General Market Index (GMI) table

$TQQQ again beats almost all individual stocks–ETF performance since GMI turned green on 11/10/16

@ 9:57 pm
GMI5/6
GMI-28/9
T210865%

I wanted to examine how the index ETFs have performed since the GMI (my General Market Index) turned green on 11/10/2016.  The GMI components mainly measure momentum in the QQQ so its signals should probably work better for nonfinancial growth and tech stocks contained in the NASDAQ 100 index (measured by the QQQ).

 

This table shows that between 11/10 and last Friday (1/13) the QQQ rose +6.4%, the SPY +4.7% and the DIA +5.6%. Note also, by definition, the leveraged ETFs for the QQQ  rose much more, the QLD rose +13.3% and the TQQQ +20.2%. The really interesting finding in the table is that these leveraged ETF far outperformed most of the individual stocks in these indexes. For example, only 12% of the NASDAQ 100 stocks, 10% of the Dow stocks, and 13% of the S&P500 stocks rose more than 13%.  In other words, the QLD did better than 87-90% of the stocks in these indexes. The triple leveraged ETF, TQQQ, beat about 96% of the individual stocks in these three indexes!  So I again come to the conclusion that if I can pick in advance the 4% of stocks that can beat the TQQQ, then I should do so. However, for most of us mortals, one only has to ride the TQQQ during an up-trend (GMI=green) to beat the pants off of most individual stocks, and it is so much easier to monitor one index ETF than to manage a portfolio of individual stocks……..(I have been accumulating the TQQQ since the GMI flashed green.)

The GMI remains green with 5 (of 6) components positive.

 

 

$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!