General Market Index (GMI) table

It looks like we are getting the year end/end of quarter rally that should take us through the end of December. After that, we get to see what a Trump administration will do and how easy it will be for them to manage the government. As the news heats up in January with stories of turmoil within the various factions of the government, it may be a good time for the market to come back down to reality. All of this sounds likely to me, but it is better to remain vigilant and let Mr. Market tell me his likely direction. For now, it is full steam ahead, with the QQQ back above its 10 week average with the DIA and SPY. This monthly chart shows that the QQQ (119.50) is getting close to its all-time high of 120.50, reached in March of 2000. A break through this top on above average volume would be quite a sign of technical strength. Note that the 2000 top came after a vertical rise, and that the current market is not showing similar signs of  irrational exuberance—yet………..

I recently worked on a new scan that I have added to those stored and accessible in my TC2000 Club. If you want to access and run these scans you need to have a TC2000 account and then join my Club. Once you do so my Club will appear in your Library tab. The link to join my Club is: https://www.wishingwealthblog.com/club/ Just paste it into your browser.

Here is a picture of the conditions stored in this new scan and its name:

This scan finds all US Common Stocks which meet 3 conditions. The fast daily 10.4 stochastics has to be above its long daily 10.4.4 stochastics and the fast stochastics must have been <20 in any of the past 2 days. Thus the stochastic is moving up from oversold. The fast stochastic must also be <=50 so it is not too extended above the bounce  and the stock must close above its 50 day average. The second filter requires the stock to have had a minimum 15% increase from its 50 day low at anytime during the past 50 days. This will find stocks that have popped up at least 15% and just bounced from an oversold stochastics. The third filter requires  trading volume of > 100,000 shares the most recent day.

Based on Friday’s close, this scan detected 5 stocks: CELG, MMS, HELE, AVXS, FTV. I then looked over the fundamentals and technicals of each. HELE is in a Stage II decline and I dropped it from further study. Here is the chart of CELG. I like the fact that CELG is also finding support at its lower 15.2 daily Bollinger Band, a pattern not required by this scan but still very promising. As an educational example, the way I might play this set-up would be to buy CELG Monday and place a sell stop below its recent bounce just below $110. Given the focus of this scan on a rebounding stochastics, I would also subsequently sell CELG if/when the fast stochastics closes back below the slow stochastics. Here is the daily chart of CELG. Note the cross-over of its fast stochastics above its slow stochastics and CELG’s recent surge in price after breaking out of a down-trend. I like to buy stocks that consolidate after a large gap up and then move up. Some of the other remaining three stocks from this scan may also merit further research. When I see promising patterns I often tweet about them intraday (@wishingwealth).

The GMI components are all positive. But T2108 is getting close to 80%…..

Friday marked the first day of a new QQQ short term down-trend. Note, however, that many (about 40%) QQQ short term down-trends end in under 5 days. Both the QQQ, SPY and DIA remain in longer term Stage II up-trends.  The QQQ, however, has now closed back below its 10 week average. These weekly charts of SPY and QQQ show important differences. SPY is climbing its 4 week average (red dotted line) which is above its 10wk (blue dotted) and 30 wk average (red line).  SPY broke out of a multi-week counter-trend decline (purple line) 4 weeks ago.

In contrast, the QQQ is now below its 4wk and 10wk averages. I can even see signs of a possible head and shoulders top forming. A close below its 30 week average (near 114) would be a sign of major weakness. The disparity between the SPY, DIA and the QQQ is likely caused by the Trump rally’s focus mainly on the infrastructure and financial stocks, not dominant in the QQQ. Once the euphoria of anticipation under-pinning this rally comes up against the reality of Democratic governing, we could face major market weakness beginning in January. The QQQ will likely rally towards the end of December when mutual funds spruce up their portfolios for end of quarter/year reports to their shareholders. Such a rally may be a great time to exit positions or raise stops….

On Friday I tweeted intraday (@wishingwealth) that NFLX looked like it was breaking out of a consolidation, following its huge high volume spike in the third week of October after it released earnings. A close back below the declining trend line (purple), around 115, would indicate to me a possible failure of the break-out and a reason to exit the trade.

For those of you who signed up last week to access my Club on TC2000, I just published the scan that produced these 7 rocket stocks (all are above their last green line tops) this weekend. These are stocks with recent EPS change of at least + 90% that  have advanced a lot this year and rose last week on above average weekly trading volume. See if your scan yields these too. (This scan will only yield stocks towards the end of a week because of its requirement for above average weekly volume.)

The GMI remains at 5 (of 6). The more sensitive GMI-2 is at 1 (of 8), reflecting the short term weakness in the QQQ. Note the huge decline to only 35% of NASDAQ 100 stocks above their daily 12.26.9 MACD signal lines. Time to be especially vigilant.