General Market Index (GMI) table

$QQQ short term up-trend reaches 20th day; GLB: $SHOP; bull markets like sex

@ 9:08 pm
GMI5/6
GMI-28/9
T210871%

The GMI is at only 5 (of 6) because my 10 day successful new high indicator was negative. Only one third of the stocks that hit a new high 10 days ago closed  higher than they did 10 days ago. When stocks that hit a new high do not continue to rise, it is one sign of potential weakness I track. The QQQ has closed above its 10 week average for 5 weeks but the SPY has done so for 9 weeks. As you know, the tech stocks measured by the QQQ, have just recently revived. In fact, the QQQ last week broke above its high of 120.50 reached in April  2000. The QQQ closed the week at 121.93. So those persons who say they never take a loss because the market eventually comes back are vindicated–if they held on for 16 years! (I wonder how many  of them started out as buy and hope types but panicked  and sold out as the QQQ bottomed at 19.76 in October, 2002 or again at the 2008 bottom at 25.05?)

The fact that the QQQ did close the week above 120.50 is a sign of strength. However, there are a few things about this rally that concern me. I track many statistics each evening after the markets close. I noticed that only 138 of almost 5,000 stocks hit a new high on Friday. This is far below the numbers seen in much of December. On December 5-12, the number of stocks hitting new highs each day ranged from 430-908. The last 5 days the range was 88-306. So while the QQQ may trade at an all-time high, new highs are not keeping up. On Friday, only 39% of all stocks rose, compared to about two thirds of the Nasdaq 100 stocks reflected in the QQQ. So there is tremendous heterogeneity in the way stocks are performing. Maybe, as I wrote last week, it is time for the tech stocks to rally as the other stocks rest. People have made some money and may be more willing to increase their risk to buy the FANG stocks (FB,AMZN,NFLX,GOOGL). Regardless, I must ride the trend until it ends. You know better than to ask me (or anyone else) to predict when that will be. As they say, bull markets are like sex, they feel best just before they end……

Last week a TC2000 alert I had set went off but I did not notice it until this weekend. SHOP convincingly broke above its green line (GLB) to an all-time high, after consolidating about 4 months around its green line. This chart shows a wonderful high volume break-out last week in SHOP,  an IPO from 2015.  SHOP is probably worth looking into as it connects with Amazon. If I bought it I would exit if it returns below its green line.

Here is the GMI table:

$QQQ short trend up-trend faces critical test; $NVDA buying climax, short $FB?

@ 6:53 am
GMI3/6
GMI-24/9
T210864%

With the GMI weakening to 3 and its short term up-trend in jeopardy, the general market faces a critical test this week. The QQQ short term up-trend has completed day 16 but is on the verge of turning negative.The averages are oversold and today’s futures predict a strong bounce at the open. So the market may move back from the edge of the cliff.

NVDA’s buying climax and reversal last week gives me pause for thought. They generally shoot the leaders first before the rest of the troops. I am also concerned with the weak chart of a former leader, FB. Here is FB’s weekly chart. If I wanted to short a stock this might be a good candidate. Note that FB is below a level (topping?) 30 week average, suggesting a potential Stage IV decline. And there were several weeks of high volume selling in November. Its 4wkavg<10wkavg<30wkavg, a weak pattern. If it pops this week, FB could present a fine set-up for a longer term short with a put option.

 

While FB’s RWB pattern is gone, it has not yet formed a BWR submarine pattern and has an RWBCount=6 (of 12). I am watching for a close below the lowest long term (blue) average, currently at 114, to suggest a potential BWR pattern. A close above the top average, at 120.49, would negate this bearish pattern. Note FB reports earnings on 1/25, which could trigger a large move.

The GMI and GMI-2 have weakened but the QQQ short term up-trend count could continue with a significant up day on Monday, with a close above 118.86.  2017 should be an eventful and challenging year for all of us traders–like every year!

12th day of $QQQ short term up-trend; $QQQ and $CDW have an RWBCount= 12

@ 7:20 pm
GMI5/6
GMI-27/9
T210871%

For a long time I have thought that my adapted Guppy charts composed of 13 weekly moving averages provide an excellent method for identifying stocks in a significant up-trend. Six of the exponential averages are red (3,5,8,10,12,15) and 6 longer term averages (30,35,40,45,50,60) are blue. When all the red averages are rising above the blue averages such that there is a white space between them, this constitutes a red white and blue (RWB) up-trend. I also add a 13th average (1) as a dotted line which shows the closing price each week. When all 13 averages line up with each shorter average rising above the next one (1>3>5>8……..60) this constitutes a really strong up-trend. I have created a new indicator that counts the number of averages that are rising above each longer average. The indicator, called the RWBCount, goes from 0-12. This indicator can be applied to both ETFs and individual stocks and in the future I will often provide the RWBCount.  Below is a weekly chart of the QQQ, which has an RWBCount=12. Note that each line is above the next one. The RWBCount for DIA=12 and the SPY=12. So right now all 3 indexes are in very strong RWB up-trends.

NVDA has an RWBCount=12 and has been 11 or more for months. Note how weekly price leads all of the averages up.

There is no way to know when an RWB pattern will end. I strive to  hop on  stocks with an RWBCount=11 or12 when they bounce up off of support and ride them until the trend ends. By the way, 60% of the Dow 30 stocks have an RWBCount=12. The current Dow dogs are: PFE (5), WMT (5), KO (3) NKE (2). Here is what a “2” looks like.

And a stock not in the Dow, GILD= “0”

Get the picture–I call such stocks BWR or submarine stocks and consider them for shorting…

CDW is an example of a stock with an RWBCount=12 that bounced off of support last Friday. I took a position and placed my stop right below Friday’s low. If for any reason CDW declines on Monday so that I am sold out, I will take my small loss–no emotion. (A stock does not have to rise just because I think it should!) On the other hand, if CDW holds Friday’s low, I will ride it as long as its RWBCount remains high (11 or 12). My goal will be to ride the strong up-trend until it ends and not to try to hop off the first time it shows signs of weakness. Why sell a stock in a strong up-trend? If CDW should rise a few percent, I will move my stop up to break-even. Small losses and large gains–that is the way to succeed in this game. The daily chart of CDW is below. Note the recent green line break-out (GLB) to an all-time high and Friday’s bounce up off of the 30 day average (red line) and its lower 15.2 daily Bollinger Band. Earnings are set for release on 2/14/2017.

Here is the RWB chart for CDW. In the near future I will publish a scan for finding stocks with IRBCount of 11 or 12 that are bouncing off of support. You can sign up for access to my free TC2000 scans at wishingwealthblog.com/club.

The GMI remains at 5 (of 6).