GMI: 5; GMI-R: 9; 18th day of QQQQ short term up-trend; writing covered calls; CPST up 50%
The GMI held at 5 (of 6) and the GMI-R at 9 (of 10). There were 130 new highs and 58 new lows in my universe of 4,000 stocks on Thursday. 63% of the Nasdaq 100 stocks closed above their 30 day averages. It is time for me to accumulate QLD and after Friday, to write new calls on IBD100 stocks. I write calls on growth stocks in up-trends that will not report earnings during the life of the option. I only write near term calls. So I will start writing May calls next week. Among the IBD100 stocks that meet these criteria and have decent call premiums above 4% are: RIMM, MON, MOS, MTL, FLS and GTLS. I may do buy-writes on some of these stocks next week. Meanwhile, I will wait for Saturday when my April calls will expire or be executed and my account will again have an infusion of cash. Making 4% each month is ample return for me. By the way, I am most successful writing covered calls when the QQQQ is in an up-trend, as is the case now. Check out CPST, now up almost 50% since I wrote about it on March 27: Judy can sure pick stocks!
GMI: 5; GMI-R: 9; QQQQ short term up-trend confirmed!; 41 IBD100 new highs
I wrote yesterday that the QQQQ was hovering on support and would either fall off of the cliff or bounce. On Wednesday, for the first time since February 26, I have registered more than 100 new highs in my universe of 4,000 stocks. There were 153 new highs and 50 new lows on Wednesday.
(Click on chart to enlarge.) The last time the GMI was above 4 (it was 6) was on December 26, 2007. The QQQQ successfully tested its up-trend on Wednesday with 94% of the Nasdaq 100 stocks advancing. While very close, the QQQQ never violated its short term up-trend; Wednesday was the 17th day of the up-trend that I identified on March 25 (U-17). Again, I had to learn the lesson not to anticipate a change in trend and kept a lot of my longs through today, although I was hedged and made less money than if I had just stayed 100% long with the up-trend. It is now time for me to accumulate QLD (the Ultra long QQQQ ETF) and other strong IBD 100 stocks. 41 of the 523 stocks on the IBD 100 lists I have monitored the past year hit a new high on Wednesday. They are: BMI,AGU,VMI,POT,SID,MOS,MON,MEE,KSU,
HK,UPL,RRC,ATLS,OIL,ATN. Note how many of these stocks are from the oil, metal and agricultural chemicals industries. These stocks continue to lead this market. Stocks that break out to new highs quickly in an up-trend tend to be among the next rally’s leaders. The key is to buy strength and not to bottom fish. The fish on the bottom tend to eat garbage.
GMI: 3: GMI-R: 4; On the edge and hedged
The GMI and GMI-R each rose one, to 3 and 4, respectively. There were 71 new highs and 153 new lows in my universe of 4,000 stocks on Tuesday. The markets are right on the edge of the cliff. They will either launch a nice bounce from here or fall through support. I am holding hedged positions and waiting for a clear signal from the market. The dollar seems to be holding and gold and silver look like they have broken their short term up-trends. It is time to just wait for options expiration on Friday and for the market to reveal its near term direction.
GMI: 2; GMI-R: 3; going to cash?
The GMI is now at 2 (of 6) and the GMI-R is 3 (of 10). There were 48 new highs and 153 new lows in my universe of 4,000 stocks on Monday. It is almost time to go to cash again. The QQQQ is sitting right on support and if it fails I will go to cash.
GMI: 3; GMI-R: 5; Ready to go to cash; more than 100 new lows
The GMI is now 3 (of 6) and the GMI-R is 5 (of 10). If Monday brings another down day, my indicators will turn bearish. For now, I wait for the change–I have made many mistakes in the past by trying to anticipate a turn. I find it far better to follow my rules and to sell after they signal a turn. There were 20 new highs and 106 new lows in my universe of 4,000 stocks on Friday. Friday was the first day with more than 100 new lows, since March 20. Many of the new lows (16) involved banks–not a good sign for the health of the economy.
GMI: 4; GMI-R: 6; 13th day of QQQQ short term up-trend
The GMI stayed the same at 4, but the GMI-R lost one, to 6, because there were fewer new highs than lows (33/71) in my universe of 4,000 stocks on Thursday. Still, Thursday was the 13th day in the current short term up-trend in the QQQQ. Seven stocks from the IBD 100 lists I follow hit a new high: MTL, BDE, CF, MOS, ATN, NEU and NBL. Next Friday is option expiration when I hope many of my stocks will be called away.
GMI: 4; GMI-R: 7; 14 IBD100 new highs; Sir Silent Knight
The GMI remains at 4, but the GMI-R fell one to 7. There were 61 new highs and 57 new lows in my universe of 4,000 stocks on Wednesday.
