QQQ short term down-trend completes 5th day; short QQQ and GLD or in cash; AAPL Fibonacci targets

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The QQQ short term down-trend reached its 5th day on Friday and I took a small position in QID, the leveraged inverse ETF that rises as the QQQ (Nasdaq 100) Index declines.   If the decline continues I will add more QID. I have learned that it is most anxiety producing to bet on a   trend reversal because, by definition, it differs from the most recent market trend which I have become accustomed to.   However, I will trust my instrument, the GMI, and stay short or in cash in my trading accounts until the next buy signal. My very conservative university pension remains invested in mutual funds, as the longer term trend of the market remains up.

In addition, AAPL, the market leader,   reports earnings on Tuesday and the stock’s reaction will tell me a lot about the market’s inclinations. If good earnings are met with a decline or flat response, then I will expect more weakness in the market.   I have learned that I can make money trading AAPL by being long only when it is above its 10 week average.   AAPL closed Friday at $572.98, just above its 10 week average of $570.79.   A close below that level after Tuesday would tell me to be out of the stock, assuming I were still in it. (I typically sell a growth stock if it looks like it will close below its 30 day average and AAPL has closed 2 days below its critical 30 day average.) See my discussion of Fibonacci retracement targets for AAPL at the end of this post.

The GMI is at 3 (of 6) and the more sensitive GMI2 is at 2.   The GMI sell signal from 4/11 remains in effect. The QQQ has now closed below its important 10 week average.   The SPY is weaker and has completed its second week below its 10 week average.   The T2108 is at 39%, in neutral territory. Only 28% of the Nasdaq 100 stocks closed with their MACD above its signal line, indicating little short term strength. I remain short   GLD by holding put options.   I could also have bought the inverse leveraged GLD ETF, DZZ.

TC2000 has a tool for drawing   Fibonacci levels. The daily chart below of AAPL shows the Fibonacci retracement levels of the advance that began in December. Stocks sometimes find support at these numbers (23.6%, 38.2%, 50% and 61.8%) which indicate the percentage of the preceding rise that the stock gives back. AAPL recently found support at the first level of 23.6%, but this level did not hold.   The next projected levels of support, in order, are approximately 547, 518 and 488. Like with charts, these numbers sometimes work because people think they do and buy at these levels. So, if AAPL breaks below its 10 week average this week, the next support may come in around $547 per share. Click on chart to enlarge.

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GMI = 2; 3rd day of QQQ short term down-tend; Sell in May and Go Away?

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I will be more confident of this new QQQ short term down-trend if it can last two more days.   I remain in cash and short gold in my trading accounts and invested long in mutual funds in my university pension. After earnings are out, we approach the dreaded, “Sell in May and Go Away,” period. This monthly chart of the SPY suggests to me that since 2005, in periods when the market had been rising for months leading up to May (like the present),   with the exception of   the strong rebound from the decline of 2008, the market has stumbled in the period after May. What do you see? Click on chart to enlarge.

 

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GMI rebounds to 3; QQQ short term trend still down, longer term trend remains up

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With Tuesday’s rebound the GMI rose 2, to 3 (of 6).   IBD still considers the market to be in a correction, absent a large volume increase (follow-through day) in one of the averages. Tuesday was the second day of the new QQQ short term down-trend.   I have observed that if a new short term trend can persist for five days, there is a high probability that it will continue for at least several weeks.   If the QQQ should rise on Wednesday, the short term trend will turn up again. Trend followers resist predicting the trend, we call the trend after it has defined itself.   The GMI sell signal issued on 4/11 is still in effect, as this daily chart of the QQQ shows. Click on chart to enlarge.

The QQQ remains in a strong Stage 2 up-trend.   My longer term university money remains invested in mutual funds. Stage analysis uses the weekly chart:

If you cannot see the charts, please go to the original site URL.

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QQQ short term up-trend ends, down-turn begins

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After 75 days,   the QQQ short term up-trend   ended on Monday.   The GMI is now at 1 (of 6).   I remain mainly in cash with a short position in GLD. AAPL caused much of the decline in the indexes, closing below its 30 day average for the first time since December 19, 2011.   It remains to be seen where the correction in AAPL will end.

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Thoughts about the Worden DC Seminar; GMI: 2; In cash and short GLD

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I had a wonderful time meeting many of you and sharing some of my experiences trading the markets.   There are a number of loose ends from my presentation that I wanted to clear up today:

1. Worden will produce the videos of my sessions and of the entire seminar series.   Call:   1-800-776-4940 or email: support@worden.com.   It will take at least 30 days before they have completed editing my sessions.

2. A number of people asked me about selling covered calls.   I think writing covered calls is a great strategy for us boomers, once we have a systematic way for selecting appropriate stocks. I think that the best simple sources for learning this technique are the books and videos of Allan Ellman.   The books I like have been added to the books at the lower right of this page.   You can check him out at his site:   thebluecollarinvestor.com.   He has a simple book written a few years ago, Cashing in on Covered Calls, which is a terrific primer.   His latest book is much larger and comprehensive.   Once you understand the strategy, look at the chapter on covered calls in Lee Lowell’s book. I am teaching myself to write the new weekly covered calls on the SPY and QQQ.

3. Some people were confused about how I use the GMI signals.   The present market situation provides a good example.   The QQQ weekly chart is in a Stage 2 up-trend.   As long as the weekly pattern remains in a Stage 2, I keep my university pension invested in mutual funds.   There are limits to how often I can trade the mutual funds. I only sell my pension funds when the 30 week average curves down.   I am short or in cash with my more short term IRA and speculative money, however, because the GMI gave me a sell signal last week (2 consecutive days below 3). Other indicators I monitor to guide my short term trading are the patterns of the 30 day averages of the SPY, DIA and QQQ, their daily 10.4.4 stochastics readings, the WordenT2108 Indicator and IBD’s market pulse (currently “in a correction.”).

Remember what I said at the seminar, however,   Every person must design a systematic set of entry and exit rules that fit with his/her tolerance for risk.   Without such a set of rules, it is preferable to forego individual stocks and to buy some index ETF’s like SPY or QQQ and to just ride the major market trend. If you want to teach yourself some safe strategies, read my blog daily and the books to the lower right of this page.   I will continue to share my experiences here, and please feel free to post a comment for everyone or to send me an email………

The GMI remains at 2 (click on table to enlarge). The SPY and DIA have now closed below their 10 week averages, a sign of weakness.   The QQQ is showing more strength and has closed above its 10 week average for 15 weeks. However, another down day in the QQQ could send the GMI to 1 and begin a new short term down-trend in the QQQ.   The QQQ short term up-trend reached 75 days on Friday.   It is rare for QQQ short term up-trends to last much longer than this. Only 12% of the Nasdaq 100 stocks closed with their MACD above their signal lines, a sign of short term weakness.   The Worden T2108, at 28% is still in neutral territory.   The only real positive sign of technical strength is that   the 10.4 daily stochastics for the QQQ is nearing oversold levels, at around 22. With a lot of key earnings to be released this week, volatility will be high.   This is a good time for me to be safely on the sidelines in my trading accounts.

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