GMI: 0; GMI-R: 0; 9th day of QQQQ down-trend; Tuesday rally if FED lowers rates?
The GMI and GMI-R remain at zero. Friday was the 9th day of the QQQQ down-trend. There were 28 new highs and 164 new lows in my universe of 4,000 stocks on Friday. If the FED lowers rates on Tuesday we could have a massive rally. I would be very cautious with any short positions.
GMI: 0; GMI-R: 0; 8th day of QQQQ down-trend; stocks at new highs
No change in the GMI and GMI-R. Note that there were 20 new highs and 452 new lows in my universe of 4,000 stocks on Thursday. This was the highest number of new lows since July 15, when there were 988. The Worden T2108 indicator is now at 37%.
Whenever the market is weak I keep an eye out for stocks hitting new 52 week highs. I especially like stocks near their all-time high. These may be the next leaders when the market recovers. Stocks I am watching (some of which I own) include DXPE, CRMT, SXE, HGR, FSYS, HWK, VAR, STE. All of these companies have great earnings and technicals. Sometimes I cannot resist nibbling at promising stocks even in a declining market, but I always use a close stop. Cutting losses quickly is the trader's secret weapon–the first loss is often the smallest loss. If a stock fails to behave as I have predicted, I get out of my position. Do not tolerate a misbehaving stock! With the small commissions available these days, I can always afford to buy it back if the stock behaves well again. Some of my best gains have come from buying back stocks that I have been scared out of. As long as I am trading in a tax deferred account, I do not have to worry about the wash sales tax rules. Nevertheless, I remain over 90% in cash during market down-trends—like this.
GMI: 0; GMI-R: 0; 7th day of QQQQ down-trend; comfortably in cash and short
No change from Tuesday; the GMI and GMI-R remain at zero. There were 26 new highs and 310 new lows in my universe of 4,000 stocks on Tuesday. The Worden T2108 indicator is at 40%, far from bottom territory. This is a great time to be short or in cash. Don't let the pundits scare you into the market. There is plenty of time to jump on board once a bottom is in. The key is to wait for the turn rather than to try to anticipate one. A real up-trend last weeks, months and sometimes, years. The up-trend in the QQQQ that began in July, 2006 lasted until November, 2007. One could have entered that market 3 months after the bottom and still have caught the bulk of that rise. There is plenty of time to get back in after a real turn.
GMI: 0;GMI-R: 0; 6th day of QQQQ down-trend; in cash and short
Well, the GMI and GMI-R remain at zero. There were only 50 new highs and 372 new lows in my universe of 4,000 stocks on Tuesday. The Worden T2108 indicator is now at 39%; when it falls below 20% I will start looking for a bottom. In the meantime, I am in cash and short. My account went up on Tuesday as my shorts rose. As long as one trades with the trend of the general market it is possible to profit. This was one of the key rules of all of my favorite gurus (Livermore, Darvas, Weinstein, O'Neil, to name a few.) It took me over 30 years to learn this simple truth. Don't let it take you that long. Simply evaluate your trades the past 2 years in relation to the GMI. I know you will find that the big gains came while going long when the GMI is above 3. However, being long when the GMI is less than 3 brings mainly misery and losses. Keep in mind that there are always a few exceptions to the trend in any market. I prefer to trade with the odds in my favor. About 70-80% of stocks follow the market trend. Why look for the 20% that buck the trend when one can trade with the trend and have an 80% chance of success?
GMI: 0; GMI-R: 0; 5th day of QQQQ down-trend
The GMI and GMI-R remain at zero. There were 78 new highs and 109 new lows in my universe of 4,000 stocks on Monday. Monday was the 5th day of the current QQQQ down-trend. The QQQQ reflects the Nasdaq 100 index, which excludes financial stocks — the primary gainers on Monday.
GMI: 0; GMI-R: 0; GMI performance since April
There were 12 new highs and 328 new lows in my universe of 4,000 stocks on Friday. This number compares with 988 new lows on July 15. So this decline is not nearly as severe as last July's, thus far. Friday was the fourth day of the current new QQQQ short term down-trend. Note that the Worden T2108 indicator is now at 42%, in neutral territory far above the extreme lows (below 20%) reached at prior market bottoms.
This chart shows how the GMI has tracked the QQQQ since April 17. It shows only changes in the GMI. Note that during rises in the QQQQ, the GMI is usually at 4 or above. When the GMI is below 3, I tend to get defensive. Note that the GMI held at zero through most of July. It then rose with the August rally and then fell quickly to 3, to 1 and now, to zero. This ability of the GMI to track the ups and downs of the QQQQ was also evident in prior time periods. While not perfect, I rely on the GMI to guide me when to enter and exit growth stocks, as reflected in the QQQQ (Nasdaq 100 index) ETF. Meanwhile, during the past 2 years, 5 consecutive daily declines in the QQQQ is extremely rare and we should expect a bounce on Monday.
GMI: 0; GMI-R: 0 3rd day of QQQQ down-trend; GMI gets me out again
The General Market Indexes, GMI and GMI-R are both zero for the first time since the August 4 lows. There were only 15 new highs and 264 new lows in my universe of 4,000 stocks on Thursday. Thursday is the 3rd day since I identified the new QQQQ down-trend. The GMI indexes once again got me out of the market at the beginning of a decline. It is now time to be short the QQQQ by being in QID or in cash. I never fight the market trend.
GMI: 1; GMI-R: 1; 2nd day of QQQQ down-trend
The GMI and GMI-R are both 1. There were 53 new highs and 123 new lows in my universe of 4,000 stocks on Wednesday. I do not hold long positions during a QQQQ down-trend. I do not fight the market trend. The odds of success always increase when one trades consistent with the general market trend. Only 37% of the Nasdaq 100 stocks are now above their 30 day average.
GMI: 1; GMI-R: 2; Day one of QQQQ down-trend
The GMI is now 1 (of 6) and the GMI-R is 2 (of 10). I am now a little short and mainly in cash. Tuesday was the first day of the new QQQQ down-trend. There were 76 new highs and 58 new lows in my universe of 4,000 stocks on Tuesday.
GMI: 3; GMI-R: 4; QQQQ on the edge of the cliff; buy QID?
But it is important to wait for the signal and not to jump the gun. I am mainly in cash and will buy some QID if the market falls on Tuesday. QID is an ETF that is designed to rise twice as much as the QQQQ declines–it is an ultra inverse ETF. This has been the most difficult market for me to trade in a long time. Another strategy would be to wait in cash until this market shows real signs of an up-trend.