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Table of long and inverse index ETFs; My AAII workshop in February; Trend still down–dead cat bounce?

GMI

0/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

14%

A number of you have asked me about  inverse index ETFs so you could short the market. Below is a table that my co-instructor, David, built for the undergraduates enrolled in our stock market class. The table includes leveraged ETFs, which attempt to move 2-3 times the underlying index. Leveraged ETFs can be dangerous. It is important to read up on how they work and to monitor holdings quite carefully. The table also contains some ETFs that trade long or short with the price of gold. There is also a whole new class of light leveraged ETFs, not in the table,  which you can learn about here.

DavidETFmatrixI will  be presenting  a 3 hour workshop for the AAII  DC Metro Chapter in Virginia in February. It is open to the public. While there is a small charge, the money raised goes to cover the expenses for the venue and to support AAII and my substance abuse research center at the university, both good causes. My co-instructor, David, and I take no compensation for the presentation. A notice about the workshop appears here. For those of you who want to learn more about my approach and to ask questions, here is our chance to meet. Just click here to learn more or go to:  http://www.aaiidcmetro.com/

The GMI remains at 0 (of 6) but the very sensitive GMI-2 has climbed to 3 (of 6). If the market indexes remain in a down-trend and they become short term over bought and begin to weaken, I might buy a leveraged inverse index ETF.  It is important to always trade with the market’s trend. The T2108 is now at 14, and no, I did not have the courage (foolishness?) to buy a bullish index ETF when T2108 was below 10!

GMI01222016

If the QQQ (103.77) could close back above all of these 12 weekly exponential moving averages, around 108.40, I might suspect a new up-trend. For now, I am looking for the proverbial “dead cat bounce.”

GMMAQQQ01222016The SPY looks even weaker than QQQ and remains in a BWR down-trend:

GMMASPY01222016

$SPY in BWR decline, like $EEM

GMI

0/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

8%

The weekly chart of the SPY shows all shorter term averages (red) declining below the longer term averages (blue) with a white space in between, hence BWR. This is a significant down-trend. The closing prices (dotted line) are leading all of the averages down.

SPY01212016Not as bad as the emerging markets (EEM), yet:

EEM

Over 1600 new lows

GMI

0/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

8%

Markets bounced on Thursday. Let’s see if this bottom will hold.

11th day of $QQQ short term down-trend; in cash

GMI

0/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

9%

Safely 100% in cash…………

Extremely oversold readings; Two stocks fighting the down-trend: $SCAI and $SLP; Media comparisons to 2008 decline; $AAPL head and shoulders warning comes true

GMI

0/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

9%

The T2108 closed at 9, but reached as low as around 6 intraday on Friday. T2108 is a great pendulum of the market. It is in single digits only near market lows. While it did reach around 1% in the 1987 and 2008 crashes,  most large declines have ended with T2108 around 6-7%. As I have written before, when the T2108 has been in single digits it has turned out to be a good time for me to buy an index ETF or mutual fund. Unfortunately I am always afraid to do it because the market and the news seem so bad at that time. Will this time be different????

I love weak markets because the new high list is very small and it is easier to uncover the few stocks bucking the bearish trend. Sometimes these stocks can lead when the market trend turns up. So I make a list of these stocks and watch them as things develop. Two stocks showing amazing strength and trading near their all-time highs are SCAI and SLP. Both appear to have recent good earnings and are worthy of my attention. But given the current market down-trend, I am reluctant to trade them. The bear could devour them at anytime. So for now, I will watch them from the sidelines. Note their RWB up-trends and the unusual high volume last week when they rose. Both are above their recent green line tops, indicating they are near their all-time highs. The dotted line represents the closing price and note for each it is leading all of the 12 red and blue averages higher.

SCAI SLPBy the way, the news media are comparing the current market decline to the vicious one from 2008. Take a look at this monthly chart of the SPY. A picture is worth a 1,000 words, maybe a million words from a stock market media pundit! (It’s too early to say this is like 2008.)

SPYmonthly

I thought you might like to revisit the post I wrote on November 10, suggesting that AAPL, at $116.77,  was forming a head and shoulders top.

WishingwealthAAPLheadansshouldersThis weekly chart shows what happened to AAPL after my November post.

AAPL01182016AAPL is now at $97.13. Sometimes my prognostications work out! But will it fall to my target, around $80?

And here is the GMI, still 0 (of 6) and on a Sell signal since mid-December.

GMI01152016

 

 

9th day of $QQQ short term down-trend; in search of a bottom

GMI

0/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

11%

For a market to bottom, enough people have to become confident enough to hold stocks during a prolonged new rise. Most bottoms have to have a successful retest of the lows to help build that confidence. A lot of people missed getting out before this recent carnage. They will likely sell as the market bounces and we may then get more of a decline.  In my lifetime  bear markets have lasted about 10 months.  We are likely in the early stages of this decline. But no one knows for sure.  Bottoms are declared well after they are in place.

