Dr. Wish

My first honors stock market class of the new semester got snowed out today! I will be writing a lot of these posts to familiarize my students with my methods. Click on the highlighted links below to begin to understand the new concepts I use.

All my indicators remain positive, but I am still mainly out of the market now.   I am still wary of the municipal bond crisis. I closed out my puts on AGO on Thursday with a nice profit.   The market makers would not buy them back at a fair price, so I purchased the shares.   I can now put the shares to them at the strike price anytime before option expiration.

NFLX held its new high nicely on Thursday.   There were 413 new highs and only 27 new lows   in my universe of 4,000 stocks. TRW hit another all-time high on Thursday and is an RWB rocket stock. Check out the weekly GMMA chart below. TRW reports earnings on February 17.

Below is the monthly chart of TRW.   This is the pattern of a rocket climbing to the moon.   We buy stocks heading toward the moon, not falling back to the earth. To buy a stock, it must exhibit a confirmed up-trend in the monthly, weekly and daily charts.

There were 381 new 52 week highs and only 24 new lows in my universe of 4,000 stocks on Wednesday.   Wednesday was the 46th day of the QQQQ short term up-trend. With so many daily highs, and the GMI at 6, it looks to me like it is possible to go long stocks near new highs again.   It will be interesting to see whether NFLX will hold on to its post-earnings rebound.   Both AAPL and GOOG did not.   I am still more cautious than usual, given my concerns about the municipal bond crisis.   See this interview with George Soros. AGO, the municipal bond insurer,   has been a good short, but has declined for 7 straight days.   A lot of the stocks that I follow are now rebounding from   oversold levels (CAVM, RVBD, PANL, APKT, CF, NTAP, VIT, BHP, ARMH BIDU, TDSC, OPEN, KKR). The key is whether they can climb back above their recent peaks.   A strategy I like is to buy a small amount of a rebounding stock and to place a stop loss order below its recent support level. In that way, I can participate with minimal risk if it resumes its decline.

The key to this market for me is whether AAPL and GOOG can go on to new highs.   (See daily chart of AAPL below.) Each fell from their peak on high volume last week after earnings were released and are now rebounding on lower volume.   I am cautiously awaiting the outcome.   Meanwhile, a lot of the key small cap tech stocks have broken their short term up-trends.   There were only 128 new 52 week highs in my universe of 4,000 stocks on Tuesday.