47th day of $QQQ short term up-trend; indexes go vertical; $NVDA weak

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Whenever a daily stock chart shows a stock or ETF going vertical, I usually get off. Both the SPY, QQQ and DIA have vertical patterns. I have therefore become very defensive. Take a look at this chart of QQQ.

I am also concerned that NVDA, a leader, could not go to a new high on good earnings. There are signs of high volume institutional selling in NVDA. It shows up clearly in a weekly chart. Look at the huge red volume spikes of selling at the two peaks. Failure to retake these peaks would set up a major decline in the stock–and probably the market….

 

 

 

$TQQQ again beats almost all individual stocks–ETF performance since GMI turned green on 11/10/16

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I wanted to examine how the index ETFs have performed since the GMI (my General Market Index) turned green on 11/10/2016.  The GMI components mainly measure momentum in the QQQ so its signals should probably work better for nonfinancial growth and tech stocks contained in the NASDAQ 100 index (measured by the QQQ).

 

This table shows that between 11/10 and last Friday (1/13) the QQQ rose +6.4%, the SPY +4.7% and the DIA +5.6%. Note also, by definition, the leveraged ETFs for the QQQ  rose much more, the QLD rose +13.3% and the TQQQ +20.2%. The really interesting finding in the table is that these leveraged ETF far outperformed most of the individual stocks in these indexes. For example, only 12% of the NASDAQ 100 stocks, 10% of the Dow stocks, and 13% of the S&P500 stocks rose more than 13%.  In other words, the QLD did better than 87-90% of the stocks in these indexes. The triple leveraged ETF, TQQQ, beat about 96% of the individual stocks in these three indexes!  So I again come to the conclusion that if I can pick in advance the 4% of stocks that can beat the TQQQ, then I should do so. However, for most of us mortals, one only has to ride the TQQQ during an up-trend (GMI=green) to beat the pants off of most individual stocks, and it is so much easier to monitor one index ETF than to manage a portfolio of individual stocks……..(I have been accumulating the TQQQ since the GMI flashed green.)

The GMI remains green with 5 (of 6) components positive.

 

 

12th day of $QQQ short term up-trend; $QQQ and $CDW have an RWBCount= 12

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For a long time I have thought that my adapted Guppy charts composed of 13 weekly moving averages provide an excellent method for identifying stocks in a significant up-trend. Six of the exponential averages are red (3,5,8,10,12,15) and 6 longer term averages (30,35,40,45,50,60) are blue. When all the red averages are rising above the blue averages such that there is a white space between them, this constitutes a red white and blue (RWB) up-trend. I also add a 13th average (1) as a dotted line which shows the closing price each week. When all 13 averages line up with each shorter average rising above the next one (1>3>5>8……..60) this constitutes a really strong up-trend. I have created a new indicator that counts the number of averages that are rising above each longer average. The indicator, called the RWBCount, goes from 0-12. This indicator can be applied to both ETFs and individual stocks and in the future I will often provide the RWBCount.  Below is a weekly chart of the QQQ, which has an RWBCount=12. Note that each line is above the next one. The RWBCount for DIA=12 and the SPY=12. So right now all 3 indexes are in very strong RWB up-trends.

NVDA has an RWBCount=12 and has been 11 or more for months. Note how weekly price leads all of the averages up.

There is no way to know when an RWB pattern will end. I strive to  hop on  stocks with an RWBCount=11 or12 when they bounce up off of support and ride them until the trend ends. By the way, 60% of the Dow 30 stocks have an RWBCount=12. The current Dow dogs are: PFE (5), WMT (5), KO (3) NKE (2). Here is what a “2” looks like.

