All Posts

With the GMI back to 5 and the short term trend about to turn positive, it looks like we may have had another small and short lived correction. IBD still sees the market in a correction and is waiting for a follow-through day to this current snap back rally. I still think this rise could be a brief bout of year end mutual fund buying (window dressing) that could quickly disappear with the new year.   So I must be very nimble and ready to exit if the market fails to surpass its recent peak of 2079 on the S&P500 and 106 on the QQQ. Below is the daily chart of each index. This rally   seems a little too frenetic to me–climax run? Given that the market always falls quicker than it went up, the next decline will likely be a doozy. Note the 30 day average (red line) of both indexes is flat, which often leads to a lot of whip-saws. Failure of these averages to hold this line on Friday would be a very bearish sign to me.

It is too early to discern if Wednesday’s bounce from oversold will hold. This is likely a good opportunity for me to reduce my holdings in mutual funds in my university pension accounts. I am not willing to risk a return to the losses my 403 (B) sustained before yesterday’s bounce. Failure of this bounce to hold would be bloody. For now, the short term trend of the QQQ remains down.

On the other hand, a lot of my oversold bounce alerts in TC2000 went off on Wednesday. If the market were in a short term up-trend I would buy some of these bouncing stocks.   An example would be CELG, which bounced from its lower 15.2 daily BB and crossed above its 30 day average. Check out this daily chart. Note the similar bounces that occurred last October and again in November. If I had purchased CELG yesterday, I would have placed my sell stop just below the bounce, around 108.25. This is one of the best scans that I teach my university students to run on TC2000. I also put my students on a list to receive all of my TC2000 alerts as they are triggered. Let’s see if CELG (and others like it) can hold this bounce for a few days.

Market is getting very oversold.   T2108 is at 27%, 598 daily new lows, 62% of stocks with an oversold 10.4 stochastic, GMI and GMI-2 both= 1. And yet the longer term trend of the market is still up, in a Weinstein Stage 2 up-trend. Based on my 45+ years of trading experience I think the market has further to decline. So many people have come to     believe that the market only rises, based on the past 5 years of gains.   When the new year starts many may be willing to sell and take their gains in the new tax year. And then there are all of the retiring boomers who will panic from the fear of their imminently needed retirement savings diminishing. I just remember a lot of significant market tops occurring in January…….

Tuesday was the second day of the new $QQQ short term down-trend. I own mainly SQQQ and will accumulate more if this decline lasts 5 days. Since 2006, about 40% of   short term down-trends (the way I define them)   have lasted     5 days or less. Once one passes 5 days, it often goes a lot further. I remain largely in cash in my trading accounts. If I could frequently trade my mutual funds in my university pension, I would have transferred some money to money market funds.   We need to be super cautious and to read what Mr. Market is telling us about his likely direction.

This monthly chart of the SPY shows that the current decline hardly registers. This could mean that the current decline will be tiny or that it is yet to begin…. (red arrows show month of May to track the sell in May signal)