General Market Index (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).

 

 

 

Performance of ETFs since GMI turned green on 11/10; $QQQ on verge of GLB

@ 6:20 pm
GMI6/6
GMI-27/9
T210870%

As this daily chart of QQQ shows, at the close on 11/10 the GMI turned from Red to Green. The table below shows how stocks and ETFs have done since the close on 11/10 through the close on 12/16.

 

If one had bought the following index ETFs at the close on 11/10 one would be up these percentages:

 

The SPY (+3.7%) and DIA (+5.4%) outperformed the QQQ (+3.3%) presumably because the underlying index (NASDAQ 100) contains no financial stocks, which have led the current rally. However, the triple leveraged ETF, TQQQ, as usual, beat all of the regular indexes during this rally, up +10.4%. We again find that that only a few, 10%, of the individual stocks in the QQQ beat TQQQ. In other words, the TQQQ outperformed 90% of the component stocks represented by the QQQ and  83% of those in the DIA and SPY. Yet again, we see how easier it may be to just ride the TQQQ in an up-trend rather than trying to pick in advance the minority of stocks that will beat it. Of course, what goes up 3x as fast also declines 3x as fast…………

The GMI remains at 6 (of 6). Note in the daily chart of the QQQ above, that QQQ is bumping up against its green line, the all-time peak reached in March, 2000. When (not if) it closes above 120.50, it will be a green line break-out (GLB), and only positive for me as long as it stays above the green line.