General Market Index (GMI) table

25th day of $QQQ short term up-trend; bonds finally breaking down and dollar rises

@ 10:38 pm
GMI6/6
GMI-26/9
T210862%

The 20 year treasury bond ETF, TLT, is now entering a Stage IV decline. Interest rates are on the rise and this is never good for the market.   People will be able to earn more from savings deposits and will be less likely to invest in stocks.

Screen Shot 2015-11-08 at 10.28.00 PMAnd the rising rates will cause the dollar to rise in value, thus hurting multi-nationals when they convert their overseas earnings back to dollars. U.S. goods will also cost more in foreign countries. Check out this weekly chart of UUP, which is an ETF of the dollar…

UUP11062015

TLT11062015

20th day of $QQQ short term up-trend; $SPY still struggling; 11 GLB stocks

@ 9:11 pm
GMI6/6
GMI-25/9
T210850%

The SPY is fighting its way back from the summer swoon. It has taken 9 weeks to retrace the decline that occurred in 2 weeks in August. (Stocks always decline faster than they rise.) However, note the overhead resistance coming up and the fact that the 10 week average (blue doted line) is still far below the 30 week average (red line). I will not reinvest my most conservative university pension until the 10 week average regains its leading position above the 30 week average. The 10 week was above the 30 week for most of the period since 2012. If this rebound fails, it could trigger a significant decline.

SPY10302015

Below are weekly charts of 11 stocks that had green line break-outs (GLB)   last week. If I bought any of them (after doing diligent research) I would always sell it immediately if the stock closed back below the green line. The green line represents an all-time high that was not exceeded for at least 3 months. It designates a technically strong stock that has consolidated and formed a base at a high level. To me (and the great trader Nicolas Darvas) a stock’s hitting an all-time high is a requirement for a purchase. Note that two well known companies, COST and PCLN, are GLBs! I own none of these…..(click on charts to enlarge)

OSISGLB COSTGLB OFLXGLB CACIGLB CCFGLB FMFGLB CVCOGLB PSXGLB PCLNGLB CHMTGBL

JBSSGLB

The GMI remains on a Buy at 6 (of 6).

GMI10302015

15th day of $QQQ short term up-trend; still a chicken

@ 10:20 pm
GMI6/6
GMI-26/9
T210866%

Here I am in cash and not participating in this rebound. Then again, I did not have to worry about the summer decline as I was safely on the sidelines. So what to do now?

True, according to the Sell in May mantra, one should get back into the market at Halloween, as Mark Hulbert eloquently reminds us. I am not ready to return just yet, however. (Maybe I will turn out to be a great contrary indicator!?) A few things continue to trouble me. First, the media seems to be ignoring the possibility of a debt limit debacle and default on government debt. Second, we could have a government shutdown. This market could turn down quickly if either of these events materialize. On the technical side there are some troubling technical signals. This daily chart of the QQQ shows that the QQQ is approaching major resistance. The QQQ closed outside of its upper 15.2 daily Bollinger Band on Friday and a major index rarely does so without a reversion to the mean (here the 15 day average).   The daily 10.4 stochastic is overbought at 87 and the fast 10.4 stochastic   is below its slower 10.4.4 stochastic. Finally, the last time the QQQ had a large weekly gain (5.9%) like last week’s (4.3%) was the week before the July top.   The QQQ might therefore be setting itself up for a quick decline, at least to the lower BB (at 103.47, an 8% decline).

QQQ10232015And AAPL reports earnings this Tuesday. IF AAPL disappoints or rises and fails to hold the gain, it could be the trigger for a decline in the QQQ. Most of the good earnings news for the other stocks heavily weighted in the QQQ is already out.

And while the strength of the QQQ reflects the strength in tech stocks, the major nontech industrial stocks are much weaker, reflected in this weekly chart of the SPY. Which group will lead the market up or down over the rest of the year?

SPYweekly10232015I am concerned by the fact that the 10 week averages for the QQQ, SPY and DIA remain below their 30 week averages. I will slowly return to the market on the long side when the 10 week averages climb back above the 30 week averages. Who knows when that will happen…..

Meanwhile, the GMI remains a positive 6 (of 6). If I was eager to trade I would have just followed the GMI’s signals. But after the August flash crash, I am much more of a chicken right now than usual…..

GMI10232015