General Market Index (GMI) table

$AAPL flashing warning signs; 68th day of $QQQ short term up-trend

@ 10:40 pm
GMI6/6
GMI-27/9
T210867%

I wrote a   few days ago that AAPL broke its critical 10 week average and then rebounded.   However, tt then closed the week back below its   10 week average.   This daily chart shows that AAPL has now created a lower high and lower low.   These pivot points were used to draw the turquoise channel lines. AAPL’s 30 day average (red solid line) is also curving down, another technical sign of weakness. When the 30 day average is declining, it means that the current day’s price is below its price 30 days ago.

AAPLchannel

A weakening AAPL can often correspond to a weak Nasdaq 100 ETF (QQQ).   With last Friday being the 68th day of the current QQQ short term up-trend, I am looking for a minor top.   Since 2006, the four longest QQQ short term up-trends were:   67, 75, 80   and 88 days.   In other words, only three of the 52 QQQ short term up-trends since 2006 lasted longer than the current one. Records are meant to be broken, but I would not bet my money on it. I have to respect the probabilities. As I have said before, a short term down-trend often lasts only a few days, so we might just get a brief pause in this up-trend, but who knows? The 75 day up-trend was followed by a 44 day down-trend, the 80 day by a 23 day down-trend and the 88 day up-trend was followed by an 11 day down-trend…..

This weekly table of the GMI shows that the QQQ has closed above its 10 week average for an amazing 28 weeks!   I tend to exit the market in my trading accounts when the QQQ closes below this critical average. With the GMI at 6 (of 6) and the GMI-2 at 7 (of 8), the market remains strong, but I am still watching for any signs of weakness.

GMI01172014

 

 

63rd day of $QQQ short term up-trend; $AAPL sends signs of weakness

@ 6:35 am
GMI5/6
GMI-27/9
T210869%

I told you that I have successfully traded AAPL by holding it when it closes above its 10 week average and exiting when it closes below. AAPL has now closed below its 10 week average (blue dotted line) and I have exited the stock.   This weekly chart of AAPL   also shows that AAPL remains in a Stage 2 up-trend (above its rising 30 week average, red line) with support around 493.   But do I want to hold it if it falls to there?

AAPLweekly01102014

Another way to look at it is through the Guppy GMMA chart.   Note that AAPL has now closed below 5 of its 6 shorter moving averages (red lines).   The dotted line is the closing price each week. This indicates considerable weakening of its up-trend.Screen shot 2014-01-12 at 11.49.33 AM

With AAPL being a heavily weighted ingredient in the QQQ showing weakness, this index may also have trouble continuing its up-trend.   Furthermore, the up-trend is 63 days old, rather long for a short term up-trend.   With more than 60% of advisers in the Investor’s Intelligence most recent poll reporting that they are bullish, I suspect this is not the time to be hanging on to a lot of positions in tech and growth stocks.   I am ready to exit quickly if the GMI and GMI-2 weaken.

GMI01102014

 

 

58th day of $QQQ short term up-trend; New Year’s Resolution–trade only leveraged ETFs

@ 6:35 am
GMI6/6
GMI-25/9
T210858%

2013 was a strong up year for the market.   I though it interesting to make a comparison of how select ETF’s performed if one held them in 2013 and each of the two prior years. The results were illuminating for me.   As this table shows, in 2013   ETFannualperf4 leveraged ETF’s far surpassed the performance of the SPY (S&P500 ETF).   While SPY rose about +30% and the QQQ (Nasdaq 100 ETF) rose +35%, the other leveraged ETFs in the table rose from +82% (QLD) to +161% (CURE).   Are we content to only do better than the SPY or QQQ? Note also that three of the four ETF’s in the table that rose over 100% in 2013 were up 50% or more in 2012. The   ETF   that is strong in   one year may also be strong the following year!

In an up-trending market, the leveraged (bullish) ETF’s are clearly the way to go!   Why am I spending all of this time and effort to uncover the rare individual stock that can do better than these leveraged ETFs?   Is it the challenge of the game? Is it the hope of appearing smart by finding the few stocks that rocket higher?   Is it an addiction to frequent trading? All of the above are terrible reasons to be in the market.

Individual stocks are prone to news and earnings based volatility. In contrast, an ETF provides some protection from event volatility because it represents a basket of stocks.   One stock’s sudden decline could be attenuated by the other stocks in that ETF.   One might even dispense with attending to the fundamentals for an ETF.   All one needs to do is to gradually accumulate a leveraged ETF that is in a confirmed up-trend and to exit gradually as the up-trend ends. (I say gradually, because it takes time for a trend to change and I like to place my bets as the trend develops and   I become more confident of the new trend.) My New Year’s Resolution for 2014:   to trade mainly the leveraged index ETF’s…….

The GMI remains at 6 (of 6).   The GMI-2 has weakened a little to 5 (of 8), with its most sensitive short term components turning negative.

GMI01032014