Red, White and Blue (RWB)- the rocket pattern and $GLD,$AAPL and the Dow 30; NYSE bear

GMI

3/6

GMI-2

0/8

What is the GMI?
 

WORDEN T2108

42%

I have taught my students the way I have adapted Daryl Guppy’s GMMA charting method, or Guppy Multiple Moving Average. I plot 12 weekly exponential moving average (6 shorter term averages plotted in red 3,5,8,10,12,15; and 6 longer term averages plotted in blue 30,35,40,45,50,60).  A strong upward moving pattern has the red lines all moving above the rising blue lines with a white space separating them.  Hence the name RWB.  A strong declining trend shows the reverse pattern, BWR.  I also plot a single week moving average as a dotted line to show  where the security is actually priced. The challenge is to only buy RWB patterns and short BWR patterns. The same patterns can be applied to other time frames, for example daily, hourly or even monthly charts.

A strong RWB pattern also has the actual price trading above all of the red lines.  If the security (dotted line) closes below the red lines (shorter term averages) it could signal a consolidation or worse, a change to a declining BWR pattern. Here is an example of GLD since 2009. GLD remained in a strong RWB pattern until 2011 when the averages began to converge. Note that since March 2013, GLD has been in a declining mostly BWR pattern. The astute investor could have used this chart to ride gold up and get out after the RWB pattern dissolved. It is clear that the averages are now converging again.  Instead of anticipating a change in trend, I prefer to wait until a RWB or BWR pattern is evident.

GLDguppy01302015This type of chart would also have guided one in investing in AAPL. Since the bottom in 2009, AAPL has been in an RWB pattern, with the exception of the weak period in 2012-13. AAPL continues to be in an RWB pattern since then.

AAPLguppy01302015So what can these charts tell us about the major market indexes? Here is the Dow 30 index. Since January, 2013, the Dow has been in an RWB up-trend, with the exception of the period around  October, 2014 when the red lines touched the blue lines and closed the white separation between them.

DOWGuppy01302015This zoom in of the last few months shows the closing of the Dow’s RWB pattern again. As happened last October, the last price of the Dow shown by the dotted line appears to have closed below the red lines and is now penetrating the blue lines. If the Dow should continue to sink below the blue lines, it could signal the beginning of a significant BWR decline or at minimal the end of the RWB up-trend. The SPY is showing a similar pattern to the Dow but the QQQ remains a little stronger. The fact that the red lines are converging again for the Dow and the SPY so quickly after they did in 2014, is a sign for caution. In addition, the converging and and even crossing of  the red line averages shows that the Dow has been flat over the various time intervals measured by the averages (the 3 week average price=the 5 week average price=the 10 week average price, etc.). To me this is a sign for extreme caution.

GuppyDowzoom

I have therefore gone mainly to cash in my university pension and my trading accounts.  My university accounts have grown considerably since the 2009 bottom and I am unwilling to risk giving the profits back in a protracted market decline.  I am content to be on the sidelines and to even miss some of an advance if I am wrong. If the RWB returns I can always reenter the market in stages. If I am right, then I can reenter at much lower and cheaper levels, and can sleep better at night.

The GMI remains at 3 (of 6) and on a Buy signal but my QQQ short term trend count is D-3, the third day of a short term down-trend. Two consecutive days with the GMI less than 3 would signal a longer term Sell.  The GMI-2 is at 0/8, with all of my more sensitive indicators negative. The QQQ is back below its 10 week average as is the SPY, and both the SPY and DIA have closed below their critical 30 week averages. This market is likely in transition and I suspect we could enter a severe down-trend soon.  Based on me, the contrarians among my readers should be very bullish………. :-)

GMI01302015After I wrote the above post, I read an email from a reader pointing out some bearish tendencies in the NYSE Composite index, one I do not follow. This composite reflects all of the US and foreign stocks listed on the NYSE. It therefore reflects larger, older and less speculative stocks than the other indexes I follow. When I looked at this weekly chart of the NYSE Composite index, I became even more concerned about the market’s trend. As you may know, over the past 20 years I have used Weinstein’s Stage Analysis strategy to help me time the market. The NYSE Composite index appears to be entering a Stage 4 decline. It is now below its 30 week average (solid red line) which itself has begun to decline. In 2000, and 2008, I exited the markets when the 30 week average of the QQQ began to curve down and avoided most of the carnage. Last week the SPY and DIA have only just crossed below their 30 week averages. Is the quicker weakening of  the established NYSE companies going to lead the rest of the markets into a major decline? I cannot overemphasize the significance of this chart showing the multiple failed rally attempts since the double top formed in 2014. The October decline may just be only the first small crack in this bull market. (Anyone know an inverse bearish ETF for this index?)

WeeklyNYSE01302015

 

2nd day of $QQQ short term down-trend

GMI

3/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

48%

Markets remain in the range bound technical channel.

New $QQQ short term down-trend; will channel hold again?

GMI

3/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

44%

The markets failed to hold early gains after AAPL’s great earnings release.  The QQQ short term up-trend lasted only 3 days. IBD now sees the market up-trend under pressure. The market appears very treacherous to me.  I increased my position in SQQQ and I am gradually selling my longs. Once 4th quarter earnings are out there is little to propel this market higher. The QQQ remains in the downward sloping channel.  The big question is whether support will come in again (for the 4th time) at the bottom of the channel, drawn in this daily chart of the QQQ.

