The media pundits claim the market needs to rest. The market gets tired and needs to consolidate for a while–such utter nonsense! I wrote a few posts ago that the rebound in the indexes thus far is actually quite small, compared with the rebounds in the 30’s. The Dow is up only about 24% from the bottom, compared with about 100% snap backs from the bottoms in the 30’s. The QQQQ is only in the 22nd day of its up-trend. The up-trend that ended July 27, 2007, lasted 80 days! The current rally may have a lot longer to go.
Meanwhile, by following the market’s up-trend and the GMI , my account is now in the black for the year and I am now working off the 5% loss from the prior year. How am I doing it? Just by buying the types of stocks that I list to the right of my post each day. Long positions in stocks like AAPL, GMCR and NFLX have helped, along with some call options on QLD. Now that so many stocks are in up-trends I am also writing cash secured puts in my IRA on stocks I hope never to own. I will write more about this interesting technique in a later post.
This month I lost money on many of my cash-secured puts. Too many stocks declined below the put option strike price and I had to buy the puts I sold back at higher prices. Selling puts is equivalent to buying stocks and selling call options on the shares. I learned again the lesson not to sell puts or covered calls during a weak or declining market. GMI0116 The QQQQ short term up-trend ended last week. Once the QQQQ fell into a down-trend, I closed all positions and bought a very little of QID, the ultra short ETF on QQQQ. If the QQQQ down-trend deepens I will buy more QID. Otherwise, I will stay mainly in cash. The GMI and GMI-R are both back to zero and the T2108 is at 59%–neutral territory. Only 27% of the NASDAQ 100 stocks closed with their MACD above their signal lines, down from 88% on January 2nd.