General Market Index (GMI) table

Rally weakening, T2108= 86% and overbought; RWB: CAT; BWR: UNG

@ 7:00 am
GMI6/6
GMI-R10/10
T210886%

While the GMI and GMI-R remain at maximum values, there are signs this 19 day old QQQQ short term up-trend is weakening.   First, the Worden T2108 indicator is in overbought territory, at 86%.   In a few instances T2108 has hit 90%, but always at market tops.   This does not mean that a big decline subsequently ensures, only that things cool off for a while.   Furthermore, only 63% of the Nasdaq 100 stocks closed with their daily MACD above its signal line, down from 82% last Friday.   The daily MACD (12/26/9) is sensitive to the short term trend.   The QQQQ and SPY index ETF’s have now closed above their 10 week averages for 5 weeks.   So, the longer term trend is still up.   So, we appear to be facing some short term weakness within a longer term up-trend.   As I have been writing, we may get weakness in the indexes at the beginning of October until we earnings come out.   The tough decision is whether to ride out the weakness or to cut back positions until it is over.   I do not have a clear answer, but I am unwilling to give back all of the gains form the past few weeks.   My university pension remains 100% invested and I will not touch that now.   I may move stops up or buy some puts for insurance on my positions.

Last Monday, I introduced the concept of Red White and Blue   (RWB) charts which is the pattern of rocket stocks.   Interestingly, there are even some RWB stocks among   three Dow 30 stocks:   CAT, DD, MCD.   So, sometimes even the big-cap, nonspeculative stocks   can show consistent strength.   Below is the chart for CAT.

A few months ago I thought I saw a bottom in UNG, but I was wrong.   The weekly chart below shows an incredible   submarine stock pattern (BWR).   What a great stock to have shorted the past two years. I would not consider buying UNG until the shorter term averages (red lines) rise above the longer term averages and it becomes a RWB chart pattern.

Rally continues as we head towards end of quarter window dressing; GMMA of AAPL

@ 7:00 am
GMI6/6
GMI-R10/10
T210875%

With options expiration behind us, the next major event that may cause the stronger growth stocks to go higher is the end of quarter mutual fund window dressing.   This event will be followed by release of quarterly earnings beginning in mid-October, followed by election results. All of these events might give the market a reason to rise, but we may have the typical October swoon somewhere in here.   But with   the GMI at 6 (of 6), I remain long in my IRA and 100% invested in my university pension. The QQQQ short term up-trend has now completed 9 days (U-9) and the QQQQ and SPY have now closed above their 10 week averages for three weeks. The Worden T2108 indicator is at 75%, which is high but not at an extreme over-bought level yet.   94% of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term strength. While the media pundits appear to be focusing on the idea that the S&P500 index is at the top of its recent trading range, it appears to me that tech stocks, as measured by the QQQQ have already broken out of their range. Tech stocks may lead the market higher, with so many new developments exciting people, such a cloud computing (CTXS, FFIV) and electric cars (PPO, SQM).   And the fact that such market leaders as PCLN, NFLX, CMG and AAPL continue to rise, bodes well for the market.

A major characteristic of rocket stocks in strong up-trends is that their short term averages are well above their rising longer term averages.   I think that the weekly GMMA provides an extraordinary way for identifying such stocks. AAPL provides a great example, below. Note that this weekly chart (click on to enlarge) has all of the shorter term averages (black) well above their rising longer term averages (red).   AAPL has consolidated the past 5 months but appears to be getting ready to break to all-time highs.   I own some AAPL, and if it breaks out, we could see a strong move up. This weekly GMMA chart shows the typical chart pattern of all rocket stocks that I buy.

QQQQ short term up-trend completes 4th day; GMMA suggests up-trend

@ 7:00 am
GMI6/6
GMI-R10/10
T210873%

The QQQQ up-trend continues and all of my indicators are now positive, with the GMI at 6 (of 6) and the GMI-R 10 (of 10).   The QQQQ and SPY indexes have now closed above their critical 10 week averages for the second straight week.   In addition, 95% of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term strength. The Worden T2108 indicator is now 73%, which is near overbought levels, but it can remain there for months.   With options expiration coming at the end of this week and the end of the 3rd quarter with mutual fund window dressing at the end of the month, we could see a nice rally. I know everyone fears the market in October, so we may get some turbulence in October before earnings come out. Still, I am accumulating stocks , given the strong GMI reading. In addition, the GMMA weekly chart of the QQQQ (click on chart to enlarge)   shows the averages holding their own. The shorter term weekly averages (in black) appear to be slowly rebounding off of the longer term averages (in red). Check out the column to the right to see the types of stocks I am trading.