Blog post: Split market with $QQQ below 10 week average and $DIA, $SPY and $IWM above; This week should tell us which index is the leader; Commodities ETF, $DBC, in Stage II up-trend

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This week the GMI flashed a Red signal, when it had two consecutive daily readings below 3. The start of the QQQ short term down-trend on February 23rd had already alerted me to exit the long side in my IRA trading account. When the GMI turned  Red, I also transferred some other pension money out of stocks. No one knows how the market will react to the COVID stimulus bill and the likely associated rise in interest rates. I do know if rates continue higher it will suck money out of riskier stocks and into less volatile interest bearing securities. One thing that seems for sure to me is expected upward pressure on commodity prices as the world economies recover and focus on rebuilding infrastructure. I therefore hold a small position in the commodity ETF, DBC, shown below. Note from this weekly chart that DBC has advanced each of the past six weeks. Note also the unusual trading volume last week as it had a weekly green bar (WGB) signal. I would sell if it traded below last week’s low of $16.51. Moving stops up to the low of each subsequent WGB can be a profitable strategy. DBC is in a Weinstein Stage II up-trend, above its rising 30 week average (solid red line) since October.

In contrast, the high volume break-down in QQQ is troubling. If QQQ does not hold its 30 week average, it could enter a major decline.

 

The GMI has kept me on the right side of the market for years. However, it is heavily focused on QQQ which is weak as other types of stocks remain strong. The question remains which index will prove to be the leader.

 

IBD says market in correction and GMI turns Red, 8th day of $QQQ short term down-trend; But still in Stage II up-trend

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Weekly chart shows QQQ still above critical rising 30 week average (solid red line). It is therefore still in a longer term Weinstein Stage II up-trend. Notice the heavy selling the past 2 weeks. A close below this average would be a dire signal. In the past, I would exit the market in my university pensions when the 30 week average curved down. When that happened it was often the beginning of a major market decline.  Stay tuned. The buy the dip crowd is getting a taste of how difficult it can be to ride the market. The GMI has closed below 3 for 2 days and this has triggered a Red signal. It is much easier to make money trading long when the GMI is Green. Mainly in cash in my IRA with a little SQQQ.

Blog post: Day 7 of $QQQ short term down-trend; How long do down-trends last?

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Our analysis of the 197 QQQ short term down-trends from 1990 through February, 2021 shows that 25% ended in less than 6 days. 64% lasted 6-49 days and 11% lasted 50 or more days. A QQQ short term down-trend is not the same as a bear market. A short term down-trend may end, followed by a brief up-trend and then a new down-trend. Once the down-trend passes 5 days, I know it can go on for many days and I buy some SQQQ. Below is a chart showing the length of down-trends that have occurred since 1990. The longest down-trend was 152 days.  Wednesday was the  7th day of the new QQQ short term down-trend. I have objective rules for calling up and down trends.