General Market Index (GMI) table

A few warnings signs flashed on Friday.   While 82% of the Nasdaq 100 stocks rose, only 31% of all U.S. stocks rose.   As I tweeted during the day, the Worden T2108 fell on Friday in the midst of the rise in techs and was a cause for concern.   (My rare tweets can be followed: @WishingWealth) .   Another ominous signal was the way the QQQ traded above its upper BB. See this daily chart.

Since the bottom on 10/16, there have been no periods with two consecutive down days. And the QQQ rose on 8 of the last 10 days. It doesn’t get much better than this for the bulls. I suspect we could have a decline back to the lower BB, around 101, this week. And then we might not.   To protect myself, I bought some insurance in the form of December call options on SQQQ.   SQQQ aims to rise 3X as much as QQQ declines. This option position will serve to hedge my long positions. And if my stocks rise and the calls expire worthless I will be very happy.   Who frets about paying home insurance when at the end of the year their home did not burn down! Was the insurance wasted money?

The GMI remains at a strong 6 (of 6).

The three market index ETFs I follow (DIA, QQQ, SPY) all opened outside of their upper daily 15.2 Bollinger Bands and closed back below them. This may represent extremely over-bought conditions. A down day on Monday would likely indicate some retracement of the recent rally will take place. I am therefore very cautious about the immediate continuation of the rally. Check out this daily chart of the QQQ.

Nevertheless the GMI remains at 6 (of 6).

The daily GMMA chart of the QQQ shows the strong current up-trend in this index ETF.   The arrows show recent GMI Buy and Sell signals.   Note how the short term averages (red lines) constrict when a pause occurs. As long as the shorter term averages are rising above the longer term averages (blue) the up-trend is intact.   This is the RWB rocket pattern I like to see on daily and weekly GMMA charts. The black dotted line is a moving average of 1, to show the closing price of the QQQ each day. (My color scheme for the GMMA differs from that used by its creator, Daryl Guppy. )…….

I had noticed the strong up-trend in BITA over the past year (it has tripled!) and wished I had traded it.   One of my students alerted me to a nice move in the stock on Friday and I bought some.   It looks to me like BITA has broken out of a classic cup and handle pattern. I drew in the pivot point at the high point of the handle. Note the recent all-time high and the huge trading volume on Friday.   It remains to be seen whether this break-out will hold. (If it does not, I will exit quickly.) IBD has a nice article about BITA, which it published after it reported earnings last week. At least I will not have to worry about a bad earnings report!

This weekly GMMA chart of BITA shows that it has been in a RWB rocket pattern since early 2013 and had a green line break-out (GLB) to an all-time high in mid-2013.   How did I miss such a great move?

Meanwhile the GMI remains on a Buy signal with all six components positive.