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Blog post: $DIA, $QQQ, $SPY, $IWM all below their 30 week averages; But $NVO, $SBOW and $BMY had GLBs, see weekly charts and $ABBV

@ 6:08 pm
GMI3/6
GMI-22/9
T210848%

This year has been a miserable time for the major stock indexes and their components. Their weakness, reflected in my GMI table below, obscures the fact that there is still a bull market in nontraditional sectors, especially those related to oil drilling, agriculture, medical distribution and drugs. So although the traditional big caps and tech stocks are weak, there are other places one might look for winners. (But I remain mainly in cash.)  NVO, SBOW and BMY had green line break-outs (GLBs) to all-time highs (ATH) last week. A GLB indicates that the stock has reached an ATH, then consolidated for a minimum of 3 months and then broken out to a new ATH. For me, a GLB is the best indicator of a potential market leader. However, not all GLBs are successful. If I buy one, I sell the moment it closes back below the green line. Many times a stock has a GLB and then returns to it. As long as it does not close below the green line I retain it. If a stock closes below the green line and then returns above it I may buy it back.

Here are three GLBs I identified this weekend. All had above average trading volume last week, a good sign. Remember, break-outs are more likely to fail in a declining market. And the GMI is just 3 (of 6). On the other hand, the GMI2 table shows the daily 10.1 stochastics is very oversold (2.8)  a level where the market often bounces. ABBV is one recent example of a successful GLB, followed by the three new stocks. Most people do not understand that a break-out to an ATH can be the start of a major advance. Any stock trading at an ATH in this market environment has a lot going for it. If I miss the GLB, I might buy the stock if it later bounces off of a key moving average, like the 4 wk and 10 wk, see chart below for examples where these would have been good entries.

 

 

Blog post: Jesse Livermore said: “Finally there came the awful day of reckoning for the bulls and the optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation—without anesthetics.”

@ 9:25 pm
GMI3/6
GMI-23/9
T210848%

In the past when I took more chances I would wait for the 30 week average to curve down before taking my conservative university pension money out of the market. We have reached that point now with QQQ, DIA, IWM, and maybe SPY. However, as I wrote last November, I began to transfer my university pension money out then because of the technical weakness I saw in the market. I described my reasons for exiting the market last November in the Eastern Michigan AAII webinar I presented last January, that you may access on the Webinars tab on this blog.

The purpose of this blog is to share with people what I have learned from the markets the past 50+ years. In my opinion, a major decline is just beginning. While younger persons can wait out this cycle, I will not. It is much better for me to be in cash until the major trends turn up. Remember, after the 1929 debacle, it took 26 years for the DOW to come back to its pre-crash level. A lot of people made money trading in 2021 when the market averages repeatedly hit new all-time highs. That is when fortunes can be made. That is now over. I will reenter when the 30 week averages start rising again.

As the greatest trader, Jesse Livermore said:

“Finally there came the awful day of reckoning for the bulls and the optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation—without anesthetics.”

I have heard media pundits warn that once one gets out of the market no one rings a bell at the bottom to get back in–hogwash! If one exits something at $100 and it declines to $40, as long as you get back in before it climbs back to $100 you have come out ahead and with much less stress. See weekly charts for four index ETFs below. The solid red line is the critical 30 week moving average.