And a stock not in the Dow, GILD= “0”

Get the picture–I call such stocks BWR or submarine stocks and consider them for shorting…

CDW is an example of a stock with an RWBCount=12 that bounced off of support last Friday. I took a position and placed my stop right below Friday’s low. If for any reason CDW declines on Monday so that I am sold out, I will take my small loss–no emotion. (A stock does not have to rise just because I think it should!) On the other hand, if CDW holds Friday’s low, I will ride it as long as its RWBCount remains high (11 or 12). My goal will be to ride the strong up-trend until it ends and not to try to hop off the first time it shows signs of weakness. Why sell a stock in a strong up-trend? If CDW should rise a few percent, I will move my stop up to break-even. Small losses and large gains–that is the way to succeed in this game. The daily chart of CDW is below. Note the recent green line break-out (GLB) to an all-time high and Friday’s bounce up off of the 30 day average (red line) and its lower 15.2 daily Bollinger Band. Earnings are set for release on 2/14/2017.

Here is the RWB chart for CDW. In the near future I will publish a scan for finding stocks with IRBCount of 11 or 12 that are bouncing off of support. You can sign up for access to my free TC2000 scans at wishingwealthblog.com/club.

The GMI remains at 5 (of 6).

 

 

 

Performance of ETFs since GMI turned green on 11/10; $QQQ on verge of GLB

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As this daily chart of QQQ shows, at the close on 11/10 the GMI turned from Red to Green. The table below shows how stocks and ETFs have done since the close on 11/10 through the close on 12/16.

 

If one had bought the following index ETFs at the close on 11/10 one would be up these percentages:

 

The SPY (+3.7%) and DIA (+5.4%) outperformed the QQQ (+3.3%) presumably because the underlying index (NASDAQ 100) contains no financial stocks, which have led the current rally. However, the triple leveraged ETF, TQQQ, as usual, beat all of the regular indexes during this rally, up +10.4%. We again find that that only a few, 10%, of the individual stocks in the QQQ beat TQQQ. In other words, the TQQQ outperformed 90% of the component stocks represented by the QQQ and  83% of those in the DIA and SPY. Yet again, we see how easier it may be to just ride the TQQQ in an up-trend rather than trying to pick in advance the minority of stocks that will beat it. Of course, what goes up 3x as fast also declines 3x as fast…………

The GMI remains at 6 (of 6). Note in the daily chart of the QQQ above, that QQQ is bumping up against its green line, the all-time peak reached in March, 2000. When (not if) it closes above 120.50, it will be a green line break-out (GLB), and only positive for me as long as it stays above the green line.

3rd day of $QQQ short term up-trend, buying $TQQQ, $WB coming back?

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I am slowly accumulating the 3X bullish QQQ ETF. this leveraged ETF strives to move three times as much as the QQQ. So far this week QQQ is up +1.4% and TQQQ is up +3.9%. Note–TQQQ also declines 3X as much as QQQ!

WB, a strong performer since its GLB last MAY, bounced up on Tuesday with its highest daily volume in months. This may mark the resumption of its strong up-trend after its recent consolidation.

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Short and long term trends now up; On using weekly charts to stay in a growth stock: $NTES

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The DIA, SPY and QQQ index ETFs are all above their 10 week averages again! Stocks are breaking out everywhere. But how to ride them to big proftis? If you are like me, you often hop on a growth stock, only to sell out prematurely on weakness that you spotted on a daily chart, and the stock continues to climb much higher without you. The great gurus I follow say that the key to making big money trading is that when the rare pick starts to really work out, stay with it until it shows genuine signs of weakening. Jesse Livermore, the consummate trader,  would often say that he hated to lose his position in a rising stock because he had sold out too quickly. In this new day of instant financial data feeds, I suspect one of the enemies of staying with a good stock (at least for swing traders)  is focusing on charts with daily and shorter time periods to signal an exit. I am told that the great William ONeil, founder of IBD, used only weekly charts because they more clearly revealed to him the meaningful stock trends. If I checked my blood pressure or cholesterol daily or hourly, I suspect I might see  a lot of noise and volatility that would make it harder to obtain a valid assessment of my longer term status.

As a solution to this problem, I have found it very helpful to focus on weekly charts using three simple moving averages: 4wk, 10wk and 30wk. An advancing growth stock will have a pattern of the 4wk>10wk>30wk for long periods of time, in addition to being near an all-time high. During a strong advance the stock will go many weeks without ever closing below its 4wk average. Once the stock closes below its 4wk it is a potential sign of weakening at which point I might raise my stops or sell a little. A weekly close below the 10week is a call for me to exit my position immediately. Growth stocks should not close the week below their 10 week average.

