General Market Index (GMI) table

The GMI has moved up to 1 (of 6), because the 10 Day Successful New High Index turned positive, and the GMI-R is at 4 (of 10), reflecting the strength in my very short term trend indicators.   The Worden T2108 is now out of bottom territory, at 25%.   The number of NASDAQ 100 stocks with their MACD above its signal line is now up to 70%, indicating short term strength.   Still, Friday was the 27th day of the current short term down-trend in the QQQQ (D-27), and the QQQQ and SPY have closed below their key 10 week averages for six weeks. I cannot trade profitably on the long side when the key indexes are below their 10 week averages.

There is a very interesting article in Barron’s online about the strong likelihood we are entering a bear market. When a big publication like Barron’s has the courage to publish such a bearish article, it   sometimes serves as a good contrary indicator.   So it   makes me stop and question whether I should get on the bear bandwagon.   Right now it is important to respect the current down-trend and to try not to anticipate a change in trend.   When a real change occurs, I will have plenty of time to jump on board.     I am therefore content to wait for my indicators to detect any turn. I remain mainly in cash, holding some GLD and a few shorts.

So many of the indicators and stocks I look at are looking very weak.   A lot of people say that copper prices are correlated with economic growth.   Copper is a key material in so many products related to building and economic development. While looking at my watchlist of indicators, I happened to see this weekly chart of copper.   By my analysis, copper looks like it is getting ready to enter a major Stage 4 (See Weinstein book below for a discussion of stage analysis) down-trend.   I can’t trade futures in my IRA account and I can’t short stocks.   But I could buy some put options on SCCO, whose chart tracks the price of copper quite closely. Regardless, I think that this chart of copper is an ominous sign for the world’s economy…..

Another ominous sign is that the GMI and GMI-R   are each at zero.   The markets are in short and longer term down-trends and it makes no sense to hold stocks or long positions now, except for gold (GLD).   So I am short a few index ETF’s and own GLD. I do not know how long this decline will last, but things do not look good right now.   Friday was the 22nd day of the current QQQQ short term down-trend.   The Worden T2108 is at 19%, which is in oversold territory but not at an extreme level.   One promising sign is that 54% of the Nasdaq 100 stocks had their MACD above their signal line, a sign of short term strength.

Anyone hanging on to long positions probably has an addiction to trading or gamboling.   One needs to have a plan to minimize market risk.   It is so much easier to make money owning stocks when the GMI is above 3.

This monthly chart of the Dow 30 really scares me.   On a long term basis, it looks like we have merely retraced a part of the decline from the 2007 market high.   In fact, the market rally has stopped at about the peak of the market in 1999-2000.   The Dow has now started down and the 30 month moving average (red line) is headed down.   This chart almost looks like a giant head and shoulders top!   What if the rise off of the 2008 bottom is over and we will now head back down to around Dow 7,000 or below?   Compare the up-trends in the 90’s and in 2004-2007 when the Dow was above its rising moving average, to the pattern the past year with the Dow below its declining moving average.   This chart, which is almost identical to that of the S&P500 index, makes me challenge my assumptions about this market.   I am watching the trend carefully and am contemplating transferring my university pension money out of mutual funds and into money market funds….

The GMI is back to zero and the more sensitive GMI-R is at 2.   The QQQQ completed its 18th day of its short term down-trend.   The QQQQ and SPY have closed below their 10 week averages for four weeks.   I rarely can make money owning growth stocks when these indexes are below their 10 week averages.   The Worden T2108 Indicator is at 18%, still near oversold territory from which the market can rally.   For me though, the odds are against my owning stocks.   I own a little GLD and remain largely in cash.   If you can’t get out of the market and sit safely on the sidelines in a down-trend, you may want to question whether you are in the market to make money or to satisfy an addiction to trading.   If you can,   pick up a copy of the old classic, The Money Game, by Adam Smith (a pseudonym), and read this perspicacious discussion of the diverse psychological motivations that bring people to the stock market.   Many persons are not there to make money.   Are you?