General Market Index (GMI) table

The weekly chart usually provides me with a better picture of the market’s main trend.   The weekly chart of the QQQ below clearly shows that this index has been in a Stage 2 up-trend.   Note that the index is well above its rising 30 week average (red line).   As long as the major indexes show this pattern, I remain 100% invested in my primary university pension accounts.   All of the major indexes I follow (QQQ, DIA and SPY) are in Stage 2 up-trends.

You can also see from this chart all of the recent   GMI buy/sell signals.   The GMI has been on a Buy since July 5.

The table below shows the components of the GMI and the GMI2. I have revised the GMI2 by adding two new indicators (7 and 8) that I want to monitor.   I use the GMI2   to keep me focused on this set of 8 very technical indicators and not for specific buy/sell signals.   Note that the GMI2=8, which means that all of its indicators are positive.

While the longer term up-trend is still very much in place, the short term trend is very risky.   On Friday I wrote that IBD sees the market in a correction.   My indicators have weakened too, with the GMI and GMI2 each at 3 (of 6). Now the Worden T2108 Indicator is very weak, at 38%. As this weekly chart shows, T2108 can bottom   at this level, but most often it falls further before a bottom is reached. Currently, 38% of all NYSE stocks closed above their simple 40 day average price.

The horizontal green line in the chart is at an extreme level (10%) where major bottoms have occurred.   The past three years, bottoms were very likely with T2108   under 20%.   The SPY and DIA index ETF’s look weaker than the QQQ.   This may largely reflect AAPL’s recent strength.   AAPL comprises a large part of the Nasdaq 100 index, measured by the QQQ. Two down days in a row in the QQQ early this week could trigger a GMI Sell signal.

The table at the bottom of this post shows the components of the GMI and GMI2.   The GMI would have to register zero for me to consider reducing the mutual fund holdings in my university pension.   I think this is unlikely.   However, I have eliminated almost all of the long positions in my trading accounts and bought some SQQQ last week. SQQQ is a 3X leveraged inverse ETF that shorts the QQQ.   I hedged this long position with some put options so that I have controlled the maximum loss I could take if I am wrong and the QQQ rises (and SQQQ falls) during the period from now through late September when my options expire. This daily chart of SQQQ is the reverse of the chart of the QQQ because SQQQ rises as QQQ declines. Thus, when the QQQ gapped down last Thursday, SQQQ gapped up, as shown in this daily chart.

Last week QQQ declined -1.3% and SQQQ rose +4%. The leveraged ETF’s can be dangerous because they are designed to rise and fall three times faster than the underlying index. That is why I hedged my long position with put options.   If QQQ falls a lot this week, you will recognize me by   the smile on my face.   🙂

I was planning to write that, for the first time since last October, AAPL appear to be back in a Stage 2 up-trend.   Last week AAPL closed above its critical 30 week average.   A fully developed Stage 2 requires a rising 30 week average (red line in chart).   AAPL’s is still declining, but it is time to watch for   it to curve up.   If one exited AAPL last October when the stock closed below its 30 week average, one would have gotten out at around $600.   I would begin buying AAPL as long as it closes above its 30 week average (red line).   Most of the hype about AAPL is over and probably so is most of the selling.   It is appropriate that AAPL would start rising just as everyone has given up on it. This weekly chart of AAPL shows where AAPL failed a green line break-out last October and then found support near its prior green line top. AAPL will probably find resistance back around its last green line top near $650.

Until I saw this weekend’s announcement about the Obama administration’s decision to protect AAPL’s right to sell   products banned by the ITC decision, the above is all I would have written about AAPL.   However, I examined the one minute chart of AAPL from Friday and found an enormous amount of buying occurring in the last two minutes of the day.   The SEC might want to examine whether someone who learned of   the imminent decision used   inside information   to buy AAPL late Friday. Or maybe it was just someone’s lucky trade!? Anyone who bought late Friday may profit handsomely   if AAPL pops on Monday morning. Check out the minute by minute chart below and come to your own conclusions. (Click on chart to enlarge.) If you buy on Monday these hypothetical insiders may be selling to you!

The GMI remains at the maximum 6 (of 6).   Oh that I had the discipline to stay invested in TQQQ since the last GMI Buy signal on July 5.   If I had bought TQQQ at the close on July 5, my account would be up 18.9%, compared to the QQQ, +6% and the SPY, +4.9%.   Maybe one of my readers did this well? Please let me know.

Below is the daily chart of TQQQ, with a green arrow showing the GMI Buy signal.