General Market Index (GMI) table

This week it will be very difficult to get an idea of the market’s near term trend. There may be some strength from mutual fund end of quarter/year window dressing. But the QQQ short term trend count is D-11 and the GMI remains on a Sell signal. IBD calls the market up-trend under pressure. The market indexes are still bouncing from a recently oversold situation and it remains to be seen how far the bounce will go. The QQQ,  at 112.59, faces considerable resistance around 114.  There does not appear to be much more room to climb, unless the index should burst through the formidable resistance. Under these circumstances I find it best to stay mainly on the sidelines and to wait for a sign of a resolution of the battle between bears and bulls. It may take until early January to get some clarity. What a nice time to relax and enjoy my academic between semester vacation.

The GMI remains on a Sell signal and I am 100% in cash.  The major indexes are in Stage IV Weinstein down-trends. I see no reason to be in this market except on the short side. But the holiday season is a nice time to just take a break from trading. The NYSE is in a BWR down-trend. Note the transition from an RWB up-trend to a BWR down-trend.

The Dow Jones 20 Transportation index looks even worse.

And the SPY is not far behind.

And then there is the wounded leader, AAPL.

To survive in this business, one must protect capital and not fight the trend…..

With the major indexes so oversold, it is very possible that they will bounce on Monday. IBD  reports that the put/call ratio was 1.19 on Friday, showing extreme bearishness among option traders, and at a level at which bounces typically occur. Given the Fed meeting this week, we could get a situation where people have already exhausted their selling in anticipation of a rate hike, and they decide to buy on the news. I am not in the prediction business, however, and will wait for the market to show its hand. What I would not do is to begin selling or shorting on Monday. Such actions may be preferable for me after the next bounce.

This GMMA weekly chart shows that the RWB pattern is gone and the  rebound from the summer decline may have ended. The SPY (dotted line) has now closed below all 12 of its moving averages. If the summer decline was the first leg down of a bear market, the next leg could be major.

But the QQQ, composed of nonfinancials and tech stocks, looks much stronger and remains in an RWB pattern.

Nevertheless, the AAPL head and shoulders top pattern I have been writing about appears to still be possible. Note the resistance at the declining 30 week average (red line). Stage IV decline anyone?

The GMI remains on a Sell signal. The SPY and QQQ have now closed below their critical 10 week averages.