General Market Index (GMI) table

With the GMI bearly (pun intended) at 1 and the GMI2 at 0, this is no time to be long stocks in my trading account.   During the rally that began last September and for most of the next 6 months the GMI was around 6 and registered as low as 2 on only one day in that entire period. During that time my accounts prospered.   But now, with the GMI at 1 and with as few as only 22 new highs on Friday in my universe of 4,000 stocks, this is not the time to be buying growth stocks near new highs.   Stocks that hit new highs are very unlikely to keep hitting new highs. So, I am forced to the sidelines in cash in my trading accounts.   If I could repeatedly buy and sell in my university pension account, I would even move a little out of mutual funds and into money market funds. In such instances, I still allocate new university contributions to equity mutual funds so that I dollar cost average into them as prices fall.   Then, when the bottom is in, I slowly reinvest the large sum of money that I had moved out at the beginning of the decline.

The new 6 month rate for U.S. Government I-bonds is now an unbelievable 4.6%!   I may put some savings into I-bonds, as I believe the U.S. Government will continue to make good on its debt payments.   Just be sure to read up on the purchase maximums and withdrawal rules.

The QQQ bounced up from oversold last week and is closing the gap down that occurred on May 23rd. I am watching closely to see if it can break above 58.05 and remain there. If the QQQ can’t and bounces down off of that area, I expect a continuation and perhaps, a deepening of this short term down-trend. Friday marked the 5th day of the short term down-trend, and once a trend lasts this long, it usually continues for a bit. The QQQ has now closed below its important 10 week average, while the SPY bearly (pun intended) remains above its 10 week average. Both indexes are bouncing off of oversold levels, so the rise could last a few days. With the GMI at 2, I remain mostly in cash with a few hedged long positions. IBD continues to call the market in a correction and remains cautious about making new buys. Since the QQQ peaked on April 27, the Nasdaq 100 index has declined 3% and 64% of its component stocks have declined; only 16% are up 5% or more. During the same time period, 58% of the S&P500 component stocks have declined; 13% are up 5% or more. Why fight these odds by going long stocks?

We are in one of those periods when the market refuses to send me clear signals regarding the short term trend.   I am therefore mainly in cash and/or completely hedged in my trading account.   I am buying put options   as insurance on all long positions. The GMI is at 5 (of 6) and the GMI2 is at 4 (of 6).   Friday was the second day of the new QQQ short term up-trend. However, the QQQ could start another short term down-trend with a decline on Monday. Only 29% of the Nasdaq 100 stocks closed with their MACD above its signal line, reflecting short term weakness. The Worden T2108 is at 51%, in neutral territory.

Check out the weekly chart of the QQQ below.   The QQQ has an RWB pattern and remains in a strong longer term up-trend.   Nevertheless, we could experience short term weakness for a while.   IBD continues to label the current market as being in a correction.

Meanwhile, AAPL is sitting on key support.   A close below the 30 week average (red line) would be an ominous sign for it as well as the rest of the market. When AAPL cannot hold up, how can the market? Click on chart to enlarge.