GMI: 6; GMI-R: 90%; Split market

The GMI remains at 6 and the GMI-R fell one, to 9 (90%) because there were more new lows than highs in my universe of 4,000 stocks on Thursday.  Remember, the GMI tracks the Nasdaq 100 stocks most closely.  We have had a miserable performance in the Dow 30 S&P 500 and SmallCap stocks and still have the GMI remain strong because the Nasdaq 100 techs stocks are outperforming these other stocks.  How long this schizophrenic, split personality of a market can last is anyone’s guess.  For now, the Nasdaq 100 tech stocks remain stronger  and are in the 45th day of their short term up-trend.  So, I retain the QLD  and my covered call positions…….

GMI: 6; GMI-R: 10; 17 IBD100 stocks at new highs

The GMI is at the maximum of 6 and the GMI-R is at 100%.  There were 326 new highs and 85 new lows in  my universe of 4,000 stocks on Wednesday.  83%-93% of the stocks in the Nasdaq 100, S&P500 and Dow 30 indexes advanced. Seventeen of the stocks on the IBD100 list from October 15 hit a new high:  MA,HDB,ATW,CMG,POT,RIO,SYNA,SID,SDA,FMCN,GOOG, AAPL,AIRM,MBT,ABB,TEF, and PAY.  Wednesday was the 44th day of the current QQQQ short term up-trend.  I am mainly in the QLD and holding stocks on which I have written calls.

GMI:6; GMI-R: 10; In QLD and covered calls

The GMI remains at 6 (of 6) and the GMI-R is at 100%.  There were 175 new highs and 91 new lows in my universe of 4,000 stocks on Tuesday.  Tuesday was the 43rd day in the current QQQQ short term up-trend.  I am invested in the QLD and in a number of covered call positions. 

GMI: 6 (of 6); GMI-R: 10 (of 10); Riding the up-trend; IBD 100 winners

The GMI returned to a maximum reading of 6 and the GMI-R is now 100%.  There were 377 new highs and 78 new lows in my universe of 4,000 stocks on Monday.  Monday was the 42nd day in the current QQQQ short term up-trend and I have a large position in the QLD, which mimics the QQQQ.  I am also writing covered calls again on rising IBD 100 stocks.  I pay attention to the movement of the market and ignore the pundits and the news.  When a car is heading towards me I don’t argue with it or complain that it is not supposed to be there.  I must react to what is occurring.  Similarly, I must ride the current market up-trend until it changes.  And we are approaching the time of the year (November to April) when most market gains have occurred…….

One third of the stocks on the IBD 100 list published on October 15 hit a new high on Monday.  Among these, the largest gainers were:  FMCN, FTK, EDU, DSX, DRYS, VIP, CTRP, HDB, CMED, and RIO.  These ten stocks each rose 4% or more on Monday.  Note that while 33% of the IBD100 stocks from October 15 hit a new high, only 8% of the Nasdaq 100 stocks and 7% of the S&P 500 stocks did so.  Who said that stocks play dead after they appear on the IBD100 list???!!

See my disclaimers below.

GMI: 4; GMI-R: 8; GMI performance; Judy’s pick: CYTR

The GMI fell one, to 4, as my 10 Day Successful New High Index turned negative–barely. (Click on Table to enlarge.) Gmi1026  This index measures the number of stocks that hit a new high 10 days ago that closed higher than they did 10 days earlier.  (In a strong market, stocks should rise after hitting new highs.) The GMI-R also fell one, to 80% for the same reason.  If the SPY holds its own on Monday, the Daily SPY Index will turn positive.  The QQQQ is in the 41st day of its short term up-trend and the QQQQ and SPY have closed above their 10 week averages for 7 weeks.  (I typically make money trading growth stocks when the QQQQ is consistently above its 10 week average.) The longer term trends are strong, with the GMI-L now at 94%.  The Worden T2108 indicator is now back to 55%, up from its recent low of 44%….

The GMI continues to do its job of defining the QQQQ trend.  I will trade long  in the market as long as the GMI is greater than 2.  Gmiperf1026 (Click on chart to enlarge.)   I continually have to learn the lesson that if I would just ride the QQQQ up-trend by holding the Pro Shares Ultra-QQQQ ETF, QLD (the QLD aims to rise or fall twice as much as the QQQQ), I can virtually outperform every other strategy I am likely to pursue.  Thus, since the GMI turned 3, on August 31, the QQQQ has risen 10.35% and the QLD by 20.07%.  How many of us have had their portfolio rise more than 20% in this time period, with a single trade?  Since August 31, only 19% of the Nasdaq 100 stocks and 7% of the S&P500 stocks have risen more than 20%, along with 34%of the stocks on the IBD100 list published on August 18.  We would have had to have been pretty lucky to select an entire portfolio of individual stocks that would have outperformed just sitting in the QLD! So many traders are interested in being right (proving their strategy or that they are smart), instead of just making money.  I continually have to resist falling into this trap…..

As I have written before, my friend Judy is an excellent stock picker who thoroughly researches a stock and only buys it after she has fallen in love with its concept. Well, Judy recently told me about a stock in the promising RNAi field.  You can look up this exciting technology yourselves by going to the company’s home page.  Well, I don’t like cheap stocks and I always subject Judy’s picks to my own technical analysis before I buy. Cytr  She buys at much lower prices than I do and amusingly watches others buy at higher levels as brokerage analysts discover her picks. So Judy told me about CYTR, which I did buy around $3.50.  The stock closed Friday at $4.65 up 12.59% for the day and 28.45% for the week!  CYTR has a lot of technical strength, so I thought I would share it with you, not as a recommendation, but to show you some signs that I look before I buy a stock.  (Click on chart to enlarge.) The weekly chart shows that CYTR has now closed above its 30 week average (red line), a critical buy signal for me.  It is also coming off of a nine month base that came after a huge rise. As you know, I like to buy stocks that have already doubled, and CYTR is up 250% in the past year.  And other RNAi stocks (ALNY, ISIS) are strong.  If CYTR’s clinical trials prove successful and the stock becomes a big winner, I will have plenty of time to average up as the stock climbs….


GMI:5; GMI-R: 9; Still mainly in cash

The GMI rose to 5 (of 6) and the GMI-R to 90%.  There were 189 new highs and 165 new lows in my universe of 4,000 stocks.  But my very short term indicators look horrendous with only 13% being positive.  A close of the QQQQ below 52 would be a serious break in support.  If the bounce in the QQQQ from MSFT’s rise does not keep the QQQQ up on Friday, I will become very defensive.  Something about this market really bothers me.  Can techs continue to resist the downward momentum in the other stocks?  Or will another reduction in interest rates by the Fed next week bring them all back?  I still think the best place to be right now is mainly in cash. 

GMI: 4; GMI-R: 7; mainly in cash

The GMI fell to 4 (of 6) and the GMI-R to 70%.  There were 98 new highs and 190 new lows in my universe of 4,000 stocks on Wednesday. Gmi1024  The QQQQ trend remains up in the face of weakness in the DIA, SPY and IJR.  Wednesday was the 39th day in the current QQQQ short term up-trend.  However, only 48% of the Nasdaq 100 stocks closed above their 30 day averages and only 32% of them rose on Wednesday.  With the GMI at 4 and the market so split, I am content to remain mainly in cash for a few more days.


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.

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