General Market Index (GMI) table

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.

HELE has been a super rocket stock since 2010. This weekly chart shows that HELE has resumed its strong RWB pattern after coming out of a base in October. HELE gapped up and broke above its green line top to an all-time high on huge volume on October 9.  It has  retested its GLB several times since.

Last week, HELE again bounced off of its green line top and may be getting ready to begin a new advance. The way I would play such a pattern would be to buy it and place a sell stop around $99.90. If I am wrong I am risking about a 4-5% loss. If I am right, I might catch a ride on a rocket! We’ll see this week if this turns out to be a timely set-up.

How did I find HELE? It came up in one of the rocket stock scans I built in TC2000. It identified 15 stocks out of about 5500 that had my desired pattern of a rocket stock (RWB) and bouncing off of support. (The other stocks were: ICE, USCR, PNFP, ALKS, TTC, RAI, NDAQ, LFUS, THG, UFCS, NXST, PRA, DLR and ADP. Of course, these need to be researched to see if any are worthy of purchase.) To learn more about my methods, go to my free December 2012 TC2000 webinar link on the right of this post. (By the way, I am doing an AAII workshop in Virginia this February–more details to come.) Whether HELE rises this week will depend a lot on the general market’s trend. Here is the GMI table. The GMI remains on a Buy signal.

I seldom get a very unexpected result from my scans. However, just for fun, I ran my scan for RWB stocks bouncing off of support focusing only on industry indexes. I found that only one industry, financial exchanges, came up! This monthly GMMA chart shows a clear RWB pattern for the financial exchanges index. (I am just discovering the benefit of a monthly GMMA chart that shows the longer term trends.) Clearly, the  financial exchange index has been in a strong RWB pattern for almost three years.

However, the weekly GMMA shows that this index  recently emerged from a year long consolidation in November, 2015.

What is driving this index? Perhaps an environment of rising interest rates increases the business of financial exchanges, as does the trading of commodities, which are getting very volatile, reflecting oil’s decline? Higher trading activity and margin interest rates will lead to higher profits for financial exchanges. The 4 stocks (out of 5) measured by this financial exchange index that all have weekly RWB patterns are: CME, CBOE, NDAQ and ICE. This is very interesting food for thought and may be worthy of my own financial exchange…….