QQQdaily01282015

A huge  sign of technical weakness is that the SPY and DIA have now closed below their critical 30 week averages.

 

3rd day of $QQQ short term up-trend; $KITE soars

GMI

5/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

51%

The QQQ reversed down from resistance on Tuesday.  With AAPL rebounding after hours it remains to be seen whether this strength will rescue the QQQ on Wednesday. The SPY and DIA are much weaker. Wednesday’s close of the QQQ will be very important to discerning the short term trend of this market.

QQQdaily01272015Maybe I should go fly a KITE.

DailyKITE01272015

2nd day of $QQQ short term up-trend; $NVIV, a Judy’s pick

GMI

6/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

53%

Tuesday night we learn whether AAPL’s earnings can lead the QQQ through resistance.

Meanwhile the bio-techs continue to show strength. My readers know that I rarely buy cheap stocks. I do make an exception when my extraordinary stock picker buddy, Judy, tells me about a small, young company that has a promising product. Enter NVIV and its spine tingling surgical implant (pun intended). She, and then I, have been nibbling at NVIV. The company has created a medical device that has shown some early unexpectedly good results. The company also has a very good medical pedigree. NVIV is very speculative, but when I look at the volume spikes on this daily chart, it is clear that there is some major buying interest. At $2.09 per share, it is probably a better use for my money than buying a lottery ticket…..

DailyNVIV01262015

 

Fly by my gut or follow my instruments? (fasten seat-belts!) $AAPL looks strong

GMI

6/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

49%

Every once in a while my technical indicators point one way and my gut to another.  While I have never systematically analysed how often which way was correct, I suspect it was my instruments.  The market tends to move in a direction opposite to the way my emotions point. This may be one of those times. The GMI has signaled a new Buy as of Friday’s close and my QQQ short term trend indicator has also turned up (U-1). I just find it difficult to believe that this up-trend will last longer than a day or so.  The last few GMI buy signals occurred within a short bounce only to have each end and reverse in about 5-7 days.  The QQQ is now right at the top of its recent channel (see daily chart below) and could reverse down again very quickly. Or will the QQQ begin a major leg up? And there are so many rational reasons to expect a market decline:  Greek election results, deflationary effects of cheap oil, too strong a U.S. dollar, post earnings release lull on the horizon, to name a few. And technically the major indexes are diverging, with the SPY still below its 10 week average even as the QQQ climbs above this critical average. Clearly, tech stocks are outperforming the large cap industrial sector that might be hurt by some of these things I mentioned. So, what to do? Follow my instruments or my gut? My intellect and some of my trading gurus  have opined that when one does not know what to do one should lay low until the dust settles.  So I will not make major trading decisions today. I will hold my long positions, mainly concentrated in a few strong bio-techs, and will cut back or eliminate my SQQQ and buy a little TQQQ if Monday looks strong.

QQQdaily01232015One reason the QQQ  appears strong is that AAPL has regained its 10 week average (blue dotted line).  I have always profited by owning AAPL when it is above this average. AAPL reports earnings this week and will have a large impact on whether the QQQ holds.

AAPLweekly01232015The GMI is now at 6 (of 6).

GMI01232015

 

14th day of the $QQQ short term down-trend–new up-trend possible on Friday

GMI

4/6

GMI-2

7/8

What is the GMI?
 

WORDEN T2108

51%

IBD says market up-trend has resumed.  A strong day on Friday could result in a new QQQ short term up-trend and a Buy signal from the GMI. The QQQ still has not broken out of its descending channel, shown by the magenta lines below. Will it happen on Friday?

QQQ01222015

13th day of $QQQ short term down-trend; critical test coming

GMI

3/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

42%

The Major indexes stopped just short of key resistance levels. Thursday they will either close above them or start to fall again in a meaningful decline.

12th day of $QQQ short term down-trend

GMI

3/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

41%

The rebound of the QQQ continues. How far will it go?

QQQ01202015

Where now $QQQ?

GMI

3/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

43%

It is impossible to consistently predict what the market will do, except by luck.  It is still possible, however, to use technical signposts to give one an edge for acting. This daily chart of QQQ shows some interesting things I monitor. First of all, the QQQ is below its 30 day average (red line) that is curving down.  This is a very ominous short term sign. Second,  note that the GMI has been on a Sell signal since January 6 and my short term daily trend indicator  has now completed its 11th day (D-11, see GMI table below).  Since 2006, 40% of these short term down-trends lasted between 11-44 days, 4% lasted 50+ days. The two solid magenta lines show the channel that the QQQ is currently within. Last Friday it bounced off of the lower channel line at which it has found support three times.  It also found support near the lower daily 15.2 Bollinger Band (BB, see the bottom of gray area between the 2 bands). From all of the above, I think the QQQ is likely to rebound to the 30 day average, or to the top of the channel. If it should fail to hold Friday’s low, however, look out below………..

QQQ01172015The GMI, at 3 (of 6), remains on a Sell signal since January 6, but the GMI-2 (1/8) is showing considerable short term weakness.

GMI011162015



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