One of my readers questioned my last post. How can I be in cash or short when the QQQQ is in an up-trend, now in its 12th day? Well, for one thing, many of the stocks with break-outs have been failing. Also, one of the GMI components measures whether the IBD growth mutual fund index is above its 50 day average. Well, this index has been below its 50 day average since mid-June, and I have never consistently made money trading growth stocks when this indicator is negative. Finally, instead of having the 100 new highs each day that are required by the GMI, we have been having only 10-14 the past few days. If only 14 stocks out of 4,000 can hit a new high each day, then it is unlikely that stocks are strong. So, the QQQQ remains in an up-trend, but I am unwilling to trade the QLD right now. I think it better to stay in cash for now. If the QQQQ up-trend strengthens, I may wade in again.
Dr. Wish
GMI: 3; GMI-R: 5; mainly in cash
The GMI fell to 3 (of 6) and the GMI-R to 5 (of 10). There were 11 new highs and 146 new lows in my universe of 4,000 stocks on Tuesday. With many failed break-outs, and more new lows than highs, this market looks treacherous on the long side. Better to be in cash or a little short.
