stocks.  Gmi1220_1 43% of the stocks on the IBD 100 list from 12/18 also rose.  After 86 days of an up-trend, the QQQQ is now in a short term down-trend (D-1).  This does not mean that the down-trend will last long.  But for now, I am short the QQQQ (by owning the inverse ETF, QID) and mainly in cash.  The QQQQ is acting very differently than it has been.  AAPL and GOOG continue to weaken, and RIMM is just holding on.  I believe the odds are turning against growth/tech stocks.  As the GMI declines, I will add to my short position.  Stay tuned………………………………..

Ever hear of the Dow theory?  It seems that the Dow Industrials and Dow Transportation averages should each confirm the major trend.Dj20 Has anyone noticed that the Dow Transportation average appears to be faltering?  In fact, one might even see a head and shoulders top in this chart.  Is this another sign of impending market weakness? Why would the transportation stocks be weakening in such a strong economy?

Please note my disclaimer at the bottom of Wednesday’s post.

GMI: 6; No longer long stocks; QID

The GMI held to 6 Tuesday–barely.  Another down day in the QQQQ will reduce the GMI at least one point.  Note there were only 126 new 52 week highs in my universe of 4,000 stocks.  Gmi1219_1 Only 46% of the 514 stocks that hit a new high 10 days ago closed higher on Tuesday than they did 10 days earlier.  Failure of new highs to hold up is a sign of market weakness.  Only 37% of the Nasdaq 100 stocks advanced, along with 57-60% of the S&P 500 and Dow 30  stocks.  The Nasdaq 100 stocks are clearly lagging.  Only 49% of them closed above their 30 day averages, the lowest percentage since this rally began in mid-August, and well down from a peak of 88% reached in October.  The IBD 100 list from 12/18 did better on Tuesday, 54% of them advanced and 72% remain above their 30 day averages. RIMM fell on Tuesday, but GOOG and AAPL bounced…….

I am sorry, but I don’t like this market and I have told you I am a chicken.  It has been 17 days since the QQQQ hit a recovery high, the longest such stretch since this up-turn began in mid-August.  Tuesday was the 86th day of the current up-trend in the QQQQ.  The MACD for the QQQQ continues to decline.  I am out of all of my longs, and holding a small pilot position in the QID.  QID will rise if the QQQQ declines. Meanwhile, I will earn 5% interest in a money market fund as I wait for a clear trend.

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GMI:6; GMI-S: 63; Ominous signs

The GMI is still 6, but the GMI-S fell 18, to 63.  The short term indicators for the small cap stocks (IJR) are almost all negative.  Only the Dow 30 stocks are holding up (DIA).  Only 24% of the Nasdaq 100 stocks advanced on Monday, Gmi1218 along with 31% of the S&P 500 stocks and 57% of the Dow 30 stocks.  Even the stocks on the new IBD 100 list published on Monday were weak; 26% advanced, though 17 hit a new high during the day.

When I see the market leaders weaken, GOOG (-3.6%) and AAPL (-2.6%), I become concerned about the market trend.  Yes, the GMI is at a maximum 6, but it would not take much more of a decline in the QQQQ to cause it to rapidly weaken.  Let’s not try to anticipate the market, however.  We can wait for a definite sell signal to take action.  Just remember, this market has been in a strong up-trend for 85 days. The 10 day average has closed above its 30 day average every day since 8/16 when the rally began.  During the huge rally in the QQQQ that began in March, 2003 after the 2002 bottom, the 10 day average closed above its 30 day average for 103 days. I have to suspect that we are not far from at least a temporary pause in this up-trend.

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GMI: 6; IBD 100 stock performance

The GMI is still 6.  59% of the Nasdaq 100 stocks rose on Friday, along with 46% of the S&P 500 stocks and 60% of the Dow 30 stocks.  Gmi1215 There were 346 new 52 week highs in my universe of 4,000 stocks. 68% of the Nasdaq 100 stocks closed above their 30 day averages, still below the peak of 79% last November 16 and 88% on October 16.  Friday was the 84th day in the current QQQQ up-trend.

I added to my IBD 100 performance table the new IBD 100 list published today.  Ibdperf121544% of the stocks on the list from 12/18 rose on Friday and 18 of them hit a new 52 week high.  88% of the stocks on the new list closed above their 30 day averages, substantially better than the other IBD 100 lists in the table. With the exception of the stocks on the list published on 5/16,  the majority  of the IBD 100 stocks closed higher than they did on the date their list was published.   In contrast, more of the stocks in the Nasdaq 100 index (59) advanced on Friday.

