The WW-GMI took a hit today. I noted that when a trend change occurs it can often fail to hold. So what happened today? First there were only 90 new highs and 71 new lows in our universe of 4,000 stocks. Second, the Daily SPY index fell into limbo–it is too close to call. The Daily QQQQ index is very close to limbo. If it closes down tomorrow it will no longer be positive and we will be back to a GMI of zero. The IBD mutual fund index is greater than its 200 day average and was approaching its 50 day average, but probably fell back today. So where are we?
The weekly QQQQ index is still not positive and remains in a downtrend. I had thought the short term trend was turning up. But I think that upturn is over or very close to it. This is a time to be on vacation from the market and in cash. Otherwise, we risk being whipsawed by the cross-currents of this meandering market. I thought we were experiencing a short term rally–short term because it was showing up in the daily indexes but not the weekly index. When the weekly index turns positive we will be in a longer term uptrend.
A few stocks I own or have been watching held up today: CRYP, GOOG, IVGN. Others declined: SWN, TOL, SHLD, ORCT, NSI. I have close sell stops on all of my holdings.————————————————-
A reader told me he was interested in TASR. I looked at the chart and asked him why he would be interested in a rocket that had peaked and was falling to the earth. I asked him why didn’t he buy it from April 03 to April 04 when it was a rocket. Notice that for a year this stock repeatedly hit an all time high week after week. Are you afraid to buy a pattern like this– when the stock went from a split adjusted 0.31 to $32? If I were you I’d cut out this chart and compare it to every stock you consider buying. Why not buy a rocket–isn’t that the dream of everyone who enters the great casino? Did you know that the pros distribute stock to the public on the way down? Note the huge red spike in volume at the top when someone unloaded a lot of shares. (A red line means that that bar/period, the stock closed less than the prior bar/period.) The little person always is shopping for a bargain. So a stock trading at $10 must be a bargain if it is down from $32. Right? I don’t want bargains. I want to buy stocks that are at their all-time high and which the media say are too expensive. They ridiculed AOL all the way up in the bubble days.
Do any stocks currently come to mind as a potential overpriced rocket? I’ll give you a four letter hint–GOOG. See any similarities with the TASR chart? You know, when a company makes a product that is so universally used that it becomes a verb (Xerox, Fed-X) the stock does pretty well, at least in its early years. I don’t know how many times each day that I hear someone say they are going to Google something. I don’t know if it is the right time to buy GOOG, but I do own some. I bet someday we will all say that we wish we bought some GOOG in the good old days when it only cost $200 per share–or $X pre-split. However, if we do enter a bear market, rest assured it will eventually get to GOOG. The bear demolishes everything before it is through.
On that note, let me wish you an "unbearable" day tomorrow. Maybe the market will surprise me and begin a rise.
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Please remember that the stock market is a risky place, especially now. I am not providing recommendations for you to follow. My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs. While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog. Please consult with your financial adviser and a mental health practitioner before you enter the stock market, and please do not take unaffordable risks in the current market environment. See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.