My indicators remain at extremely low levels and the major indexes remain in down-trends. There were only 13 new highs and 1,576 new lows in my universe of 4,000 stocks on Friday. I see no evidence of any strength yet. EBS and LPHI, two promising stocks at new highs that I have written about, showed large price swings last week. This is typical of weak markets, when the few stocks that hit new highs cannot hold the gains. It is folly to go long during the time when the general market averages are in down-trends. I remain in cash and hold put options on a few stocks.
Dr. Wish
GMI: 0; GMI-R: 0; T2108: 3%; 38th day of QQQQ short term down-trend
My General Market Indicators (GMI, GMI-R) remain at zero. The Worden T2108 Indicator is at 3%, still in extreme low territory where bottoms typically occur. Thursday was the 38th day of the current QQQQ short term down-trend. There were 4 new highs and 1,139 new lows in my universe of 4,000 stocks on Thursday. October 10 is the last day we had more new lows (2,832). So, many stocks were quite weak on Thursday, at least at the day's low. I have a "Rocket" scan in TC2007 that I run each day. I have used it in bull markets to find promising stocks to purchase. At Thursday's close, only 5 stocks out of 4,000 met my stringent criteria for possible rockets. Similarly, my "Darvas" scan based on that great trader's stock picking criteria yielded no stocks. This clearly is a market with few winning stocks on the long side. I therefore remain mainly in cash, while holding a few puts on stocks in down-trends.
GMI: 0; GMI-R: 0; 37th day of QQQQ short term down-trend; decline just beginning?
The GMI and GMI-R remain at zero. There were 3 new highs and 671 new lows in my universe of 4,000 stocks on Wednesday. The indexes I follow remain in solid down-trends and I made a little money in my IRA as my put options increased in value…..
I have been going to trader meet-up groups the past three years and had noticed that attendance was sometimes a good contrary indicator at market tops and bottoms. When few people attend the meeting it often signifies disgust with the market and a possible bottom. Last night we had the largest attendance ever, an ominous sign to me. When I mentioned this to the group they all laughed, which I interpreted to mean that they did not think the market was in for a further decline. Many of the new attendees were noticing the volatility of the market and wanted to find ways to profit from it. Could it be that as long as we have lots of people looking for opportunities, this market will not bottom? Capitulation (and bottoms) usually occurs when people want no part of the market. Moreover, when I look at this monthly chart of the QQQQ, I see a market that may be closer to the beginning of a decline than to the end.
Note that the shorter term moving average (dotted line) has just crossed below the longer moving average (red line). In contrast, the 2000-2002 market spent two years with this short moving average declining below the longer average. Maybe we should get ready for a long decline and stop trying to find a bottom. What do you think?