Can Cramer hedge? GMI sinks to +1; Content to remain in cash

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We should have known that when Cramer finally jumped on the tech bandwagon it probably was topping out.  He is brave to make such explicit predictions.  But I think he is therein sowing the seeds of his show’s  destruction.  No one knows what will happen in the market.  So, by definition, a brave pundit must be proved wrong eventually–to join the long ranks of the fallen gurus, including Gazarelli, Joseph-Cohen and Granville, etc……………..I know Cramer has retired his hedge fund, but it looks like he has forgotten how to hedge………………..

I went to 95% cash in my IRA and 100% money market funds in my university pension.  While GOOG was strong, I sold that too.  Did you ever notice the strange phenomenon that a popular stock like GOOG can often resist a general market decline and then decline when the market strengthens? You begin to think, boy, if this stock can stay strong in a weak market it really should rise when the market moves up!  Then it declines.  Maybe traders rotate into the rebounding "bargain" stocks.

Because I trade in tax deferred accounts, I do not care if I get out too soon, or at the wrong time.  I merely buy back when I think the trend is clear again and the odds favor a rise–no tax consequences.  Being out of the market provides a mental catharsis and is good for the psyche and the bottom line. I can step back and be amused by all of the conflicting pontifications of the media analysts.  Explaining the market action after it has occurred  reminds me of that famous definition of history–"games people play on the dead."  Show me a person who can explain the market action BEFORE it happens.  Now, there is a perspicacious pundit worth listening to……………………………..

The GMI sank to +1 Friday.  There were only 89 successful 10 day new highs (new high 10 days ago that closed higher Friday than 10 days earlier, see post on 4/26).  There were only 94 new highs (and 45 new lows) Friday in my universe of 4,000 stocks.  The daily and weekly QQQQ indexes turned negative.  The SPY daily index needs one more day to turn negative. Only the IBD growth mutual fund index remains positive, but is declining towards its 50 day average. The percentage of stocks closing above their 10 week average declined to 70%.

As I see it, we are in day one of the decline (D-1).  However, turning points can be tricky and it is easy to get whipsawed.  If we get to D-4 next week I will begin to look for stocks or indexes that I can buy puts on.  Right now I am content to remain in cash.  The market’s true proclivities will be revealed after the end of the month/quarter and after we know if Alan is done being Fed up with the market (interest rate market, that is).

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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.