General Market Index (GMI) table

GMI Sell signal remains in place; very cautious as bonds march higher

@ 8:14 pm
GMI2/6
GMI-24/9
T210846%

My indicators weakened on Friday and so the GMI Sell signal remains in place.   My more sensitive measure of the short term trend of the QQQ also remains down, now having reached 6 days.   I am holding mainly biotech stocks which have been miraculously bucking any market weakness, some SQQQ as a hedge,   and a lot of cash in my trading accounts.   I am about 40% cash in my more conservative university pension accounts. I am very cautious now. The market will become very volatile now as 4th quarter earnings are released and everyone focuses mainly on estimating the   impact of lower oil prices on the future profits of many companies.

Meanwhile interest rates continue to drop as government bonds strengthen.   Note that   TLT (20 yr treasury bond ETF) broke above the possible double top I wrote about around December 23rd. Check out this daily chart that I have now updated. I guess the entire world is seeking the relative safety and better yield of U.S. long term bonds! This pattern looks like a powerful cup and handle break-out. Bonds will probably continue to be bid up until the eventual bubble bursts!

TLTdaily01102015

Here are the GMI stats. Note that SPY has now closed below its critical 10 week average.

I will be unable to post on Monday night, as I will be far from my computer and my statistical software. I will post again Tuesday night.

GMI01092015

Market at crossroad; $AAPL –time to exit?

@ 8:18 pm
GMI3/6
GMI-23/9
T210851%

It is noteworthy that the IBD market pulse claims the market up-trend to be under pressure. My GMI is now 3, indicating a market trend that is midway between up-trend and down-trend.   Nevertheless, with my QQQ short term trend count now turning down, I am taking money off of the table. My university pension assets are double what they were at the 2009 bottom and I am unwilling to give much of it back.     I have transferred about half of my mutual funds to money market funds. I will sleep better knowing that I have protected money that I will need for retirement. (I am a chicken!)

I am hedged, long and short in my trading IRA, however. I own inverse ETF, SQQQ, which is designed to rise 3X the amount that QQQ falls. If the QQQ short term down-trend ends quickly, I will exit my position in SQQQ.   There are other storm clouds on the horizon. The QQQ has now closed below its critical 10 week moving average. In the past I have found it very difficult to make money on the long side when this was so. The fact   that the IBD Mutual Fund Index is also below its 50 day average (a component included in the GMI, see below) suggests to me that the pros who invest   in growth stocks are   having trouble…..

A lot of people are married to AAPL. It is the one stock that people seem to think is safe. Over the years I have found that as long as AAPL closes above its 10 week average it is   profitable to hold. Growth stocks should remain above their rising 10 week averages. I tend to get into AAPL when it closes above its 10 week average and to exit when it closes below. Well, AAPL has now closed the week below its 10 week average. The weekly chart below clearly illustrates this. AAPL may quickly regain its 10 week average as it did last October, and then again   it may not…..

AAPLwkly01022015

AAPL has a lot of company below the 10 week average:   TSLA, GOOG, AMZN, BABA, NFLX, PCLN, GMCR to name a few.   They typically shoot the leaders first.

The GMI remains at 3 (of 6). Two consecutive daily closes below 3 would trigger a GMI Sell signal. Note that the SPY remains above its 10 week average–for now.

GMI01022015

 

Whither oil?

@ 9:48 pm
GMI6/6
GMI-28/9
T210854%

One of my students made a small fortune   the next year after taking my honors course by shorting (buying put options) USO during oil’s collapse in 2008.   I took a look at the chart of USO, an oil commodity ETF, and was surprised to see that USO has now closed below the level of its   bottom reached in early 2009. Take a look at this monthly chart. December’s trading volume thus far   is a lot less than the monthly volume at the 2009 low. (Note that the TC2000 monthly bar only presents the cumulative total since the beginning of the month,   so it underestimates December’s full month volume.)

USOmonthly

This weekly chart of USO shows more clearly what has happened recently.   Two weeks ago there was a large volume bounce up of USO after a near vertical multi-week drop, and it closed that week near the top of its weekly price range.   Notice that that bounce came on the largest weekly trading volume in months. More significant, note that last week USO gave back most of the bounce. Given that USO has closed below the 2008 bottom after a 4 year side-ways consolidation, this could mean that USO (and oil) may have a long way down to go?? What would that do to the bullish market scenario for 2015 embraced by so many…….. (By the way, all of the other oil-related commodity ETFs I checked had the same price pattern.)

USOweeklyMeanwhile the GMI remains at a full 6 (of 6).

GMI12262014