General Market Index (GMI) table

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

 

1st day of new $QQQ short term up-trend; GMI back to Buy

@ 9:04 pm
GMI6/6
GMI-27/9
T210850%

The QQQ short term down-trend only lasted 4 days. I have written that short term down-trends often last under 5 days and that I do not trust a short term trend change until it persists for at least 5 days. The GMI Sell signal also only lasted for 4 days. As of Friday’s close the GMI signaled a new Buy.   IBD still sees the market in a correction.

I expected December to end strong because of mutual fund window dressing. But when the GMI issued its Sell signal, I shed most of my long positions.   The bounce we have had looks a lot, technically,   like the bounce we had in mid-October.   The QQQ bounced from its lower 15.2 daily BB. So maybe it will persist.   If I fly by instrument I would go long here. But my instinct is to hold back for a while. I just do not trust this bounce.   Are the problems that precipitated the recent decline really over?   So, for now, I am mainly in cash. (I may prove to be the ideal contrary indicator!)

QQQdaily12192014GMI12192014

Trend change imminent; World markets in free-fall

@ 9:56 pm
GMI2/6
GMI-23/9
T210836%

The GMI registered 2 after Friday’s close and will likely be 2 or less again on Monday, triggering a GMI Sell signal. If so, I will close out my few longs and accumulate a leveraged inverse ETF (SQQQ). The T2108 is at 36% and has a long way to fall before our markets are at the level where declines typically end. (See weekly chart below.)

GMI12122014T2108wkly12142014

I am very concerned that many of the world’s markets are in free fall and we tend to pretend that the U.S. market is immune from the fall-out. Do we really think that the U.S. economy exists in its own cocoon? Take a look at the recent weekly charts of some of the foreign ETF’s:

TRF: Russia/East Europe:

TRFEWZ: Brazil:

EWZEWG: Germany:

EWGEWC: Canada

EWCEWW: Mexico:

EWWUSX–X: China:

USX--XCEE: Central Europe, Russia, Turkey:

CEEAre we worried yet? Or maybe it’s just a benign and temporary oil price precipitated scare….. (would you like to buy a bridge?) I’m not going to wait around to find out. (I have told you I trade like a chicken.)