Dr. Wish

GMI: +1; Rotten to the core

@ 12:01 am

There was not much change today in my indicators.  The GMI remains at +1, indicating that this market continues in a down-trend.  Gmi1011 One more decline in the QQQQ should turn its weekly indicator negative, and the GMI to zero.  I had hoped the market would bounce for a few days as new earnings were released.  However, the failure of Apple to bounce after Tuesday’s close suggests to me that this market is rotten to the core.  Look how bad the market internals have become.  Only 27 of the 127 stocks that hit a new yearly high ten days ago closed higher on Tuesday than they closed 10 days earlier.  The dearth of successful 10 day highs contrasts with the number of successful 10 day lows–47 out of 75.  Buying stocks at new highs 2 weeks ago has not been as profitable as shorting new lows.  There were 34 new highs Tuesday and 185 new lows.  Only 19% of the 4,000 stocks in my universe of stocks are in a short term up-trend and only 27% are above their 10 week averages.  Only 45% of the stocks that have doubled this year are above their 30 day averages.  And more stocks are within 5% of their yearly lows (15%) than their yearly highs (10%).  Only 30% of the Nasdaq 100 stocks rose Tuesday, along with 24% of the S&P 500 stocks and 29% of the Dow 30 stocks.  Tuesday was the fifth day (D-5) in the QQQQ down-trend.  If things continue to deteriorate, I might start looking at gold mining stocks.  Note that ASA is already flying high–and it pays a dividend.

Please send me your feedback at: silentknight@wishingwealthblog.com.

GMI: +1; Another nasty day; optimists, addicts and masochists should buy stocks

@ 12:01 am

The GMI is still +1 and the market looks pretty bad.  Housing stocks look real bad.  I talked about shorting them weeks ago.  I did, for a while, and am now waiting for a bounce to put on a new short.  Only 21% of the 4,000 stocks in my universe of stocks remain in a short term up-trend.  Gmi1010 There were 38 new highs and 140 new lows on Monday.  Only 31% of the Nasdaq 100 stocks advanced on Monday, compared with 17% of the S&P 500 stocks and 33% of the Dow 30 stocks.  Only 30% of stocks closed above their 10 week averages.  This is the fourth day (D-4) of the QQQQ down-trend. More stocks are closer to their 52 week lows (14%) than to their highs (11%). In my humble opinion, only incurable optimists, market addicts and masochists should buy stocks during this confirmed down-trend.  There is plenty of time to go long after the GMI signals an up-trend.

Please send me your feedback at: silentknight@wishingwealthblog.com.

Nicolas Darvas trading techniques require markets at all-time peaks

@ 12:49 pm

The basic principles of my method are in fact quite simple:

Firstly, except in exceptional cases I only buy the stock of companies in new or developing industries, i.e., companies whose growth and earnings prospects look highly promising.   I never buy stocks in established industries, in companies with huge capitalizations, or in companies which are already so big that the prospect of substantial growth is highly unlikely.

Secondly, having found such lively stocks, I certainly do not buy them straightaway.   I first check the overall market trend to ascertain whether stocks in general are in an uptrend.   I then check whether the stock belongs to a strong industry group, i.e., a group that is performing well in the market relative to other groups. Only when I have satisfied myself on these two points do I look in more detail at the stock that interests me.

Why all these precautions?   Because I like to be sure that the odds are in my favor.   If the market is in a downtrend, and the industry group is performing weakly I know that the cards are stacked against me and that my chances of making big profits are poorer than if the market and the industry are strong.   You cannot be too careful in the stock market.

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