General Market Index (GMI) table

This is a critical week for the market. Failure of the SPY to hold its 30 week average (solid red line) will suggest to me a failed rebound and the likely beginning of a Stage 4 down-trend. Weakness is likely now anyway because of the end of the 2nd quarter and associated mutual fund window dressing. The 4 week average (red dotted line) is now curving down, a sign that the recent rebound is over. The time to be in the market is when the 4 week average is climbing, as was the case during much of 2017. That is when making money on the long side is much easier. The SPY would have to retake its 4 week average for me to buy stocks again.

The 4 week average of the QQQ is also turning down, but the QQQ is stronger, as it remains well above its 30 week average.

The GMI remains Red, at 2 of 6. I changed the 6th component of the GMI2, substituting  an oversold daily stochastic for a close of the QQQ above its 5 month average.

Last weekend I wrote that only 6 of 38 country index ETFs I follow were above their rising 30 week moving averages (Stage II up-trend). Now there are only 3–US (SPY), Ireland (EIRL) and Israel (EIS). The markets around the rest of the world are flashing signs of weakness. I have sold all my positions  in my trading accounts and remain in cash in my university pensions. Chickens live to fly another day. If one cannot be out of the market then s/he may be addicted to the thrill of trading. All of my trading gurus, including Jesse Livermore, have said that there is a time to be on the sidelines.

After failing to hold its green line break-out (GLB, see glossary) earlier this year, GS is now in an unfolding Stage 4 down-trend. When GS is ill, it is ominous for the entire market. (see weekly charts)

The global bank index is also forming a Stage 4 decline. I rest my case.

Meanwhile, reflecting the strength of the US markets, the GMI is at 5 (of 6).

During my 50 years of investing/trading I have learned that when my account grows suddenly very quickly and when many people tell me they are making money in the market (I see this now in tweets and chat rooms), the market often rests or tops. I sense we are at a time like this and I am holding on only for the end of the quarter mutual fund window dressing period to be over before I reduce my holdings. Too many speculative stocks, especially recent IPOs, are quickly doubling  (IQ, HUYA are examples). I was just mildly concerned, until I did the following analysis.

I have created a watchlist of 38 country market index ETFs across the world. I decided to look at them this weekend. I sorted them by whether each closed above its rising 30 week moving average. In the past, anytime the SPY closed below a declining 30 week average I went to cash and was minimally impacted by the ensuing bear markets of 2000 and 2008. I was very surprised and concerned to find that only 6 of the 38 (16%) markets  passed this test: The U.S. was the strongest (SPY), along with Qatar (QAT), United Kingdom (EWU), France (EWQ), Israel (EIS), and Ireland (EIRL). The remaining 84% failed my test. Some looked particularly weak to me: Russia (RUSL), Mexico (EWW), Italy (EWI), Thailand (THD), Turkey (TUR), South Korea (EWY), South Africa (EZA), Singapore (EWS), Brazil (EWZ), India (IFN). But Canada (EWC), Germany (EWG) and China (FXI) may also be topping.

Check out Turkey as an extreme example of a Stage IV down-trend. (solid red line= 30 week average)

And Germany, which may be topping.

And China

Compared with the U.S. (A close of the SPY back below its 30 week average would get me into 100% cash.)

With the U.S. now raising costs (by tariffs) for a lot of imported goods, it looks to me like the rest of the world may be heading for a recession, or worse. How long can the U.S. market diverge?

The GMI remains strong at 6 (of 6) and Green–for now.