Monday was a better day and the short term stats improved a little. The GMI remains at +6. There were 166 successful 10 day new highs and 138 new yearly highs. There were only 21 new lows in my universe of 4,000 stocks. While the percentage of stocks above their 10 week averages increased 2 points to 62%, the percentage in a short term up trend declined 2 to 32%. Between 63%-67% of the Nasdaq 100, S&P 500 and Dow 30 stocks advanced Monday. The DIA and SPY climbed back above their 10 day averages–a good sign. The QQQQ closed just below (.06) its 10 day. Today is a very important day. If these indexes close below their 10 day I will become more defensive and it will probably only be a short time before the GMI begins to decline. The key is not to become too bearish as long as the GMI holds. There is plenty of time for me to go short after the GMI gives the proper signal.
Sunday night I mentioned that CME and GOOG appeared to be weakening. CME cracked Monday, down 18.96 (-6.5%) and GOOG fell 5.72 (-1.9%). I don’t like to see the leaders weaken. Many of the gurus I admire (see Boik’s book at right) have said that after the leaders of the market crack, the whole market is likely to decline. So I am waiting with a mixture of longs and puts in my IRA. LUFK and FTO were strong on Monday, and BBY may be bouncing (I own these.) Note also that some of the housing stocks (for example PHM, TOL, HOV) are showing a negative cross-over of their 10 day average below their 30 day average, for the first time in months. In a few days we will know whether the short term weakening we are seeing will lead to a larger decline, or a resumption of the general market’s advance. Have a good day.
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