There were 14 new highs in the several lists of IBD 100 stocks I have followed over the past year: MOS,COG,CF,SCHN,VIVO,HK,
MT,POT,NBL,KWK,NEU, MTL, OIL, MA. Many of these are oil, steel, and agriculture stocks, and have been leaders for months. The QQQQ is in the 12th day of its short term up-trend. The QQQQ and SPY are still above their 10 week averages, so I am still riding this up-trend. But with so many down days, it is getting harder to stay on the long side. For those of you who use TC2007, my Sir Silent Knight submission containing my propositions for trading was published in the Worden Report this evening. Check it out.
GMI: 4; GMI-R: 8; 11th day of QQQQ up-trend; IBD 100 new highs
The GMI and GMI-R each rose 1. There were only 37 new highs and 32 new lows in my universe of 4,000 stocks on Tuesday. The QQQQ remains in a short term up-trend. Since I identified this up-trend, the QQQQ has advanced 1.3%. The QLD is up 2.9%, and 54% of the Nasdaq 100 stocks have advanced. Five stocks on the IBD 100 lists I monitor hit a new high on Tuesday: GGB, COG, NVO, UPL and KOP. I am holding positions in QLD and in a lot of stocks on which I have written April calls.
GMI: 3; GMI-R: 7; 10th day of QQQQ up-trend
The GMI remains at 3 and the GMI-R at 7. There were 93 new highs and 21 new lows in my universe of 4,000 stocks on Monday. Monday was the 10th day of the QQQQ short term up-trend. The Worden T2108 indicator reached 69% on Monday.
GMI: 3; GMI-R: 7; 9th day of QQQQ short term up-trend; QLD; URBN
The GMI declined one, to 3 (of 6) and the GMI-R to 7 (of 10). I am not worried by this minor decline which was caused by my Successful 10 Day New High indicator’s turning negative. This indicator is very unstable when only a few stocks hit new highs 10 days ago. The QQQQ is now in its 9th day of a short term up-trend. I am making money again! The QQQQ is well above its 10 week average, which in turn is beginning to turn up. When the QQQQ is above its rising 10 week average I have the best chance of profiting from buying IBD 100 type growth stocks hitting new highs.
During the QQQQ’s recent 55 day down-trend, that index (Nasdaq 100) declined about 11% and 72% of its component stocks declined; 31% declined more than 15%. During that same period, 65% of the S&P 500 stocks declined, along with 70% of the Dow 30 stocks. Again, we see that when the QQQQ is in a down-trend, the odds are 2 to 1 that an individual stock will decline, not good odds for going long or holding stocks. On the other hand, going short would have worked very well. During this period of decline, QLD, the Ultra long QQQ ETF, declined about 24% while QID, the Ultra short ETF rose 22%. You can see that if one can identify market trends early, all that one has to do is to trade these two ultra QQQ ETF’s to earn a nice return. So, since the beginning of the new QQQQ up-trend, QQQQ has advanced 2.3% and QLD, 4.4%. By the way, one can buy these ETF’s and even write covered calls on them……
Some of my students are resisting the current up-trend because of all of the bad news about the economy. I reminded them that if one is crossing the street and sees a truck bearing down on them, one does not argue about whether the truck should/will stop or shouldn’t be acting that way. One must get out of the way or hop on board if it is going in the right direction. To wait for the economic news to turn good is to miss much of the move and to increase the odds of buying at a top. The news is usually worst after the market has already turned. As long as I have rules for getting out of my positions if the market returns to a down- trend, then I am content to go long now. The great speculator, Bernard Baruch, bought and sold his positions repeatedly in 1929 until he finally caught the major trend down. With commissions so low and having no tax consequences or wash sale rules while trading within my IRA, I can afford to go in and out of stocks until I catch the primary wave….
So I scanned the market for promising stocks and noticed that URBN, after rising 12x from 2003-2005, fell from grace in 2005 and went into a 3+ year consolidation. Well, URBN appears to be coming back to life. It is back on the IBD 100 list and has broken out to all-time highs on the highest volume since 1994. I’ll tell you a secret.
One can often identify major break-outs by looking at a stock’s monthly chart. On February 25, I wrote "I also like FDG, which this monthly chart indicates has
had a high volume break-out to a new all-time high, breaking its peak
from September 2005." I said then that FDG looked like a long term cup-with-handle bullish pattern. When I wrote that post, FDG had closed at $49.06. It closed on Friday at $57.75. URBN looks to me like it has a similar bullish pattern, as long as it can get above $34. (Click on this monthly chart to enlarge.) I have no idea whether this stock will perform as well as FDG. But now that it is on the IBD 100 list in an up-trending market, I might be tempted to buy it and maybe even sell covered calls on it…..