The GMI fell to 3, and there were 267 new lows in my universe of 4,000 stocks and only 43 new highs. The QQQQ indicators remain positive. In fact the GMI-R rose to 6, reflecting the strength in the QQQQ. Let’s see if AAPL can hold last night’s extended market gains. If it can’t, the QQQQ may follow the other indexes down.
Dr. Wish
GMI: 4; GMI-R: 5; Techs show strength; Mainly in cash
The GMI fell to 4 (of 6) and the GMI-R is now at 50%. There were more than twice as many new lows than new highs in my universe of 4,000 stocks (226/91) on Friday, an ominous sign.
Many of the new lows are banks, apparel companies and trucks, possible indications of a slowing economy. Less than one half (47%) of the Nasdaq 100 stocks closed above their 30 day averages, a level not seen since late last August. I should have noticed earlier last week that there are now 3 times as many bullish advisors than bearish advisors in the latest poll, with over 60% being bullish–almost at the 5 year high. Finally, the Worden T2108 indicator is now at 44%, down from 82% and suggesting to me that this market pendulum is falling out of the bullish range. All of these may be signs of some type of a top in the market.
On the other hand, the tech stocks, as indicated by the Nasdaq 100 index remains in an up-trend. And the put/call ratio on Friday broke 1.00 (1.08) indicating that 108 puts were traded for every 100 calls. This is a sign that options players are getting bearish, at least short term, a good contrary signal. And we are approaching a seasonally strong end-of-year period for the market. This decline could set up a nice year-end rally. So, maybe Monday will bring a reversal to the up-side, after the hysterics and media pundits realize that 2007 is not 1987.
So what to do? Almost all of my covered call stocks were exercised and bought out this weekend. So, I am left with a lot of cash. With the markets so volatile, I prefer to stay in cash and write more calls at the end of October. I am willing to forfeit some additional premium in order to gain a little more clarity on where this market is heading. I will also consider closing out my QLD position early this week if the QQQQ fails to show sustained strength. I know the market climbs a wall of worry, but this wall appears to be lined with barbed-wire and land mines.
GMI: 6; GMI-R: 10; new lows climbing; COMV climbs
The GMI remains at 6 and the GMI-R at 10. In spite these strong readings, it is disconcerting to me that the number of stocks in my universe of 4,000 that are hitting new lows is climbing. On Thursday, there were 157 new highs and 153 new lows. It is strange to see the steady climb in new lows. Many of these lows are regional banks that are in the midst of large declines. As Judy said to me, this may be the reason the Fed reduced rates. They may have foreseen the bank carnage. Speaking of Judy, her stock pick, COMV, that I wrote about on October 10, at 35.01, moved up again on Thursday, to 38.46.