The QQQ short term down-trend only lasted 4 days. I have written that short term down-trends often last under 5 days and that I do not trust a short term trend change until it persists for at least 5 days. The GMI Sell signal also only lasted for 4 days. As of Friday’s close the GMI signaled a new Buy. IBD still sees the market in a correction.
I expected December to end strong because of mutual fund window dressing. But when the GMI issued its Sell signal, I shed most of my long positions. The bounce we have had looks a lot, technically, like the bounce we had in mid-October. The QQQ bounced from its lower 15.2 daily BB. So maybe it will persist. If I fly by instrument I would go long here. But my instinct is to hold back for a while. I just do not trust this bounce. Are the problems that precipitated the recent decline really over? So, for now, I am mainly in cash. (I may prove to be the ideal contrary indicator!)
I was getting excited at this last pullback. A couple of my signals were setting up. I was just waiting for a reversal candle. It never showed up for me. Them BAMM, away we go. I agree with you that this bounce is suspect. But it Looks like Yellen found Bernanke’s stock market playbook, so all v-shaped bounces could be suspect.
Dr Wish, Thank you for all the work you are doing here. Unless 30 week moving average is becoming flat and we get more close below 30 week moving averages, we would should not expect any significant correction. Again, these are all hindsight observations. I think your GMI is a fabulous work and very good indicator in predicting market turns. Solely based on my observation, if we use GMI along with trend, you can get very good signals.
Oh how the market likes to play head-games with us. That’s why we build systems…and yours is one of the best! I’ve heard you say a few times you wish you could just computerize your GMI to do the buying and selling for you. Easier said than done I know, trust me! Dr. Wish, let’s make a New Years resolution to trust our systems and only trade the leveraged ETFs accordingly (I know we’ve both made this one before too! LOL). Looking forward to following your writings into the new year. Thanks for your guidance through our journey in the markets.
The GMI is much too sensitive to short-term whipsaws. This should be apparent by now to those who are willing to look critically. Yes, it will catch the big drawdowns of a bear market but it will also have too many false alarms to be really useful. There are better ways to avoid the large corrections without the (losing) whipsaws of the minor pullbacks. I’ve concluded that the GMI is “truthy”, per Stephen Colbert. (look it up if not familiar)
ZZ,
I re-read your posting and could not identify what you meant by your comments! Instead of making vague claims, perhaps you could have have given little more clarity on other systems which can avoid “large corrections”. Also could not understand who is Stephen Colbert and his work!
I would suggest, when you make claims, you should show the relevant resources to backup your claims.
See http://dark-liquidity.com/StrategiesSummaryPage.php
2010 & 2014 were similar years with respect to whipsaws. However, the model used in those examples is particularly slow to react as compared to the QQQ short term uptrend/downtrend.