According to IBD, the market is still in a correction. Monday’s gains came on lower volume than on Friday. The QQQ short term trend will turn up on Tuesday if the QQQ stays level or positive today. The GMI-2, which is more sentivie to short term trends, is 3, of 6. In fact, the GMI could turn to 4 with an up day on Tuesday. The T2108 indicator, at 42%, is well into neutral territory. I am content to wait for the GMI to rise to 4 before I tiptoe back into the market on the long side. In the meantime I will scan the new 52 week high list for potential leaders to put on a watch list. Among Tuesday’s winners are: SXL,CELG,QCOR,DLTR,CEPH,ROST,LO. All of these have recent quarterly EPS increases of 19% or more and ROE of at least 17%.No tags for this post.
The QQQ short term down-trend reached its 6th day on Friday. GMI remains at zero, but shorter term GMI2 shows a little strength, at 2. Meanwhile, the weekly GMMA chart of the QQQ shows a level, basing? pattern, for now. Click on chart to enlarge. I remain in cash until the GMI rises above 3.
With the GMI and GMI-2 both at zero, it is a good time to be in cash. Note that the T2108, at 15%, is getting back into oversold territory. It bottomed in August at 7%. Both the DIA and SPY have now closed at their August lows. The QQQ is still above its August low. With AAPL finally breaking down below its 10 week average, the bear may be almost through devouring this market. But we don’t predict, we follow the trend. And the long and short term trends are now down. WE sit back and wait to reenter this market at cheaper levels, after we get a buy signal. Nevertheless, in spite of the media hysteria about the current weak market, this monthly chart of the S&P500 Index shows that we still have had only a mild decline thus far. We remain above the 2010 consolidation lows. Click on chart to enlarge.
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With the GMI and GMI-2 each at zero, I have gone to cash. However, I am 30% invested in mutual funds in my university pension because of trading limits. The only glimmer of bullish hope that I see is the fact that the Investor’s Intelligence poll of investment advisers still shows more bulls than bears, a very rare occurrence. The market usually fools the majority of participants. Everyone is so darn bearish. This market may be getting ready for a huge bottom to this decline, which is typical of the month of October. The “Sell in May” crowd usually returns around Halloween.
If you take a look at these weekly GMMA charts of the QQQ and SPY, you can see that the shorter term averages (red) are crossing below the longer term averages (blue). The QQQ, which does not contain financial stocks, looks a little stronger than the SPY. Click on charts to enlarge.
For the moment, the present declines do not look that bad compared with the decline in 2008. The SPY looks like we could get a replay of the 2008 rout, but the averages could turn around as they did in 2010. Better to wait on the sidelines for a significant sign of an up-trend. The QQQ just entered a new short term down-trend.No tags for this post.