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GMI: 6; GMI-S: 81; AAPL and GOOG lag

The GMI is 6 and the GMI-S climbed to 81.  Gmi1214_1 The trend is still intact and Thursday was the 83rd day of the QQQQ up-trend.  There were 389 new 52 week highs in my universe of 4,000 stocks.  85% of the Nasdaq 100 stocks rose, along with 79% of the S&P 500 stocks and 90% of the Dow 30 stocks.  70% of the IBD 100 stocks from 11/20 rose and 13 hit a new high.  RIMM rose nicely Thursday, but AAPL and GOOG lagged.

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GMI: 6; AAPL and RIMM bounce

The GMI is still 6.  39% of the Nasdaq 100 stocks advanced on Wednesday, along with 50% of the S&P 500 stocks and 40% of the Dow 30 stocks. Gmi1213_1 There were 266 new 52 week highs in my universe of 4,000 stocks. 47% of the stocks on the IBD 100 list from 11/20 advanced and only 8 of them hit a new high.   Wednesday was the 82nd day in the QQQQ up-trend.  AAPL and RIMM appeared to bounce off of major moving averages on Wednesday, but GOOG continued to weaken.  This market has yet to tip its hand.


GMI: 6; GMI-S: 63; 81st day of QQQQ up-trend; 59% of stocks declined since peak

The GMI is back to 6 but the GMI-S slipped to 63. Gmi1212_1 Only 31% of the Nasdaq 100 stocks rose on Tuesday, along with 45% of the S&P 500 stocks and 43% of the Dow 30 stocks. Only 21 of the IBD 100 stocks from 11/20 advanced and 13 of them hit a new 52 week high.  Just 58% of the Nasdaq 100 stocks closed higher than their 30 day averages, down from 74% on November 24.  This market has still not tipped its hand.  However, the fact that the market leaders (AAPL, GOOG and RIMM) have all closed below their 30 day averages is a bad omen for the general market. Since the QQQQ peaked on 11/24, that index has fallen 1.9% and 59% of the Nasdaq 100 stocks have declined.

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GMI: 5; GMI-S: 69; 80th day of QQQQ up-trend

The GMI declined one, to 5, as there were only 96 stocks that hit a new high 10 days ago and closed higher on Monday than they closed 10 days ago. (I count 50% as positive for this indicator only if there were too few new highs 10 days earlier to achieve the required 100.) Gmi1211_1 50-56% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes rose on Monday.  There were 259 new 52 week highs in my universe of 4,000 stocks.  53% of the IBD 100 stocks published on 11/20 rose and 20 of them hit a 52 week high.  The GMI-S slipped 6, to 69, as one of the short term indicators for the IJR (S&P smallcap 600 ETF) turned negative. Monday was the 80th day of the current QQQQ up-trend.

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GMI: 6; Follow instruments and/or gut? IBD100 stocks thrive

The GMI remains at a maximum of 6.  Gmi1208_1 There were 195 new yearly highs in my universe of nearly 4,000 stocks on Friday and Friday was the 79th day in the QQQQ up-trend.  55-62% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Friday.

With my market indicators so positive, some of you have written to me asking me why I have been raising cash and even taking on a position in QID, the ultra inverse ETF for the QQQQ.  You raise an important question that I have been struggling with.  Why not stay with the up-trend signaled by the GMI and not try to anticipate a change in trend?  You may be right– maybe I should fly on instruments.  But doing so subjects me to a possible large cut in my profits because my indicators will only call the peak after the indexes have fallen some.  So, to retain profits I have decided to cut back.

Furthermore, while the GMI indicates that the up-trend is intact, there are a number of other signs that make me cautious:  1) there are twice as many bullish  than bearish newsletters; 2) some market leaders (GOOG, AAPL and RIMM) have stopped hitting new highs; 3) the MACD for the QQQQ is declining; 4) the QQQQ has closed 7 of the past 10 days below its 10 day average; and 5) market peaks have been common in December the past 5 years.

In addition to the above, I prefer to phase in and out of my positions in the market index ETFs.  When I turned bullish I bought on the way up.  Now, I am simply cutting back in stages.  If it turns out that some of the warning signs above lessen or reverse,  I will buy more QLD again…..

Meanwhile the IBD 100 lists in the recent past have done quite well. Ibdperf1208Four of the five lists closed higher than on the day they were published.  64-82% of the  individual stocks closed higher than their 30 day averages.  The list from 11/20 had 16 new yearly highs on Friday. Compared with the Nasdaq 100 stocks, the IBD 100 type of growth stocks appear to be thriving in this market.

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