Dr. Wish

GMI +6; Leading stocks weak

@ 12:01 am

The GMI stayed at +6 but many indicators weakened Monday.  Gmi1128 Only 15% of the Nasdaq 100 stocks advanced, the lowest percentage since October 27.  The next day, the current rally in the QQQQ began.  23% of the S&P 500 stocks and 37% of the Dow 30 stocks also rose on Monday.  There were 184 new highs among the 4,000 stocks in my universe.  Still there were large decreases in the percentage of stocks in a short term up-trend (-4) and that closed above their ten week averages (-7).  Only 70% (-14%) of stocks that doubled in the past year are now above their 30 day averages.  I added a new indicator today, the percentage of stocks that have doubled in the past year that hit a new high.  Only 18% of the doublers hit a new high on Monday.  Thus the strongest stocks did not appear to be very strong.  Tuesday was the nineteenth day of the current QQQQ rally (U-19).

NOTE:    A NEW SECTION TO THE BOTTOM RIGHT PROVIDES LINKS TO MY FAVORITE PRIOR POSTS.  THESE INCLUDE MY STRATEGY POSTS, DEFINITIONS OF THE GMI COMPONENTS, AND MY ANALYSIS OF WHY THE TRADING TECHNIQUES OF THE GREAT NICOLAS DARVAS WORK BEST DURING BULL MARKETS AT ALL-TIME HIGHS.

How have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com. 

GMI: +6, WPM shows continuing strength; Rally continues–but for how long?

@ 12:07 pm

The GMI remains at the maximum +6, and has been an excellent indicator of the market’s primary direction.  Gmi1125 There were 158 new highs in Friday’s shortened session, down from 351 on Thursday.  Much of the pre-rally gloom seen in mid-October has dissipated.  Friday was the eighteenth day in the QQQQ up-trend (U-18).  Between 55-63% of the Nasdaq 100, S&P 500 and Dow 30 stocks advanced on Friday.  60% of the 4,000 stocks in my universe are in a short term up-trend and 69% closed above their 10 week averages.  27% of stocks are within 5% of their 52 week highs.

The WPM also shows improvement in the stocks of all five market indexes.  Wpm1125 80% or more of the stocks in these indexes closed above their 30 day averages, and 70% or more closed above their 30 week averages.  The only exception was the S&P small cap stocks (63% above their 30 week).  Again, the small stocks are lagging the others. ………………………..

While the markets are strong, none of these statistics can tell us when this rally will end.  Trend followers, by definition,  follow the trend–they do not lead it.  We will therefore have to give up some of our profits before we discern a change in trend and sell out.  This is the price we pay to avoid selling too soon in the hope of getting a larger gain.

NOTE:    A NEW SECTION TO THE BOTTOM RIGHT PROVIDES LINKS TO MY FAVORITE PRIOR POSTS.  THESE INCLUDE MY STRATEGY POSTS, DEFINITIONS OF THE GMI COMPONENTS, AND MY ANALYSIS OF WHY THE TRADING TECHNIQUES OF THE GREAT NICOLAS DARVAS WORK BEST DURING BULL MARKETS AT ALL-TIME HIGHS.

How have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com. 

Reader comment; GMI: +6: Strong market; Nasdaq in long term uptrend?

@ 12:01 am

Reader comment, received 11/23:

    I have used your blog as part of my trading strategy over the last six months. The CANSLIM method depends on the direction of the market. Your indicator is something that I look for in order to determine whether or not I am in the market. I use a number of
indicators and yours is the "tie breaker". Thank you!…………………………………………….

I use the GMI the same way as the above reader–to determine whether to be in the market on the long or short side.  I always trade consistent with the GMI…………………………………

This market keeps humming along in  a nice up-trend.  The GMI remains at a maximum +6 and detected this rally in its early stages.  Gmi112305 Growth stocks at new highs have been strong.  There were 111 stocks that hit a new high 10 days ago that closed higher on Tuesday than they did 10 days earlier.  There were 351 new yearly highs in my universe of 4,000 stocks and 82% of the stocks that doubled in the past year closed above their 30 day averages. More than three times as many stocks (26% vs. 7%) are within 5% of a new high than a new low.  Two thirds of stocks closed above their 10 week averages and 59% are above their 30 day averages.  The Nasdaq 100 stocks lagged the market on Tuesday again, with 54% gainers, compare with 65% of the S&P 500 stocks and 77% of the Dow 30 stocks………………….

The monthly chart of the market can provide a context for the current trend.  This monthly chart of the Nasdaq Composite index Comp112305 presents a revealing picture of the strong uptrend from 1994-2000, followed by the substantial decline that bottomed in 2002.  Since the initial rise from the 2002 bottom, the Nasdaq has been basing with a slight up-trend.  The 30 month moving average (red line) has finally complete a rounding bottom and appears to be on the rise.  No one knows how long this up-trend will last.  However, to me, this pattern does not justify the fears expressed by many media pundits that the Nasdaq has come too far too fast.  While we clearly are not following the path of rapid increases that occurred from 95-2000,  the Nasdaq market does appear to be in the early stages of a long term up-trend.

NOTE:    A NEW SECTION TO THE BOTTOM RIGHT PROVIDES LINKS TO MY FAVORITE PRIOR POSTS.  THESE INCLUDE MY STRATEGY POSTS, DEFINITIONS OF THE GMI COMPONENTS, AND MY ANALYSIS OF WHY THE TRADING TECHNIQUES OF THE GREAT NICOLAS DARVAS WORK BEST DURING BULL MARKETS AT ALL-TIME HIGHS.

How have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com.