General Market Index (GMI) table

QQQ Head and shoulders top forming?

@ 7:37 am
GMI5/6
GMI-25/9
T210861%

I am concerned that the chart below suggests to me a possible head and shoulders top formation.   The blue line shows the daily closes of the QQQ and the red line shows the   moving average of the closes over the prior 30 days. Note that the QQQ has now closed below its 30 day average, a possible sign of weakness.   In addition, the left and right shoulders peaked at almost identical closing price levels, as shown by the green line.   This week is critical to determining whether a major decline in the QQQ is beginning.   If the right shoulder breaks down and the neckline is penetrated, the head and shoulder top pattern is forecasting around a   20% decline in the QQQ from current levels, to around 54. Interestingly, the large cap indexes, the Dow 30 and the S&P500, do not share this weak pattern. I never trust a change in the short term trend until it lasts 5 days.   Friday was only day two of the new QQQ short term down-trend.

Thus, on Friday the GMI and GMI-2 each rebounded to 5 (of 6).   But note that only 20% of the Nasdaq 100 stocks closed with their MACD above the signal line, a sign of short term weakness. The red and green arrows show previous GMI buy and sell signals.   The GMI remains on a buy signal since January 2nd. With such conflicting signals, it is best for me not to place huge bets in either direction.

T2108 weakening, getting cautious

@ 7:00 am
GMI6/6
GMI-25/9
T210869%

Although the GMI (General Market Index)   remains at 6 (of 6) and on a buy signal, the Worden T2108 daily chart below looks like it is weakening and may be showing that NYSE stocks are starting to decline. T2108 shows that only 69% of the NYSE stocks are now above their average close over the past 40 days.   In addition, only 34% of the Nasdaq 100 stocks closed with their MACD above its signal line, another sign of short term weakness. With more antics to be expected out of Washington the next two weeks, we may finally see some reaction to the sequester debacle in the market averages.   So, I am getting quite cautious.

 

This bull has legs, with RWB patterns in the major indexes

@ 7:00 am
GMI6/6
GMI-25/9
T210876%

Below is a weekly GMMA chart of the S&P500 Index.   A GMMA chart contains a set of 12 exponential moving averages. In my version of the GMMA, all of the shorter term averages are red and the longer term averages are blue. I add one more moving average, plotted in a dark dotted line.   This moving average is set to one, and represents the closing price of the index plotted. The dotted line therefore shows where the index closed relative to all of the moving averages. A strong up-trend is apparent when all of the red lines are rising above the blue ones so that there is a white band between them.   I call this a red white and blue (RWB) pattern. As long as there is a RWB pattern and the dotted line is rising above all of the other averages, it is clear sailing.   The first sign of a possible weakening of the up-trend is evident to me when the the dotted line closes below the top (shortest) red moving average. (Click on the chart to enlarge it.)

It is clear that the S&P500 Index (and the Dow 30, not shown) has an RWB pattern.   The green line in the chart is at the S&P500 all-time high. See my discussion of the green line top of this index in last Monday’s blog. It is noteworthy that the Nasdaq 100 Index ETF (QQQ) has not been as strong as the other two indexes.   However, the chart below shows that the QQQ is now in a RWB up-trend and may be gaining strength.   Perhaps the tech stocks are about to catch up with the other stocks, especially now that AAPL may have formed at least a short term   bottom and GOOG has hit an all-time high?

Meanwhile, the GMI remains at a strong 6 (of 6) and the GMI-2 is heading towards 6 also, for the first time since September 21.