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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

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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

 

 

Market very oversold–bounce coming?

GMI

0/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

17%

With the put/call ratio at 1.23 and with many stocks at oversold levels, we will likely get a bounce soon. But the major U.S. market indexes remain in  Stage IV down-trends. I might consider buying an inverse index ETF or some puts to profit from a further decline, but only after the market bounces and hits resistance. It is nice to be in cash on the sidelines.

By the way, this weekly chart of the Shanghai Composite Index shows it to have now begun a Stage IV down-trend. The best is yet to come….

SSEC

$SPY and $DIA are in Stage IV down-trends, $QQQ is next? 100% in cash; $GLD–Stage IV too

GMI

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GMI-2

0/8

What is the GMI?
 

WORDEN T2108

24%

I have told you before that I stayed safely out of the market during the 2000-2002 and 2008 market declines. I did so because I determined that the major indexes had entered Weinstein Stage IV down-trends. The SPY and DIA are now in Stage IV down-trends. Both are below their declining 30 week moving averages. The QQQ is also now below its 30 week average, although the average itself is now flat.  I am therefore in cash in all of my accounts, including my university pension. I actually have been in cash for some time, as I have written. It is impossible to know how far a down-trend will go. The best strategy for me is to wait for definite signs of a Stage II up-trend before I reenter the market on the long side. I fear we are much closer to the beginning of a major decline than to the end….

By the way, this weekly chart of GLD shows that in spite of its recent bounce, gold remains in a multi-year Stage IV down-trend too. (Red line is 30 week moving average.) Gold may not be a safe haven either.

GLDGMMA

GMI goes to 0 (out of 6); $AAPL very sick, along with $CMG; Cramer has a $FIT

GMI

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GMI-2

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What is the GMI?
 

WORDEN T2108

27%

Tuesday was the second day of the new QQQ short term down-trend and the GMI has hit 0………..

With the apparent completion of a head and shoulders top pattern for AAPL, a decline to around $80 is likely. AAPL has also now begun a BWR down-trend with all of the shorter averages (red) now declining below the falling longer term averages (blue). For me, AAPL is a short or at least a stock to avoid. It is about to join the ranks of CMG as a broken stock, at least for now. I only buy stocks in RWB up-trends. Note the difference in the AAPL pattern, before versus after the summer began.

AAPLGMMA

And here is CMG.

GMMACMGAnd yet the CNBC pundits tonight were debating whether one should hold AAPL. A picture is worth a 1000 words. There is no reason for me to hold a stock in a BWR down-trend other than masochism or financial suicide.

And before the open on Tuesday, Jim Cramer was talking up the virtues of FIT. The stock fell more than 18% during the day. Beware the media pundits!!!!!

FIT

 

New $QQQ short term down-trend; skeptical of any rebound

GMI

1/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

24%

IBD switches back to calling the market in a correction. The GMI, however, has remained on a steady Sell signal since December 10 and was not fooled by the end of year volatility. Monday’s action created a huge gap down with the index trading below its lower Bollinger Band. The market closed near its high for the day and the retracement has likely begun. I suspect the market may move up and fill the gap, but I remain skeptical of any near term rally. A lot of technical damage has been done to this market and the market leaders have been wounded. It felt great to watch this decline from the sidelines, in cash.

QQQ01042016

New $QQQ short term up-trend in jeopardy; Market indexes look weak; So do $AAPL,$NKE, $DIS

GMI

2/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

32%

The GMI remains on a Sell signal even as my short term trend indicator for the QQQ is in the second day (U-2) of an up-trend. A down day on Monday could change the short term trend for the QQQ back to down. The QQQ and SPY have now closed below their critical 10 week averages for 4 weeks.

GMI12312015The GMMA charts which I have adapted clearly show the patterns of the major market indexes. When the six shorter term (red) averages are above the rising longer term averages (blue) with a white space between them we have a strong RWB up-trend. When the reverse is true we have a  BWR down-trend.

It is clear that the Dow Transportation average is in a BWR down-trend. Note the strong RWB up-trend lasted for several years, through early 2015. We now have an ominous pattern for those who follow the Dow theory of the market.

GMMADJ20The Dow 30 index is no longer in an RWB up-trend, but a BWR pattern is not in place.

DJ30GMMABut the NYSE index is definitely in a BWR down-trend.

GMMANYSE

Perhaps the NYSE stocks are weighted down more by energy related stocks or multi-nationals. Look at the energy ETF, XLE. It is in a confirmed BWR down-trend. No one but a gambler would try to pick a bottom here. Look how clearly one can see in 2014 the change in trend from an RWB to a BWR pattern. I would never hold a long position in a stock or ETF in a BWR down-trend.

GMMAXLE

The SPY looks like the Dow 30 and has not transitioned into a BWR down-trend yet. But it does show the end of a multi-year BWR up-trend. How much easier (and more profitable) it is  to hold stocks when the indexes are in strong RWB up-trends!

GMMASPY1231The QQQ bearly? remains in an  RWB up-trend.

GMMAQQQWhat does all of the above mean to me?  We have a split market, with  energy related stocks and multi-nationals weak but with tech stocks acting stronger. However, note that the QQQ failed to break through resistance last week, as this daily chart shows. (Click on to enlarge.)

QQQ12312015dailyThe QQQ, at 111.86, is now heading back down towards support, around 109. Will it hold, fail and re-test the lows around 98, or make another run at resistance near 114? The continuing weakness in the leader, AAPL, suggests to me more weakness in techs (and the whole market) lies ahead. This weekly chart shows that AAPL may have completed the head and shoulders top formation I have been posting about for weeks–very ominous, with a price objective around 80.

AAPL12312015

And NKE sold off after a good earnings report.  When leaders cannot rise on good news, it is telling us something about the inner strength (or lack thereof) of the market. Check out this daily chart of NKE.

MKEdaily12312015

Even DIS, with the release of StarWars, could not get out of its own way. Check out this daily chart of DIS.

DIS12312015

Is the bear already upon us? 2016 will tell the story……

New $QQQ short term up-trend; Happy New Year

GMI

3/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

35%

The GMI remains on a Sell signal but my QQQ short term trend count has turned up. I do not trust a change in trend until it reaches the 5th day. The QQQ met resistance around 114, as I suspected it might. The market indexes are moving around flat moving averages and are subject to whip-saws until a new trend develops. Next year things will become more clear. Until then, I wish a Happy New Year to all of my guests.

$QQQ short term down-trend may end on Wednesday

GMI

3/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

40%

IBD sees resumed market up-trend. This strength may reflect mutual fund end of quarter/year window dressing?

12th day of $QQQ short term down-trend

GMI

1/6

GMI-2

5/8

What is the GMI?
 

WORDEN T2108

36%

Watching from the sidelines.

 



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