GMI: 5; GMI-S: 31; The Dow’s dirty little secret;
We keep hearing about how the Dow is at an all-time high. I looked at the price range of the 30 Dow stocks since the bubble top in 2000. Was I surprised to find that only 10 of the 30 stocks (33%) surpassed their 1999/2000 top in 2006: CAT, XOM, BA, AXP, JNJ, MO, C, UTX, MMM and PG. The fact that the Dow 30 average reached an all time high in 2006 is meaningless when 20 of the 30 stocks never got above their 1999/2000 bubble peaks! It all boils down to media hype to get unsuspecting investors to enter this record high market …
Meanwhile the GMI closed on Friday at 5 but the GMI-S fell 19, to 31. With the media talking about another great year, it is interesting that my short term indicators for the Nasdaq 100 stocks and the S&P 600 Small Cap stocks are all negative. Only 18% of the Nasdaq 100 and S&P 500 stocks rose on Friday, along with 23% of the Dow 30 stocks. Just 33% of the Nasdaq 100 stocks have closed above their 30 day averages. Only 18% of the IBD 100 list from 12/18 advanced and only 29% closed higher than they did on 12/18. Friday was the 7th day in the current QQQQ down-trend.
So, rather than try to predict the market, we need to look at what the market is doing now. The Nasdaq 100 stocks clearly are in a short term down-trend. The past leaders, RIMM, AAPL and GOOG, all look tired, and it has been several weeks since they hit new highs. Since the QQQQ hit a new high on 11/24, it has fallen 3.34% and 63% of the Nasdaq 100 stocks have declined. In fact, only 26% of the Nasdaq 100 stocks are up 1% or more since 11/24. With odds like these, I am mainly in cash and ready to accumulate more QID if the QQQQ continues to weaken.
GMI: 5; Happy New Year!
The GMI remains at 5 and the GMI-S is at 50. Only 35% of the Nasdaq 100 stocks rose on Thursday, along with 32% of the S&P 500 stocks and 43% of the Dow 30 stocks. There were 231 new 52 week highs in my universe of 4,000 stocks. Thursday was the 6th day in the current QQQQ down-trend. The Nasdaq 100 stocks and the Dow 30 stocks are clearly on different tracks. It remains to be seen next year which of these indexes will lead the market.
Happy New Year to all of my readers, and I hope to see you back next year. Please see my disclaimers at the bottom of yesterday’s post.
GMI: 5; AAPL; IBD 100 stocks stronger than Nasdaq 100; window dressing?
I guess we all know why AAPL has been weak. See the beauty of technical analysis? The bad news was evident in the stock movement long before it was revealed to the rest of us….
The GMI remains at 5, as the major indexes recovered. 72% of the Nasdaq 100 stocks rose on Wednesday, along with 84% of the S&P 500 stocks and 97% of the Dow 30 stocks. There were 306 new 52 week highs on Wednesday and only 7 new lows in my universe of 4,000 stocks. Still, the QQQQ remains in a downtrend; Wednesday was the 5th day of the current down-trend. The GMI-S is back to 50, but none of my short term indicators for the QQQQ are positive. We will need to see the end of the 4th quarter mutual fund "window dressing," before we know if this rally is for real. For now, I remain cautious and skeptical.
An interesting difference in strength occurred on Wednesday in the Nasdaq 100 stocks and the IBD 100 stock lists that I follow. 90% or more of the IBD 100 stocks rose on Wednesday, compared with 72% the Nasdaq 100 stocks. More of these IBD 100 stocks hit new highs and they were more likely to close above their 30 day averages. It sure looks like the fast growing type of stocks selected for the IBD 100 lists are outperfoming the Nasdaq 100 stocks right now. Growth stock window dressing by the mutual funds who want to include the winners in their end of year portfolio statements? What a great way to look smart, given that the funds fail to disclose the price and date of their acquisitions during the prior quarter….
GMI: 5; 4th day of QQQQ down-trend
The GMI rebounded to 5 on very light volume on Tuesday and will fall back on any market weakness. 64% of the Nasdaq 100 stocks rose, along with 75% of the S&P 500 stocks and 87% of the Dow 30 stocks. There were 167 new 52 week highs in my universe of 4,000 stocks. Still, the QQQQ is in the 4th day of its current down-trend. AAPL and RIMM continued to weaken and only 62% of the IBD 100 stock list from 12/18 advanced. See yesterday’s post below, for my disclaimer.
GMI: 1; GMI-S: 25; IBD 100 stocks and market leaders falter
Well, the GMI declined to 1 on Friday and the GMI-S fell to 25. On Friday, only 14% of the Nasdaq 100 stocks rose, along with 21% of the S&P 500 stocks and none of the Dow 30 stocks. Only 73 stocks in my universe of 4,000 stocks hit a new 52 week high. Only 32% of the Nasdaq 100 stocks closed above their 30 day averages, the lowest percentage since last July. Only 25% of my short term indicators for four indexes are positive; none of the indicators for the Nasdaq 100 stocks are positive, and even the longer term indicators for these indexes has fallen below 100% (GMI-L: 94%) for the first time since October 24.
The IBD 100 stocks are also faltering. Only 38% of the IBD 100 stocks from the list published on 12/18 advanced on Friday and only 2 stocks hit a 52 week high. More telling, only 22% of the stocks from 12/18 closed higher on Friday than they did when that list was published. With one exception, less than 50% of the stocks in the IBD 100 lists in this table closed above their average price of the past 30 days, and there were very few new highs.
Beware the general market when the leaders weaken. When a leader like RIMM announces great earnings (+47%) after the close on Thursday , soars on extended trading, and then opens at its high and closes at its low, it is a sign of impending weakness. On Friday, RIMM opened at 139.97, rose to 140.11 and closed at 130.00, down 3.70 on very heavy above average volume. Then look at AAPL which hasn’t hit a new high in 19 days, and GOOG which has not done so in 21 days. All 3 stocks have now also closed below their 10 day averages. With the QQQQ in its 3rd day of a new down-trend, I am slowly accumulating QID, which rises as the QQQQ falls. Since the Nasdaq 100 peaked on 11/24, that index has fallen -3.85% and 66% of the Nasdaq 100 stocks have declined and only 23% have risen 1% or more. With odds like these, it pays to be in cash, or short the tech/growth stock indexes.
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. 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.
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. 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. 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. 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.
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, 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.
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. 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. 44% 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.