My indicators keep getting stronger. The GMI is 4 for the first time since August 20, 2008. There were more new highs than lows (22 vs. 6) in my universe of 4,000 stocks on Thursday. The Worden T2108 indicator is at 83%, the highest reading since 89% on January 6. This is typically an over-bought reading, but in July, 2003 when the market began the new bull market after the preceding bear market, the T2108 reached 93% as the new bull market got going. Thus, the current high reading may represent the burst of buying after a long bear market. Finally, the daily Guppy chart of the QQQQ suggests the beginning of a new up-trend.
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QQQQ counter-trend rally completes 11th day; Apple of my I-phone?
While the Nasdaq 100 tech rally completed its 11th day, the rise has failed to produce many new highs. There were 8 new highs and 20 new lows in my universe of 4,000 stocks on Wednesday. 71% of the NYSE stocks closed above their 40 day averages, reflecting the strong but not severely overbought reading in the T2108 indicator.
Four of the 8 stocks at new highs are on my IBD100 lists: SNDA, MNRO, AZO and ROH. MNRO has a strong chart, rising on large volume. Both AZO and MNRO are in the auto parts/repair business. During a recession, people keep their old cars longer and must eventually repair them.
I remain cautious and largely in cash. I maintain small long positions in QLD (the ultra long QQQQ ETF), AMZN, NFLX, AAPL and GMCR. My sons tell me the new iphone release this summer will be extraordinary. This anticipated development may be why AAPL is holding up pretty well lately.
Is the bear market over? Check out my “Guppy” charts
Everyone wants to know if the bottom of this bear market is finally in place. The truth is that only liars and lucky people can really call a bear market bottom close to its occurrence. I noticed years ago that the pundits on TV usually felt comfortable calling a new bull market about six months after the actual bottom.
The true trend follower rides the current trend until his/her indicators suggest a new trend has begun. But all trends are not equal. Within a longer term down-trend there are short term up-trends. Currently, we have had a daily up-trend within a weekly and monthly down-trend. Day traders who monitor trends by the minute or hourly, for example, can trade numerous up and down trends within the longer term trend.
Thus, each person needs to determine his trading time interval when trying to trade trends. And one can trade different pots of money using different time trends. So I will not commit my university pension money to the long side of the market when the weekly trend is down. I stay in cash during such periods. But I may trade with my IRA funds during a daily up-trend that is occurring withing a weekly down-trend. However, I have had more success trading consistent with the weekly trend and tend to stay mainly in cash even in my IRA during a weekly down-trend. It is hard to resist buying some recovering stocks during a rally like we have just had, even though my longer term trends are still down.