General Market Index (GMI) table

With the QQQ now back above its 30 week average (solid red line), I am ready to reenter this market. The QQQ, composed of tech stocks, is outperforming the SPY and DIA.

Friday was the 4th day of the new QQQ short term up-trend. AAPL has emerged as a leader again and there is too much bearish market sentiment.

The GMI is now back to 4, reflecting the growing strength in the market indexes.

Check out this weekly chart of AAPL.   It is back above its 10 week average (blue dotted line). Click on chart to enlarge.

With the GMI and GMI-2 each at zero, I have gone to cash.   However, I am 30% invested in mutual funds in my university pension because of trading limits.   The only glimmer of bullish hope that I see is the fact that the Investor’s Intelligence poll of investment advisers still shows more bulls than bears, a very rare occurrence.   The market usually fools the majority of participants.   Everyone is so darn bearish.   This market may be getting ready for a huge bottom to this decline, which is typical of the month of October. The “Sell in May” crowd usually returns around Halloween.

If you take a look at these weekly GMMA charts of the QQQ and SPY, you can see that the shorter term averages (red) are crossing below the longer term averages (blue). The QQQ, which does not contain financial stocks, looks a little stronger than the SPY. Click on charts to enlarge.

For the moment, the present declines do not look that bad compared with the decline in 2008. The SPY looks like we could get a replay of the 2008 rout, but the averages could turn around as they did in 2010.   Better to wait on the sidelines for a significant sign of an up-trend. The QQQ just entered a new short term down-trend.

According to how I define short term trends, QQQ is still in an up-trend, having completed its 12th day on Friday. We will see whether it will hold this week.   The GMI is still 1 (of 6) and the GMI-2 is zero.   The T2108 is at 20%, in low, neutral territory.   The T2108 indicator reached 7%, very oversold, at the August market bottom. Note that the SPY has closed below its 10 week average for 9 weeks but the QQQ for just one week.   This   reflects the fact that the Nasdaq 100 Index (QQQ), unlike the S&P500 Index (SPY)   contains no financial stocks. And as in 2008, the major weakness is showing up in the financial stocks.

My stock buddy, Judy, asked me where I thought gold would find support.   I sent her the weekly chart of GLD below. Note how well GLD has found support at the 30 week average (red line) since the current up-trend began in early 2009.   Since then GLD has been in a perfect Stage II advance.   Support should therefore be around $154. Click on chart to enlarge.

I remain partially invested long in this market, but will exit all positions if the short term up-trend ends.