Dr. Wish

GMI: +4; Reversal coming?; Next week shoud tell

@ 12:01 am

The market internals reversed Thursday and showed unusual strength.  The GMI rose to +4 and could rise to +6 with another advance tomorrow.  There were 240 new yearly highs in my universe of 4,000 stocks and the percentage of stocks in a short term up-trend has gradually risen from a low of 24% on 9/26 to 29% on Thursday.  Gmi929_1 The percentage of stocks closing above their 10 week average has risen from 37% on 9/23 to 47% by Thursday.  Between 78-83% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Thursday.  There were 105 successful 10 day new highs.

I am still cautious about this rally because it is occurring at the end of the quarter.  Mutual funds may be loading up on recent winners in order to look smart when they release their 3rd quarter portfolios.  (This tactic is called window dressing, because the unsuspecting investor cannot tell the exact date that these shares were acquired and the fund manager appears smart to have bought these winners.)  I am still inclined to wait until next week to determine the market’s probable direction.

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

GMI: +2, little change Wednesday

@ 12:26 am

I got back too late from the IBD Meetup to do a full post.  The GMI remains at +2 and there were no significant changes in my market indicators.  I think we will have to wait until next week when the end of the quarter "window dressing" by the mutual funds is finished.  Early October should reveal the market’s direction.

GMI holds +2; ISRG and ADSK; IBD Meetup tonight

@ 8:10 am

Not much change in my indicators Tuesday.  The GMI remains at +2. Gmi927   Between 40-50% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes rose.  There were only 67 successful 10 day new highs–stocks that hit a new high 10 days ago and closed higher Tuesday than 10 days earlier.  Buying new highs has not been a strategy likely to show profits.  With only 25% of stocks in a short term up-trend, this is not the time to be positioned long on many stocks.

Nevertheless, I could not resist buying some ADSK and ISRG.  Isrg_1 Note the above average up volume Tuesday on ISRG as it broke above its 30 day average (red line, click on to enlarge).  ISRG looks like it has completed its consolidation after a huge move in July. Both stocks seem to be bouncing from support, probably in anticipation of good 3rd quarter earnings.  I bought these and immediately placed stop losses below their moving averages.  I am still mostly short and in cash.

Tonight is the monthly IBD meetup and I will be able to  assess group sentiment.

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