With the GMI back to 5 and the short term trend about to turn positive, it looks like we may have had another small and short lived correction. IBD still sees the market in a correction and is waiting for a follow-through day to this current snap back rally. I still think this rise could be a brief bout of year end mutual fund buying (window dressing) that could quickly disappear with the new year. So I must be very nimble and ready to exit if the market fails to surpass its recent peak of 2079 on the S&P500 and 106 on the QQQ. Below is the daily chart of each index. This rally seems a little too frenetic to me–climax run? Given that the market always falls quicker than it went up, the next decline will likely be a doozy. Note the 30 day average (red line) of both indexes is flat, which often leads to a lot of whip-saws. Failure of these averages to hold this line on Friday would be a very bearish sign to me.
When IBD says “market in correction”, wait two weeks and BUY…. when it says “Market uptrend” it is time to wait 2 weeks and sell. Reason: IBD is often late in calling the trend.
Your stated approach will get you burned in a severe down-trend. IBD is the only national newspaper that advises people to exit the market during a decline. Sometimes they may be late or early. It is the price everyone pays for timing the market.