We are nearing the place when the averages come up against major resistance. The outcome will determine whether this counter-trend rally turns into an up-trend or ends with a continuation of the down-trend.
Dr. Wish
Market remains in down-trend as GMI2 rises to 2 (of 6)
I am still waiting for to see whether this base will hold. Friday was the 18th day of the QQQ short term down-trend. The longer term trend remains down. It is very tempting to nibble at stocks that are rebounding. The problem is that the decline could resume quickly for such stocks. It is much safer to own stocks when the GMI is at least 4. With the GMI still at zero, I will let the bottom feeders get in before me. When my indicators signal a true up-trend, I will get back in. A trend follower always waits for a trend to develop and therefore identifies bottoms and tops after they have been established. The GMI2 contains several more sensitive short term indicators which can turn up in a counter-trend rally during a down-trend. Friday was the 18th day (D-18) of the current QQQ short term down-trend. Only 2 of the 9 leaders I follow have closed above their critical 10 week averages: AAPL and AZO.
IBD becomes more cautious about up-trend; 17th day of QQQ short term down-trend
According to IBD, Thursday was a distribution day and when that occurs within 2 days of a follow-through day, the up-trend fails “95% of the time.” My indicators show that the QQQ short term down-trend completed its 17th day on Thursday. This market remains treacherous and it is good to be on the sidelines in cash. It will be interesting to see if Uncle Ben can rescue this market on Friday. Irene may have something to say about that too.