Day 5 of $QQQ short term down-trend; GMI to turn again?

GMI

4/6

GMI-2

5/8

What is the GMI?
 

WORDEN T2108

49%

IBD has called the market back in an up-trend. Another up day could turn the GMI to a Buy signal. I have rarely seen such volatility. I did say that more than one half of QQQ short term down-trends have lasted under 10 days. This daily chart shows the recent GMI signals (by the arrows).

DailyQQQ01082014I remain a little skeptical of whether this bounce will hold.

4th day of $QQQ short term down-trend; selling cash secured puts

GMI

2/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

40%

Perhaps one of the best teachers of option strategies is Alan Ellman.  He has specialized in teaching people to sell covered calls, a conservative relatively low risk option strategy. Alan just published a new book on selling cash secured puts. This technique can be used to generate income or to buy a stock at a price lower than it is currently selling at. This technique is very similar in risk profile to selling covered call options. I have used this technique in my IRA. This is the best book I have read on the subject. I have added it to the list to the right of this post. If you purchase it through this link, my webmaster son might earn something to repay him for all of the support he freely gives me on this site.

3rd day of $QQQ short term down-trend; $NPSP shines; GMI signals Sell

GMI

2/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

34%

In spite of the decline on Tuesday, it was surprising to see that there were 171 new highs. So I looked at where they were. I was amazed to find that one half of the new highs were REITs! Could it be because REITs tend to pay more yield or is it that people are afraid of stocks and moving toward real estate?  Any ideas?

Biotechs continue to outperform and many have been rising in this declining market. I noticed that NPSP had a high volume green line break-out to an all time high on Tuesday. Check out its weekly chart. There is chatter about a takeover. Any stock that can come through this market at an all time high has something going for it.

NPSP01062014

With the GMI below 3 (at 2) for a second day, it now signals Sell.  I am hedged and not looking for long positions now. The GMI has done a great job  getting me out of declining markets.

2nd day of new $QQQ short term down-trend; $T2108 suggests more room to decline

GMI

2/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

39%

I looked back at the length of QQQ short term down-trends since 2006. About 40% have lasted 5 or fewer days and another 16% lasted 6-10 days.  So there is about a 50/50 chance this short term down-trend could end within 2 weeks. However, one more weak or flat day and the GMI will flash a new Sell signal. GMI sell signals are more significant and can indicate a longer term down-trend. Note the GMI-2 is now 0 and the T2108 has fallen to 39%.  I start looking for a bottom when T2108 is below 20%. This weekly chart puts T2108 in context. It still has a long way to fall.

T2108weekly01022015

Market at crossroad; $AAPL –time to exit?

GMI

3/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

51%

It is noteworthy that the IBD market pulse claims the market up-trend to be under pressure. My GMI is now 3, indicating a market trend that is midway between up-trend and down-trend.  Nevertheless, with my QQQ short term trend count now turning down, I am taking money off of the table. My university pension assets are double what they were at the 2009 bottom and I am unwilling to give much of it back.   I have transferred about half of my mutual funds to money market funds. I will sleep better knowing that I have protected money that I will need for retirement. (I am a chicken!)

I am hedged, long and short in my trading IRA, however. I own inverse ETF, SQQQ, which is designed to rise 3X the amount that QQQ falls. If the QQQ short term down-trend ends quickly, I will exit my position in SQQQ.  There are other storm clouds on the horizon. The QQQ has now closed below its critical 10 week moving average. In the past I have found it very difficult to make money on the long side when this was so. The fact  that the IBD Mutual Fund Index is also below its 50 day average (a component included in the GMI, see below) suggests to me that the pros who invest  in growth stocks are  having trouble…..

A lot of people are married to AAPL. It is the one stock that people seem to think is safe. Over the years I have found that as long as AAPL closes above its 10 week average it is  profitable to hold. Growth stocks should remain above their rising 10 week averages. I tend to get into AAPL when it closes above its 10 week average and to exit when it closes below. Well, AAPL has now closed the week below its 10 week average. The weekly chart below clearly illustrates this. AAPL may quickly regain its 10 week average as it did last October, and then again  it may not…..

AAPLwkly01022015

AAPL has a lot of company below the 10 week average:  TSLA, GOOG, AMZN, BABA, NFLX, PCLN, GMCR to name a few.  They typically shoot the leaders first.

The GMI remains at 3 (of 6). Two consecutive daily closes below 3 would trigger a GMI Sell signal. Note that the SPY remains above its 10 week average–for now.

GMI01022015

 

#QQQ short term up-trend could end on Friday; #UWTI when oil recovers

GMI

4/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

50%

The QQQ short term up-trend has completed 8 days. Note that the sensitive GMI-2 has declined to 3 (of 8) A flat or down day on Friday would begin a new QQQ short term down-trend. This would be quite ominous because it means that the rebound from the mid-December decline is likely over. The fact that QQQ could not go on to a new high is very troubling, especially if QQQ closes below the recent decline’s bottom of 99.96. I am holding a position in SQQQ (3x bearish QQQ ETF) just in case a new down-trend begins. If the QQQ declines I will add more SQQQ. However, if the QQQ holds, I will exit and go back into TQQQ. I am willing to take a few small losses because when a real trend develops I will make it all back and more. Below is a daily chart of the QQQ.  Note the comparatively weak recent rebound from the December decline, compared with the rebound from the October swoon.