8th day of $QQQ short term down-trend

GMI

0/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

10%

The GMI gave a Sell signal on December 10.  There were over 1,000 52 week lows on Wednesday. The T2108 is at 10%. Significant bottoms have occurred when the T2108 was in single digits. Stay tuned……

7th day of $QQQ short term down-trend; $GS in BWR down-trend too

GMI

0/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

14%

I remain almost entirely in cash. Waiting to see where this bounce runs into resistance. Even GS is in a BWR down-trend! I wonder if they are heavily invested in China or oil or just plain equities?

GS

Market very oversold; $GLD to decline? $AAPL in BWR down-trend

GMI

0/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

15%

The markets are very short term oversold. There were over 900 new lows on Monday, the most since August 24, the day of the flash crash. About 75% of the Nasdaq 100 stocks have a Stochastics below 20 and almost as many reached their lower 15.2 daily Bollinger Band. This is a very oversold market. With earnings season upon us, we are due for a relief rally. I will seek to short the major indexes when this rally loses steam, if one occurs. As this daily chart shows, the QQQ closed at 104.33 on Monday. Possible areas of resistance are around 109 and 112.

QQQ01112016I suspect the flight to gold, for safety, may be over for now. GLD is backing down from its upper 15.2 daily Bollinger Band where it was quite overbought.

GLD01112016GLD remains in a multi-year BWR down-trend. See my prior post for an explanation of the BWR pattern.

GLDGMMA01112016

By the way, AAPL has now formed a BWR down-trend. I wouldn’t go out on a limb for it…..

AAPLGMMA01112016

 

All World Stock Markets entering BWR Down-trends! I am in cash and monitoring T2108

GMI

0/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

15%

I assume that most  U.S. part-time traders, like me, tend to monitor  closely the U.S. stock indexes. I have been writing that the major indexes I follow (DIA, QQQ, SPY and NYSE) appear to be entering major down-trends, showing the RWB pattern I invented by modifying GMMA weekly charts. My charts have 12 exponential weekly moving averages, a band of 6 shorter averages plotted in red, and a band of six longer term averages in blue. A strong up-trend is evident when all of the red lines are well above the rising blue lines such that there is a white band separating them. I call this an RWB pattern, Red/White/Blue. A significant down-trend is evident when the reverse is true, giving a BWR pattern. I also include in my charts a gray dotted line that shows the weekly close of the index being plotted. This more recent price line (gray dotted line) tends to lead the averages.

The past few weeks I have been showing you that the U.S. indexes I follow have been transitioning from a multi-year strong RWB up-trend into a BWR down-trend. This is clearly evident in this weekly chart of the SPY. The NYSE index, composed of large multi-national stocks, is in a fully formed BWR down-trend.

01082016SPYgmma

NYSE

All of the other U.S. indexes I follow have  patterns  similar to the SPY, although the QQQ, shown below, composed of nonfinancial tech stocks,  is  less far along than the others in forming a BWR pattern. It is clear from these charts that these markets have come out of a  multi-year RWB up-trend. In an RWB the gray dotted line is largely above the red averages, showing that the direction is headed up. In a BWR down-trend the reverse is true. Note that the gray dotted lines in the above two charts are now below all 12 averages, signalling a deepening down-trend. One  sign of a new up-trend would be if the gray dotted line were to close back above all 12 averages, although I prefer to see the full RWB pattern develop before I trade big with a changed trend. My primary conclusion is that the RWB pattern (bull advance) of the lest few years in the U.S. markets  is clearly over and no one  knows when it will come back. Is it too late to sell?  Sorry, no one knows.

01082016QQQgmma

The above discussion would have been my routine analysis of the markets. But given the current market turmoil and the primary cause being ascribed to the market in China, I thought I would look at the chart patterns of markets world-wide. I examined 37 ETFs representing markets across the world. With the exceptions of the markets in Belgium and Ireland, all markets I examined were in well developed BWR down-trends!  Can we legitimately blame all of this on China? I will post just a few representative examples below.

Thailand:

ThailandAustralia:

Australia

Russia:

RussiaSouth Africa:

SouthAfricaUnited Kingdom:

UnitedKingdomGermany:

GermanyHongKong:

HongKongFrance:

FranceChile:

ChileIndia:

IndiaEgypt:

SwedenSweden:

SwedenChina 25:

ChinaI am not an expert on world markets. Maybe one of you can comment on these relationships. Is it really possible that all world markets are going down because of the China market? I suspect not. There is probably another factor driving all of these markets? Deflating commodities?

Did similar relationships occur in 2008? Not all of these ETFs existed in 2008. When I looked back at the patterns across a few countries in 2008 I again saw tremendous similarity across the markets. That does not necessarily mean that we are entering  another crisis like the one  in 2008? Nevertheless, the possible implications of these charts concern me more than a little……..

My GMI remains on a Sell signal with all indicators negative. Where is the bottom? A major past signal of  panic-induced market bottoms that I have noticed is when the Worden T2108 indicator, now 15,  falls into single digits. The monthly chart below shows that T2108 reached 1 at the 2008 bottom,  7 in 2011 and around 6 last August. I post T2108 each day, to the right of this page.

If T2108 goes below 10, I hope to hold my nose and move some cash into an index ETF (SPY or QQQ) or an index mutual fund. I will then only average up if the market continues to recover. I make this promise each time we have a large decline but seldom keep it! At the bottom the market always looks too scary to buy…..

GMI01082016T2108revised

 

 



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