I am very cautious about the current market. I believe that we have entered a new QQQQ short term down-trend. On Friday there were just 11 new highs and four new lows in my universe of 4,000 stocks. In addition, a number of leaders have broken down, including AIPC, QSII, ALGT and NFLX. When rally leaders falter, it often is an ominous sign of things to come.
With the GMI now at 3, I am becoming more defensive. I am getting out of QLD and will buy some QID (ultra short QQQQ ETF). If this down-trend continues, I will make money in QID as the QQQQ declines. I am concerned that only 20% of the QQQQ (NASDAQ 100) stocks had a MACD close Friday above its signal line. The perplexing thing about this market is that my longer term weekly QQQQ trend indicator remains positive. But any long term decline must, by definition, begin with the short term indicators declining. So, this may be a contained decline withing a longer term up-trend. The key is to be cautious and wait for the market trend to reveal itself. I remain mainly in cash.