QQQdaily01012014

Last post I showed you how the 3X bearish oil ETN, DWTI,  rocketed up as oil plummeted. It got me  thinking about what will happen when oil finally bottoms out and starts to recover. It turns out there is a 3X bullish counterpart to DWTI, UWTI.  I bought a little just to keep it on my radar. When oil turns around UWTI could rocket higher. At a cost of under $5, I am willing to take on the risk.

UTWIdaily

 

 

$DWTI and leveraged index ETFs shine again

GMI

6/6

GMI-2

8/8

What is the GMI?
 

WORDEN T2108

53%

If I had bought and held these ETFs from January 2 until Tuesday’s close I would have made: DIA: +9.35%; SPY: +13.9% and QQQ: +19.53%.   However the following bullish leveraged QQQ ETFs far out performed these:  QLD: + 42.4% and TQQQ: + 66.01%.  And the 3x leveraged bearish oil commodity ETF beat them all:  DWTI: +235.11%.  How did I miss that one?  Check out the DWTI weekly chart. There was plenty of time to jump on board for the ride.

DWTIweekly

Happy New Year!

6th day of $QQQ short term up-trend; $INGN breathes new life

GMI

6/6

GMI-2

8/8

What is the GMI?
 

WORDEN T2108

53%

My great stock picker friend, Judy, knows someone who needs to be on oxygen. Judy  discovered that there is a product made  that is  very mobile,  light weight and has a great battery. She claims that it beats the competition and makes a huge difference to people who must be on oxygen.  So Judy researched the product and identified its manufacturer,  INGN. Judy does very well by picking stocks that have a great concept underlying their product. She bought some INGN.

INGN is a recent IPO and is scheduled to make some investor conference presentations in mid-January.  The stock may therefore be volatile in the coming weeks.  Nevertheless, I bought some INGN. By the way, INGN had a green line break-out in November, consolidated, and then moved up. Check out its weekly chart. It has already doubled.

INGNweekly

 

 

Whither oil?

GMI

6/6

GMI-2

8/8

What is the GMI?
 

WORDEN T2108

54%

One of my students made a small fortune  the next year after taking my honors course by shorting (buying put options) USO during oil’s collapse in 2008.  I took a look at the chart of USO, an oil commodity ETF, and was surprised to see that USO has now closed below the level of its  bottom reached in early 2009. Take a look at this monthly chart. December’s trading volume thus far  is a lot less than the monthly volume at the 2009 low. (Note that the TC2000 monthly bar only presents the cumulative total since the beginning of the month,  so it underestimates December’s full month volume.)

USOmonthly

This weekly chart of USO shows more clearly what has happened recently.  Two weeks ago there was a large volume bounce up of USO after a near vertical multi-week drop, and it closed that week near the top of its weekly price range.  Notice that that bounce came on the largest weekly trading volume in months. More significant, note that last week USO gave back most of the bounce. Given that USO has closed below the 2008 bottom after a 4 year side-ways consolidation, this could mean that USO (and oil) may have a long way down to go?? What would that do to the bullish market scenario for 2015 embraced by so many…….. (By the way, all of the other oil-related commodity ETFs I checked had the same price pattern.)

USOweeklyMeanwhile the GMI remains at a full 6 (of 6).

GMI12262014

 

More on bonds and rising rates; Buy and hold index funds?

GMI

6/6

GMI-2

8/8

What is the GMI?
 

WORDEN T2108

52%

Last post I explained why bonds fall in value when interest rates rise. What I neglected to add was that with interest rates having declined so much over the past few years since the 2008 debacle, a lot of people who invested in bonds saw their bonds increase  in value. Many of these people will likely flee their bonds if (when?) rates start to reverse up.  People who became accustomed to merely holding bonds and watching them rise in value may be in for a large shock when they plummet. After the turn when rates rise enough to be attractive, people will exit risky stocks in favor of more conservative bonds or CDs, precipitating a bear market in stocks. For example, if the day ever returns that  I could nail down 6% annual interest in insured CDs, I and many other boomers would presumably be happy to get out of stocks and park our money in interest bearing instruments after retirement.  It is for this reason that I need to be very vigilant for the first signs that interest rates are reversing up….

Mr Market tends to seduce people into the stock market so that the most persons get hurt at some point. I am noticing more and more articles by the media pundits saying that people should just buy  index ETF’s. Why try to beat the market when most professionals fail? Along with this advice is the idea not to try to time the market. Just buy the index ETF and don’t even peek at it.  What could happen to make this advice hurt the most people?  What if the entire market as reflected in these index ETFs or mutual funds declined 30% or more in a short  period of time?  Would these investors who swore off market timing throw in the towel and panic at the exact bottom? I think so.  The boomers who put their faith in index funds will look at the impact of a declining market on their retirement finances and run for the exits. I think we fail to acknowledge the huge negative reaction that boomers will have to the next large stock market decline.

Using many of the components I put into the GMI, and my experience in the markets since the 1960’s, I exited the markets during the major 2000-2002 and 2008 market declines. I then reinvested after the dust had settled. Today I am that much closer to retirement and refuse to hold an index fund through the next big market decline.  I cannot afford (emotionally or financially) to wait even 3  years for the market and my account balances to recover. So I disagree with all of these “buy and hold  index funds (or ETFs)” adherents. Maybe they do not depend mainly on their 401(k)s and IRAs to fund their retirements (hint: that is why they sell their advice)….

I do not know when the market will turn down (no one does). I do know that when it turns it will be quick and massive as the boomers head for the exits. I will monitor my GMI for the early signs and remain a chicken, willing to exit early rather than late.

 



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