General Market Index (GMI) table

I find repeatedly that if I can buy TQQQ on Day 1 of a new QQQ short term up-trend and if the up-trend lasts, it beats almost all individual stocks. Similarly, SQQQ beats almost all individual stocks in a sustained down-trend. The key is to buy on Day 1 and hold, but to sell quickly if the trend reverses.

I am so disappointed and angry that social media and the media pundits are, with few exceptions,  telling the masses to stay in a declining market. If one got out when I said I was in February, one can just calmly wait out the decline. I do not have to reinvest at the bottom, just return in a new up-trend before the market rises to the point I got out. Stop trying to predict a bottom and wait for it to define itself. Young investors can wait out a decline and keep dollar cost averaging into SPY. People near retirement may not have adequate time. It took 25 years for the DOW to come back to the 1929 top. But the market always comes back……

As to individual stocks, I, like Nicolas Darvas and William O’Neil,  buy only when a stock trades at or near an ATH,  I am not interested in buying the fallen leaders until or IF they ever trade at an ATH. We never know in advance when a rebound will end. The stocks that reach an ATH early in a market up-trend are proving themselves worthy of my attention and money. With the GMI=0 and RED, I must remain in cash. On Friday there were 4/6119 US stocks that reached an ATH (PM,TATT,ATO,OPOF).  When so few stocks trade at an ATH, it is too risky for me to buy one. But they are worth monitoring.

On May 21, I shall present to the Boston IBD meetup group. The online meeting will be open to all. I will post a link when I receive it. You can register and just watch the recording if necessary.

Last week I posted that when a stock in a down-trend has a gap below the declining 4 wk average it often means the stock is extended on the down side and it will often rebound to close the gap. See on this weekly chart where the original gap was and that it has been closed. This pattern happened last week with the SPY, QQQ and DIA. To indicate emerging strength, the index must first close the week above its 4wk average. Then when the 4wk avg rises above the 10 wk avg and then the 10 wk avg rises above the 30 wk average we have a possible up-trend.  Right now the 4wk (red dotted) is well below the 10wk (blue dotted) which is declining below the 30 wk (solid red). It takes a lot of discipline to refrain from  buying the sudden sharp bounces in declining stocks way below their highs. The most successful traders know how to do this. I prefer to wait to buy the first stocks that come through the market carnage and reach ATHs. Most of these will emerge once the indexes have begun a strong advance. That is also when the GMI , now RED, will flash Green. With the 30wk average curving down, we may be at the beginning of a Weinstein Stage 4 downtrend. See TraderLion’s just released Stage Analysis Model Book.  When a Stage 4  down-trend unfolds, the index sometimes rebounds to kiss the 10 week or even the 30 week average. This can be a good time to sell out if one had missed exiting. Plenty of time for me to get back on board once the new up-trend is established. Look at the nice long advance that began in late 2023, that I noted on this chart.

The 10 week average of QQQ is now declining below its 30 week average, for the first time since February, 2023. That usually happens at the beginning of a major decline. And yet T2108 is at at 7%, an extremely oversold level where prior bottoms tended to occur. I am just about all in cash and will not jump in long at the first rally. If I had bought and held the 3x leveraged inverse ETF, SQQQ,  that tracks QQQ on Day 1, it is now  up +65%.  QQQ is down -18%.  I nibbled at some SQQQ and TWM much later and have nice gains.

I am amused at the media pundits saying that the current  2 day 10% decline is a historic crash when I remember the one day drop of 20% in Oct, 1987 and the huge decline in 1974.

No one knows how and when this decline will end. I am extremely sad for my fellow Boomers who have seen their retirement and life savings take a big hit. They  are one reason I post this blog. Youth can wait decades, if necessary, to recoup their losses. The rest of us may not have enough time.

As for the experts who claim it is impossible to time the market, I say look at my posts going back to 2006. I avoided the declines in  2000, 2008, 2020, 2022 and it was really not difficult. Just review how I use Stage Analysis, my GMI, Guppy charts and 10:30 weekly charts. I show my class slides of the indexes going back to 1929 that demonstrate how to apply stage analysis. I also publish here what I am doing.

I am content to sit on the sidelines now and wait for evidence of a new up-trend. It is far easier to profit on the long side when the GMI = 5 or 6 and is flashing GREEN.