General Market Index (GMI) table

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?

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.

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.

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   4 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.