General Market Index (GMI) table

I spent a wonderful morning Saturday presenting a workshop to the DC Metro AAII Chapter. The audience of primarily Boomers was very appreciative of my rather conservative presentation. I stressed the desirability of focusing more on ETF’s than individual stocks in order to lessen volatility and stress levels.

As always, I recalled some points I wish I had made.   First, all should investigate the use of U.S Government I-bonds for ultra safe money.   These are U.S. savings bonds that adjust every 6 months to the level of inflation. Thus they are very safe and their yield will rise if interest rates do.   They will not fall in value like regular bonds can when rates rise. Read all of the rules on I-bonds here. I believe they are better than CD’s or savings accounts. The current yield is 1.38%

I also wanted to tell new readers that they can have the GMI stats mailed to them every day by entering their email address in the box to the right of this post. I do not release your email address to others.   The box by which to subscribe looks like this:

You may also view my Houston TC2000 webinar from 2012 by clicking the link to the right side of this page.

As to this market,   all of the indicators in the GMI and GMI-2 are positive.   Furthermore, the GMI flashed a Buy Signal on 2/12.   Friday was also the 5th day of the new QQQ short term up-trend.   The longer term up-trend is very intact.   Look at the Stage 2 up-trend in the weekly chart of the QQQ.   The QQQ is nicely above it rising 30 week average (solid red line).

Hopefully this nonsense about the Dow chart looking similar to its chart from 1929 has dissipated.   This market looks no way like the one in   1929 leading up the the great crash.   But the market climbs a “wall of worry” so bring on the whiners.   I will become concerned when the pundits start saying that the market has nowhere to go but up….

I have been talking about a bottom in gold (GLD ETF) for several weeks.   Last week GLD closed back above its 30 week average for the first time since January, 2013.   I think it is early, but we might be seeing the beginning of a Stage 2 up-tend. I have been buying GLD and writing weekly calls on the position. The return is about 3% per month on my investment. Check out this weekly chart of GLD. Note the double bottom around 114.50 and the flattening 30 week average.

Finally, TSLA had a green line break-out last week.   It will be interesting to see if the stock surges after earnings are released this week.

Here are the GMI stats: (click on to enlarge)

The truth is that no one knows for sure.   IBD does still label the market in a correction. As I define it, the QQQ short term down-trend completed its 10th day on Friday.   Another flat or up day on Monday will end the down-trend and begin a new QQQ short term up-trend. I am   most certain of a change in trend when it persists for at least 5 days, however.   I sold most of my SQQQ on Friday and will sell the rest on Monday if the QQQ holds.   I will then buy a very small position in TQQQ and will only add to it at a higher price later in the week, probably on Friday. If a new short term up-trend begins and it is for real, then I will have many days on which to accumulate TQQQ.   The key is to not rush in but to ease into the new move.   On the other hand, if the QQQ weakens a lot on Monday, I will buy back some more SQQQ and ride the continuing down-trend.   One must be agnostic in this business and ride whatever trend becomes apparent…..

As my readers   know, I do not like to go long stocks in a general market down-trend.   I find it to be very useful, however, to watch the new high list during declines because stocks appearing on it are exhibiting unusual strength. Any stock that can come through a correction and trade at a new high is demonstrating a lot of technical support. It is also much easier to find winners when there are only a handful of new highs. On Friday, only 14 stocks (out of 6,000) came up in my new 52 week high and good fundamentals TC2000 scan.   All had recent quarterly earnings up at least 25% and   increases in revenues.   I think these stocks are worth researching for possible purchase in case a new up-trend begins. They appear to the left, sorted by recent EPS change, with the biggest earners at the top.   Thus, the top six stocks each had quarterly earnings up more than 100%.   Funny how stocks with big earnings increases appear on the new daily high list even during a market correction. It is noteworthy that all of these stocks are at or very close (GMCR) to trading at their all-time highs.   Now that is a show of strength…….

I prefer to buy strong stocks when the GMI is on a Buy signal.   The GMI closed Friday at 2 (of 6) but the more sensitive and short term GMI-2 rose to 7 (of 8). The GMI flashed a Sell signal at the close of trading on   1/27 and remains so. I am therefore mainly in cash in my trading accounts but I do have a small position in SQQQ and GLD.   My position in GLD is based solely on the technical pattern.   It just looks like it is in a Stage 1 base. Note from this table that the QQQ has now closed   back above its 10 week average, a very promising sign of strength. We will learn this week if the short term decline is likely over. Do not forget, however, that the QQQ remains in a longer term Stage 2 up-trend, as defined by Stan Weinstein.

Since 2006, 76% of the QQQ short term down-trends that lasted 5 days, eventually lasted for 11 days or more. I am therefore content to remain mainly in cash with a small position in SQQQ.   SQQQ is an inverse ETF which is designed to rise 3X as much as QQQ falls. The Dow 30 stocks are much weaker than the Nasdaq 100 or S&P500 stocks. One half of the Dow stocks are below their critical 30 week averages, compared with about one third of the stocks in these other indexes.

The GMI flashed a Sell signal as of the close on 1/27 and registers 2 (of 6).