A weekly chart is worth a 1,000 words, so it will be easier to demonstrate this strategy with an example. NTES showed the 4>10>30 pattern from June, 2016 through November, or for about 21 weeks (4wk=red dotted line, 10wk=blue dotted, 3o wk=red solid). During that time the stock rose over 40%.  During this period, NTES closed  the week below its 4wk average only 3 times. I say closed the week because a stock often trades intraweek below its 4wk average only to find support and close the week back above it. This strategy therefore works well for part-time traders like me who are able to review their stocks over the weekend or near Friday’s close. I am looking for weekly closes below the 4wk after several weeks of closing above it and for any close below the 10 wk average. In early November, NTES closed below its 4wk and then its 10week, a clear signal for me to exit (if I had owned it). Note that NTES is still in a Stage 2 advance, above its rising 30 week average, and I would consider purchasing it with a weekly close back above the 10 week average.

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Note how this strategy would have kept one in NVDA: (I wish I had used it!)

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I often tell my students not to take what I teach them on faith, but to test everything for themselves. Go  out and look at the weekly charts of stocks you are trading and see if this method could have helped you. I have too many times been prematurely shaken out of a stock by focusing on its daily movements, only to see that a glance at its weekly chart could have given me the confidence to ride it higher.  This method slows down my selling. I described this strategy in greater detail  in a 2012 speech to the Houston Worden TC2000 Users group. A link to the archived webinar appears here and to the right of this page.

Meanwhile the GMI is back to 6 (of 6) and the QQQ short term trend is now up (U-1).

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Watching for Halloween rally; $AAPL supporting $QQQ; Interest rates $TLT and the dollar $UUP rise and gold $GLD falls

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I am mainly in cash in my trading accounts but holding a small position in SQQQ. If the short term down-trend continues a few more days I will add more SQQQ (the inverse 3x leveraged bearish QQQ ETF). The T2108 is at 31% and would have to fall closer to 10% to suggest a very over-sold market where significant declines end. The 10.4 daily stochastic is at 25, low, but still not in extremely oversold territory. And the QQQ has just had an oversold bounce from its lower 15.2 Bollinger Band but it looks like this support level could fail to hold. The daily 12/26/9 MACD histograms are negative and declining, showing downward momentum. The GMI signal recently flashed Red, but  this signal has recently coincided with short term bottoms rather than tops. Time for me to be extra careful and to conserve cash while Mr. Market makes up his mind which direction to go.

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However, Mark Hulbert’s recent post reminds me that this may be the time to return to the market according to  the “Sell in May” strategy. Mark has a perspicacious empirical approach to analyzing the market’s behavior. Coming up is the seasonally strongest time for the market, he writes,  and the current weakness may be setting us up for it. Scare everyone into selling out to stronger hands who will buy low and profit from the subsequent move up. Most advances begin after a decline. So I will reverse and go long if this market shows any signs of strength in the coming days………

One of the major reasons the QQQ is outperforming SPY and DIA is the technical strength shown by AAPL, which is heavily weighted in the computation of QQQ’s underlying index (NASDAQ 100). AAPL is defying gravity and may  be the last component to  decline before the current weakness in the QQQ ends? (When the bulls give up on AAPL, the end of the decline may be near.)

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A major factor behind the weakening of the indexes is falling long term government bonds, representing higher interest rates and leading to lower gold prices. I follow the 20+ year government bond ETF, TLT, as an indicator of how bond traders feel about long term interest rates. TLT is in  a swoon, leading to a higher dollar and lower gold prices.

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And the dollar rises, as shown by UUP.

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And gold falls, as shown by GLD. It all fits together like a jig saw puzzle–until it doesn’t…

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The GMI table below shows that the QQQ has just closed the week below its critical 10 week average while the SPY has done so for 6 straight weeks. Will there be a Halloween rally?

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