3rd day of $QQQ short term up-trend

GMI

5/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

55%

I am very tired today after an all-day meeting. Did not watch the market.

GMI performance since 2006; GMI flashes a Buy; GLB $RCPT takes off; GLB: $EW

GMI

4/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

43%

In response to a comment left by a reader who questioned the value of the GMI, I am posting a visual of how the QQQ behaved since 2006 while the GMI was on a Sell (red) or Buy (green) signal.  You will see that the GMI got me out of the major declines.  The cost was that sometimes the GMI gave a false signal and got me out at the end of a short decline.  It then got me back in. I think this is a fine trade-off to make in order to avoid the pain of a serious decline. I am a chicken when it comes to trading. (Click on chart to enlarge.)GMIperf10272014The GMI is now back to a Buy signal as of Monday’s close. Two consecutive closes above 3 yield a Buy signal. Monday was also the second day of the new QQQ short term up-trend.

On September 10, I wrote that RCPT had had a green line break-out (GLB).  The stock exploded up after hours on Monday and is trading up about 25%.  Check it out on Tuesday. After the close RCPT announced good results on their colitis treatment. This is why technical analysis has value.  Somebody apparently anticipated this news and bought into the company huge over a month ago! Their buying was evident in the chart. Here is its hourly chart after Monday’s close. Expect RCPT to open way up on Tuesday.

RCPThourly10272014Speaking of GLB stocks, EW had a huge break-out last week. Check out this daily chart of EW.

EWdaily10272014

 

 

 

 

 

 

$QQQ short term trend turns up, retakes 30 week average; GLB stocks shine: $AAPL,$BABY,$AGIO,$RGLS,$REGN

GMI

5/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

44%

The snap-back in my indicators was quick and extraordinary. A new QQQ short term up-trend has begun. However, it has to last 5 days for me to heavily accumulate TQQQ,  the 3X leveraged bullish QQQ ETF.  I did take a small position in TQQQ at the end of the day on Friday. Buying right after a technical buy signal is actually low risk to me, because if the technical buy signal fails, I can quickly sell out with a relatively small loss. The GMI is above 3, and one more day there and the GMI will flash a Buy signal. Most important, the QQQ is now back above its critical 30 week average (red line), indicating that the Stage 2 advance is still intact. The SPY and DIA also retook their 30 week averages last week.

QQQwkly10242014

We are entering what is typically the strongest period for the market, the fourth quarter.  (“Buy stocks on Halloween!”) I expect the strong popular stocks to be bought  by the mutual funds so their end-of-year reports will include the winners in their portfolios. In this way the fund managers look smart for owning them, even though they may have just purchased them at high prices. It’s all about looking good so potential customers will buy their funds and pay their exorbitant management fees. (Why buy mutual funds when one can buy  index ETFs, with their cheaper management fees?)….

Speaking of stocks that institutions will want to own at year’s end, AAPL has regained its critical 10 week average.  I have repeatedly found it  profitable to own AAPL as long as it stayed above its rising 10 week average. AAPL has again broken above its green line and is well above its 10 week average (blue dotted line). Stocks can sometimes consolidate after a green line break-out (GLB), especially if the market becomes weak. The fact that AAPL came through the recent market turbulence at an all-time high shows impressive relative strength and bodes well for the end of year rally and accompanying mutual fund window dressing.

WklyAAPL10242014

Another recent GLB that I have written about is BABY.  BABY is showing a lot of strength, having plodded higher amidst the recent market turmoil. Notice how it is hugging its rising 10 week average (blue dotted line).

BABY10242014wklyAGIO is another biotech with a recent GLB, that is showing considerable strength.

AGIO10242014wkly

A reader wrote  to thank me for posting Judy’s first comment to me about RGLS. As my long time readers know, Judy is an incredible stock picker and my stock buddy. Judy reads technical reports voraciously and uncovers gems , often bio-techs, that are working on promising drugs or inventions. She then buys a little and holds them for a long time, if she believes they have a great concept. Unfortunately, I do not have the confidence to hold such stocks for a long time through thick and thin. I have lived through too many bear market declines where everything gets decimated. Anyway, Judy talked to me again and I posted a second time  about the prospects for RGLS in Decmber, 2013. At least one reader apparently bought it. Look at what RGLS did last week. Note the GLB last week and its huge volume! Is this the start of something great? (Remember though, clinical trials are risky.)

RGLS10242014wklyAnother stock that Judy has been urging me to buy is REGN, another recent GLB, which Judy has talked about for a long time.  REGN is running clinical trials for several new drugs, including a potential new blockbuster drug for treating high cholesterol. This weekly chart shows a GLB, followed by a multi-week consolidation.

REGNwkly10242014

Here is the weekly GMI table. Note that while the QQQ is back above its 10 week average, SPY is not. The large cap industrial stocks are lagging this rebound. This market is not out of the woods yet.

GMI10242014

20th day of $QQQ short term down-trend

GMI

3/6

GMI-2

5/8

What is the GMI?
 

WORDEN T2108

39%

The QQQ short term trend could turn up on Friday.  More important, QQQ and SPY are now back above their 30 week averages.

