Googlemania, GMI +5 and growing stronger

To my visitors: I am only one trader, not a guru, and not a financial advisor.  I am presenting my own opinions and my own experiences and people are welcome to decide for themselves what, if anything, on this site is of value to them.  Please refer to the additional comments, highlighted in red, at the end of this post.

Everywhere I turn I find articles on GOOG. Cramer was on CNBC today and on his MadMoney show this evening, taking credit for being an early believer in this stock.  (I have to admit I became interested in GOOG after listening to Cramer’s reasoning about projected earnings and suitable PE levels.) Goog601  This is all fine, but when the bandwagon gets so crowded I become a little skeptical. And when the chart starts to go into a vertical rise on the highest daily volume in 4 months, I need to take stock (pun intended).  The stock is very far from its 50 day average.  I think GOOG is an excellent long term play.  And I suspect that there will be serious buying at the end of this month (quarter too).  Cramer mentioned this possibility today, too–he must have read my post yesterday about mutual fund end-of-quarter window dressing.  So, even if we get this end of the month surge in GOOG, we still could get some weakness before then.  I do not know what will happen, nobody does.  Therefore I intend to hold my shares and not make new purchases until the stock reacts a little or forms a plateau.  As you know, I began SLOWLY accumulating GOOG in April after that delicious gap up.  Throughout the rise, I have my stops in place just in case something ugly happens. So, for now, I will just watch the action from the sidelines…………………………….

The GMI remains at +5, but is getting close to a +6.  Gmi601 This is because there were 243 new 52 week highs in my universe of 4,000 stocks.  That means we will probably  get 100 successful 10 day highs soon. The Nasdaq 100 stocks (measured by the QQQQ) is now in the 18th day of the uptrend (U-18).  There were more than 10 times as many new highs today than new lows in my universe of stocks.  In addition, 81% of the Nasdaq 100 stocks rose, 80% of the S&P 500 stocks and 77% of the Dow 30 stocks.  There were 54 successful 10 day new highs and only 10 successful new lows.  (See my post on 4/26 in the archives for components of the GMI.)  The train has left the station.  The question remains as to where and when the train will stop and/or reverse. Right now, I remain comfortably long stocks with my stops in place just below suitable support levels.  I hope all of you are profiting from this uptrend and are not resisting it.

Send me your feedback at silentknight@wishingwealthblog.com

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

A mixed day, trend-followers, GMI: +5

To my visitors: I am only one trader, not a guru, and not a financial advisor.  I am presenting my own opinions and my own experiences and people are welcome to decide for themselves what, if anything, on this site is of value to them.  Please refer to the additional comments, highlighted in red, at the end of this post.

Today was a mixed day, and the GMI remains at +5, as we complete day 17 of this QQQQ uptrend (U-17).  Gmi531 There were 35 successful 10 day new highs and only 11 "successful" new lows.  More than 70% of the 49 stocks that hit new highs 10 days ago, closed higher today than they closed 10 days ago.  There were 155 new 52 week highs in my universe of nearly 4,000 stocks, and only 23 new lows.  What is somewhat troubling is that only 36% of the Nasdaq 100 stocks rose today, 32% of the S&P 500 stocks and only 7% (2) of the 30 Dow stocks.  So, while there were a large number of new highs, most stocks did not rise today.

Still, some of the stocks I have been discussing hit new highs today, including GOOG, BOOM, NSI, MW, PNRA  (I own some of these).  A sign of a bull market top is weakness in the leaders.  We will therefore continue to monitor these stocks for any signs of weakness–clearly they are still very strong.  Moreover, given the strength of the GMI, I am not in a defensive mode yet.  It will be interesting to see whether the market can bounce back tomorrow……………………………………..

In my prior post, I said I was an orthodox agnostic when it came to believing in a rationale for market moves.  Since then I read an interview in Technical Analysis of Stocks & Commodities, June edition, with Michael W. Covel.  Mr. Covel recently published the book, Trend Following: How Great Traders Make Millions in Up or Down Markets. In the interview, Covel says, "A trend-follower doesn’t need to know the "why" of market behavior during trends.  They just need to know the price.  A lot of trend-followers don’t even want the name of the markets.  They just want the price data and they can tell you whether they can trade it by the price data alone.  I think this kind of mentality is odd to most people."(p. 55)

I guess Darvas, Livermore, O’Neil and a host of other gurus would be called trend-followers today.  I don’t feel so weird about my orthodox agnostic comment anymore.  I am in good company.  However, Covel is describing the most extreme case of trend following, someone who needs no fundamental information about a stock other than its price and volume–an approach we call in my field, blind empiricism.  Most of the successful gurus I admire wanted to trade with the trend, but also factored in other information about the company’s profitability and industry.  By the way, I was disappointed with Covel’s book.  It merely makes the case that specific trend-followers have been successful, without providing any details of how these people achieved their success. Borrow it from your local library.

Send me your feedback at silentknight@wishingwealthblog.com

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.