With all of the pundits calling for a September drop and a double dip recession, the market fooled them all–at least for one day. And the Investor’s Intelligence poll shows that investor adviser sentiment is quite bearish with almost as many bears as bulls. This poll has been a contrary indicator, with market tops occurring when there are many more bulls (near 60%) and bottoms when there are many bears. Rarely are there more bears than bulls. IBD called Wednesday’s action a follow-through day on the rally that began last Friday. Even though the indexes I follow are still in short and long term down-trends, the GMI advanced to 3 (of 6) and the more sensitive GMI-R, to 5 (of 10). One reason is that the IBD mutual fund index just crossed above its 50 day average, indicating that growth mutual funds are rising. This has been a bipolar market. On Tuesday we had 151 new 52 week lows in my universe of 4,000 stocks, only to have 174 new highs on Wednesday. I have found such action is typical at turning points, until the new trend gets going. It is a tug-of-war between bears and bulls. In a few days we will know if this is indeed the start of a real tradable up-trend. Right now, it is best for me to hedge/close my short positions and to look for stocks to buy. A lot of the stocks that I have been watching had resisted the down-trend and did well on Wednesday. Check out the stocks to the right that I have been watching. Every stock I buy is protected by a put option or a stop loss order.
It would be wise for IBD to reevaluate their “trend” criteria. Calling yesterday’s price action a follow-thru to Friday’s action (which of course was reversed Monday) is curious at best. Agree with your posture of waiting for a clear trend to emerge.
Hi,
quick question –
for long term investors do you suggest trading based on weekly gmi/gmr values or on daily basis.
if i am just trading rydex whats your suggestions
if possible can you generate and excel of daily gmi/gmr and sp500 values, i am asking too much but if possible let me know.
still trying to see how you avoid whipsaws.
awesome blog
bill
On 4.14.10 you suggested that you would post your TC2007 Davas Scan – did I miss it somehow?
Lee Young
Dr. Wish,
What do you think about the divergence indicator called the Hindenburg Omen?
This is basically when the NYSE 10 week moving average is rising and EACH of the daily
new 52 week highs and new 52 week lows (NYSE) are more than 2.2% of the total stocks.
At the least this shows high volitility which to me is a good environment for changes in market direction.
Thanks for your thoughts!
Rob
http://www.investingdaily.com/id/17661/hindenburg-omen–prepare-for-a-stock-market-decline.html?cigx=d.k,stid.15618,sid.1920435,lid.202
Check out this post on Hindenburg by Mark Hulbert:
http://www.marketwatch.com/story/a-statistical-take-on-the-hindenburg-omen-2010-08-24
I think IBD is more often right than wrong.
Was wednesday a new ibd follow through day.. Peachy 🙂