The GMI is almost zero. The IBD growth mutual fund index is right next to its 50 day average and too close to call. There were 112 new yearly lows and 32 new highs in my universe of 4,000 stocks. The leaders, GOOG and AAPL appear to be weakening. Only 31% of the Nasdaq 100 stocks closed above their 30 day averages. It appears that the QQQQ may lead the market down even though it barely participated in the up trend with the DIA. Both the GMI-L and GMI-S indicators have weakened. Only 13-15% of the stocks in the QQQQ, SPY and DIA indexes advanced on Friday. The only contrary sign I have noticed is that IBD reports that on Friday the put/call ratio was 1.12. Readings over one usually occur at the end of a decline when the little guy bets on a further decline by buying more put options than call options. The fact that the index was above one near the beginning of a decline suggests to me that many persons are expecting a market top. In view of this extreme bearishness I would not be surprised to see a sharp and brief bear rally this week. Regardless, I am buying long term in-the-money puts on stocks that appear to have topped out. In fact, my TC2005 market scans found more submarine stocks (111) than rockets (19) this weekend. This in itself is a sign of a weakening market. Also, 11% of stocks are now within 5% of their yearly lows. Be careful and don’t be afraid to go to cash.
Please send your comments to: firstname.lastname@example.org.