GMI: 0; GMI-R: 0; 40th day of QQQQ short term down-trend; shorting stocks at new lows

No change in my indicators on Monday.  There were 3 new highs and 980 new lows in my universe of 4,000 stocks on Monday…..

Jesse Livermore once wrote that no stock was too low to sell (short).  As you may know, one of the indicators in the GMI computes the percentage of stocks that hit a new high 10 days ago that closed today higher today then they closed 10 days ago.  The logic is that in a rising market, stocks that break-out to new highs should keep rising.  In  fact, Nicolas Darvas wrote that a pattern of failed break-outs often tipped him off to a coming bear market. Well, the reverse is true in a declining market.  In a declining market stocks hitting new lows should continue to decline.  So, I compute each night a similar measure–the percentage of stocks at new lows 10 days ago that closed lower today than they did 10 days ago.  Would you be surprised to learn that, with one exception, since September 8 (the 5th day of the current QQQQ down-trend) each day 50% or more of the stocks that hit a new low 10 days before closed lower than they did 10 days earlier.  In fact, the percentages were above 80% on many of the days during this down-trend.  The bottom line:  during the current down-trend, shorting a stock on any day it hit a new low was very likely to be profitable 10 days later.  Trade consistent with the down-trend or go to cash!

1 thought on “GMI: 0; GMI-R: 0; 40th day of QQQQ short term down-trend; shorting stocks at new lows”

  1. Hi There. The insights on lows vs stocks hitting new lows 10 days ago is fascinating. What tool are you using to measure this metric?

    Thank you and keep it up!

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