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On May 12, we had 1,625 US stocks at new lows. So today’s number of 1,115 is not as extreme. The GMI is now =0. It is so much easier to make money buying stocks when the GMI is Green and =6. The last time the GMI= 6 was November 18, near the market top! It had registered 6 for 24 straight days.

However, the indicator I find most useful in discerning a bottom is the Worden T2108 indicator. It can be found daily on TC2000 or created manually on other charting programs. I post T2108 every day on this blog. T2108 measures the percentage of NYSE stocks that are above their simple 40 day moving average. This monthly chart shows that T2108 is extremely low when it reaches single digits, below the green line. It closed today at 14% and dipped intraday to 9.2%  at the bounce on May 12.

Every year I tell my class that one should back up the truck and buy some SPY, not an individual stock, the next time T2108 is below 10%. I tell these aspiring undergraduates to use a very small percentage of their account and then to accumulate more only as SPY moves up and the bottom is in. However, each time T2108 gets that low I am usually too scared to buy SPY. That is because in order for stocks to become so oversold, the news is usually very scary. Since I went to cash in November, I promise that this time I will buy SPY,  I hope…..

I have rarely seen my indicators whip-saw like this.  Only one US stock out of 7,022, PAG, passed my weekly green bar scan. Time to be in cash. QQQ is back below key daily moving averages.

And this weekly chart shows a steady down-trend with the 10 week average (dotted) below a declining 30 week average. We cannot fight the tide. How easy it was to profit buying stocks when the 10 week was climbing above the rising 30 week. It makes sense to me to wait for that pattern to reappear.

Similar story for SPY.

My weekly green bar scan finds stocks that have recently reached an ATH, have 4wk>10wk>30wk averages and 4 wk avg is rising and stock bounced up off of the 4 wk avg this week and closed up today. Their relative strength vs SPY also must be at a 20 week high. And they must be >$30. I ran this scan on my watchlist of stocks recently listed on IBD50 or MS growth250 lists. I found only 6 stocks out of 782 passed the screen. They are ranked by close today/close 250 days ago. Thus, CEIX and LNTH have  tripled over the past year.

Here is a weekly chart of CEIX. Note that this week’s price bar is green and check out the 4,10,30 week averages. A rising stock will repeatedly close the week above its 4 week average. If I buy a green bar stock I place my stop below the low of the green bar and may move it below each successive green bar. Note CEIX had a GLB 5 weeks ago and the 10 week average (red dotted) is climbing nicely above the 30 week average (solid red). This is my favorite yellow band rocket stock pattern. A close below the 10 week average would also cause me to exit.