Dr. Wish

GMI: 5; new QQQQ down-trend; Dow theory warning?

@ 12:01 am

NOTE:  THE PROSHARES ETF’S WENT EX-DIVIDEND YESTERDAY AND THEIR PRICES WERE REDUCED BY THE DIVIDEND.

Well, the GMI weakened 1, to 5 on Wednesday.  Only 34% of the Nasdaq 100 stocks rose, as did 51% of the S&P 500 and 33% of the Dow 30 stocks.  Gmi1220_1 43% of the stocks on the IBD 100 list from 12/18 also rose.  After 86 days of an up-trend, the QQQQ is now in a short term down-trend (D-1).  This does not mean that the down-trend will last long.  But for now, I am short the QQQQ (by owning the inverse ETF, QID) and mainly in cash.  The QQQQ is acting very differently than it has been.  AAPL and GOOG continue to weaken, and RIMM is just holding on.  I believe the odds are turning against growth/tech stocks.  As the GMI declines, I will add to my short position.  Stay tuned………………………………..

Ever hear of the Dow theory?  It seems that the Dow Industrials and Dow Transportation averages should each confirm the major trend.Dj20 Has anyone noticed that the Dow Transportation average appears to be faltering?  In fact, one might even see a head and shoulders top in this chart.  Is this another sign of impending market weakness? Why would the transportation stocks be weakening in such a strong economy?

Please note my disclaimer at the bottom of Wednesday’s post.

GMI: 6; No longer long stocks; QID

@ 12:01 am

The GMI held to 6 Tuesday–barely.  Another down day in the QQQQ will reduce the GMI at least one point.  Note there were only 126 new 52 week highs in my universe of 4,000 stocks.  Gmi1219_1 Only 46% of the 514 stocks that hit a new high 10 days ago closed higher on Tuesday than they did 10 days earlier.  Failure of new highs to hold up is a sign of market weakness.  Only 37% of the Nasdaq 100 stocks advanced, along with 57-60% of the S&P 500 and Dow 30  stocks.  The Nasdaq 100 stocks are clearly lagging.  Only 49% of them closed above their 30 day averages, the lowest percentage since this rally began in mid-August, and well down from a peak of 88% reached in October.  The IBD 100 list from 12/18 did better on Tuesday, 54% of them advanced and 72% remain above their 30 day averages. RIMM fell on Tuesday, but GOOG and AAPL bounced…….

I am sorry, but I don’t like this market and I have told you I am a chicken.  It has been 17 days since the QQQQ hit a recovery high, the longest such stretch since this up-turn began in mid-August.  Tuesday was the 86th day of the current up-trend in the QQQQ.  The MACD for the QQQQ continues to decline.  I am out of all of my longs, and holding a small pilot position in the QID.  QID will rise if the QQQQ declines. Meanwhile, I will earn 5% interest in a money market fund as I wait for a clear trend.

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GMI:6; GMI-S: 63; Ominous signs

@ 12:01 am

The GMI is still 6, but the GMI-S fell 18, to 63.  The short term indicators for the small cap stocks (IJR) are almost all negative.  Only the Dow 30 stocks are holding up (DIA).  Only 24% of the Nasdaq 100 stocks advanced on Monday, Gmi1218 along with 31% of the S&P 500 stocks and 57% of the Dow 30 stocks.  Even the stocks on the new IBD 100 list published on Monday were weak; 26% advanced, though 17 hit a new high during the day.

When I see the market leaders weaken, GOOG (-3.6%) and AAPL (-2.6%), I become concerned about the market trend.  Yes, the GMI is at a maximum 6, but it would not take much more of a decline in the QQQQ to cause it to rapidly weaken.  Let’s not try to anticipate the market, however.  We can wait for a definite sell signal to take action.  Just remember, this market has been in a strong up-trend for 85 days. The 10 day average has closed above its 30 day average every day since 8/16 when the rally began.  During the huge rally in the QQQQ that began in March, 2003 after the 2002 bottom, the 10 day average closed above its 30 day average for 103 days. I have to suspect that we are not far from at least a temporary pause in this up-trend.

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