General Market Index (GMI) table

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).

I have been writing for some time about the fact that the current QQQ short term up-trend, was approaching the longest duration of any short term up-trend since 2006.   Since 2006, there have been 52 short term up-trends in the QQQ.   This table shows the length of the ten longest.   The current up-trend is now in its 72nd day and is   the fourth longest up-trend since 2006,   the way I define them.   Another down or flat day in the QQQ will begin a new short term down-trend. If that happens, the   GMI might also approach a Sell signal. (IBD now sees the “Uptrend under pressure.”) I also wrote last week, however,   that the end of a short term up-trend has not necessarily implied the beginning of an extended short term down-trend.   The new down-trend could become only   a short pause in this long term up-trend.   The fact that the Worden T2108 indicator , the put/call ratio and my other favorite technical indicators are not at extremely oversold levels leads me to conclude that we have more of a decline to come.   But no one, including me, knows for sure what will happen.   I am therefore 90%+ in cash in my margin and trading accounts.   I remain fully invested in mutual funds in my university pension accounts, which limit my ability to go in and out.   As long as the market remains in a Weinstein Stage 2 up-trend, I will stay invested there.

The weekly chart below shows the QQQ to be in a firm Stage 2 up-trend, well above its rising 30 week average (red line). It is also resting on its 10 week average (blue dotted lone) and I have found in the past that I could not make money trading growth stocks when the QQQ is below this important moving average. Also note that the QQQ could fall quite a distance to its red line support without breaking the longer term up-trend, as it did in June, 2013. Everyone must determine his/her own tolerance for risk.

The GMI has now fallen to 3.   If it remains below 3 for two days it would flash a Sell signal.

AAPL reports earnings after the close on Monday.   This daily chart shows AAPL to be   in a declining price channel.   It will be interesting to see if an earnings surprise can enable the stock to break out of this formation. We will know Monday night after the close when we will see extended hours trading in AAPL.

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.

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.