General Market Index (GMI) table

Buying climax in the $QQQ?

@ 10:12 pm
GMI6/6
GMI-27/9
T210841%

In reviewing my   market statistics this weekend, I was surprised by what I learned. With the Nasdaq 100 (QQQ) streaming to an all-time high last week I expected to see strength in my measures of how individual stocks had performed. The QQQ closed up 5.5% last week to an all-time high. But the SPY (+2.4%) and DIA (+1.8%) have not followed it to record territory. Then I found that only 34% of the Nasdaq 100 stocks rose on Friday and 39% of the SPY (S&P 500) stocks. While these were strange inconsistencies, the most striking finding was that there were more new yearly lows on Friday than yearly highs in my universe of over 5,000 stocks!   So what is driving the Nasdaq 100 index to record levels?   This index weights stocks by capitalization (total shares outstanding   by price per share). Among the stocks in the index with the highest weighting are GOOG and FB, up 16% and 4.5% on Friday alone. So a few very large cap stocks in the Nasdaq 100 index (NFLX, CELG, AMZN) are responsible for this record run and are distracting from the weakness in the other stocks. It does not bode well for an army when most troops do not follow the generals. I would not be surprised to see this market   top out shortly after the major tech stocks report earnings this week.

Two other indicators I follow signal short term overbought in the QQQ. 56% of the stocks in the QQQ have   overbought statistics and this daily chart of the QQQ shows it is now above its top 15.2 daily BB. Look what happened last April when the QQQ behaved this way.   The 7% rise in the QQQ the past 6 days looks to me like a buying climax. (I hold a small trading position in SQQQ.) If the SPY and DIA reach record levels I will have to revise my outlook.

QQQ07172015The GMI remains at 6 (of 6).

GMI07172015

Schizoid Mr. Market

@ 8:30 pm
GMI3/6
GMI-22/9
T210833%

The famous J.P. Morgan, when asked what the market will do, responded with, “It will fluctuate.” Today we use the euphemistic term, volatility. Mr. market is driven today by extreme news events coming out of Greece and China. Do we really believe the Chinese government can permanently kill a panicked bear by suspending trading in one half of the stocks, and other ridiculous trading prohibitions that you may read about elsewhere? And then we have the Fed threatening to begin raising interest rates later this year. Put this together with the fact that this is an old bull market and we are nearing the season of market weakness, it is probably safer to pull back and conserve cash. But the market often rises as earnings are released.

With that as a context, what are my technical indicators showing? The QQQ closed back above its critical 30 week average after being below it during the week. This was the 4th time that the QQQ has found support at this average since 2014. The 30 week average is the solid red line. The red arrows signify a GMI Sell signal and indicates that during this bull market one would have done well by buying stocks when the GMI issued a Sell. So we could get another rise from this week on. But if this rally should fail to break to new highs and breaks below last week’s low, look out below. Over a long multi-year period the GMI has kept me out of bear markets. I don’t mind exiting with a GMI Sell and going back in if the market rally resumes. This is a benefit of trading in a tax deferred IRA where I can go in and out without any tax consequences.

QQQweekly07122015The GMMA weekly chart also shows a market still in an up-trend with an RWB pattern. Note the QQQ closed Friday below all of the shorter term (red) averages, as designated by the dark dotted line.

QQQGMMA07122015The daily chart of the QQQ also shows a likely bounce from oversold levels. The QQQ Stochastics (not shown) recovered from an oversold level (<20) and the QQQ also bounced twice from its lower BB. It is a negative, however, to see the lower BB in a steep decline. A rally to 109, the level of the peak reached on March 20,   would paint a very nice symmetrical triple top formation.

QQQdialy07122015

AAPL also regained its lower BB on Friday, but AAPL looks very weak to me. While we may get a rise into earnings, I would not trust it unless it breaks above the upper purple line to a new high.

AAPL07122015The GMI remains on a Sell signal and Friday was the 9th day of the QQQ short term down-trend.

GMI07102015

Bounce coming? In cash.

@ 8:42 pm
GMI1/6
GMI-20/9
T210826%

IBD says put/call ratio Monday was 1.24. Bounces usually come from this level. I am mainly in cash in my trading accounts. I forgot to post this table on Sunday night:GMI06262015

But this is history. The GMI is now 1 (revised after IBD released mutual fund index) and another day below 3 will signal a Sell.