Indexes meet resistance; 19th day of $QQQ short term down-trend

GMI

2/6

GMI-2

5/8

What is the GMI?
 

WORDEN T2108

33%

The SPY and QQQ both hit a wall at their 30 day averages on Wednesday.  The key for me is whether they can close above this key average or head back down.  Check out this daily chart of the QQQ.  Note how the QQQ could not break above its 30 day average (red line). If it closes Thursday above this line, I would become more confident that the short term trend is reversing up.

QQQdaily10222014

IBD: correction over; 18th day of $QQQ short term down-trend

GMI

2/6

GMI-2

5/8

What is the GMI?
 

WORDEN T2108

37%

IBD says Tuesday was a follow through day and marked the end of the correction. I will wait for the GMI to turn positive before I re-enter the market. I still do not trust this rebound yet.

17th day of $QQQ short term down-trend; SPY still a broken up-trend

GMI

0/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

27%

Rebound continues, but for how long? Look at this daily chart of the SPY. SPY is way below the long term trend line (blue line) that it recently broke. We now have a lower bottom.  Will we get a lower top?  Stay tuned…….

DailySPY10202014

16th day of $QQQ short term down-trend; Bottom or dead cat bounce? Keeping an eye on the $BABY

GMI

0/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

21%

The sharp rise on Friday came from very over-sold levels. Given that the market often is strong towards the end of the year, I would not be surprised to see a rise that takes us through mid-January. But with people being worried by  Ebola and the Fed’s cessation of QE , this market could resume its decline at anytime. I therefore took a very small amount of my university pension out of the market on Friday.  If the market rises to likely resistance levels, I will take more of my pension out of mutual funds, just in case. With the GMI at “0” I am very cautious.  I am already mainly in cash  in my trading accounts.  Things are just too volatile for everything but my most speculative trading funds. I have repeatedly written that I trade like a chicken. If I am wrong, and the GMI returns to a Buy signal, I can always go back in……

As this weekly chart of the SPY shows, a major up-trend (blue line) support line that lasted for more than one year has been broken. Also ominous is the fact that the critical 30 week average (red line) has been penetrated and there are large red spikes indicating high volume selling by institutions. I would not be surprised to see the current rebound  touch the 30 week average again, now around 193.  If that average curves down, that will be my signal to begin taking all of my university pension out of the market.  (I did that in 2000 and 2008.) That would signal the possible beginning of a Weinstein Stage 4 down-trend.

SPYwklytrend

Look what has happened when the 30 week average curved down. (Ignore the red arrows, left over from a Sell in May analysis.)

SPYwkly2008

If I think a Stage 4 down-trend is imminent, I will sleep soundly with most of my money on the sidelines until the GMI signals a BUY and the market enters a new confirmed Stage 2 up-trend. (I might also buy some SPY before those events occur, if the Worden T2108 gets down to single digits, where most market wash-outs since 1987  have ended.) The T2108  rebounded to 21% on Friday, after reaching a recent low of 13%. Dramatic market declines typically end below the green line on the chart, which is drawn at the 10% level. (Note we are not there yet!)…..

WklyT210810172014

You know I do not like to take a new long position on anything during a market down-trend.  But when a stock keeps hitting new all-time highs and coming up on my scans it signifies amazing relative strength and I add it to my watch list for close monitoring.  I don’t know why BABY is so strong but someone else apparently does. Check out this weekly chart of BABY, which had a successful green line break-out to an all-time high 13 weeks ago.  BABY’s  crawling higher just  showed up in my Darvas scan, which looks for stocks that have characteristics that I think Nicolas Darvas used to like. Of course, Darvas type stocks only out-performed in rising markets and BABY could stage a temper tantrum at anytime……

BABY10192014

 

GMI10172014

15th day of $QQQ short term down-trend; skeptical of rally

GMI

0/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

20%

The Worden T2108 has held and  is now back to 20%. It is very important to study carefully the quality of the next rebound.  I suspect the rebound will not break the current down-trend and that the decline will resume with a vengeance.  If the major indicators rebound to their 30 week averages, I will transfer some of my university pension money out of mutual funds and put it in money market funds. It will take a lot for me to trust any market rally. This decline is still relatively small and I have not seen enough panic to suggest a sturdy bottom.

14th day of $QQQ short term down-trend; the current mini-decline

GMI

0/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

17%

Isn’t it nice to be in cash on the sidelines during this decline?  The GMI issued its Sell signal on 9/26.  All of the pundits are rushing to explain the decline by things happening now.  However, the GMI picked up on a decline long before these events.  One must follow the market, not the news. The GMI will likely flash a Buy signal long before the news turns positive.  Remember how most pundits were skeptical of the market’s rise that began in 2009!

The market will retest Wednesday’s lows and I suspect even if they hold, the market will eventually go lower.  This still mini-decline could turn out to be the prologue to a major bear market. It takes a while for the 30 week average to curve down. Time will tell. Meanwhile, take a look at the weekly chart of the SPY. Note how small the current decline appears compared with the decline in 2011.

SPYweekly10152014

 



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