General Market Index (GMI) table

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?

On May 3rd, I posted the results of my submarine scan, designed to detect stocks in a significant down-trend. The scan was run on the close of 4/29 and this table shows the performance of the nine stocks since then.   TC2007 lets me run a watchlist tracking report that shows the changes of each stock in a watchlist as of the date the stock was added to the list. One can see from this list that all 9 stocks have declined, not an unexpected result, given the market’s decline since then.   Since the close on 4/29, the QQQQ has declined almost 11% and the S&P500 index (SPY), almost 10%.   Note, however, that 5 of the 9 submarine stocks ( 56%) have declined by 15% or more.     In comparison, only 17%of the Nasdaq 100 stocks and 19% of the S&P500 component stocks have declined at least 15% during the same period.   Thus, my submarine scan detected stocks that were more likely to have taken big dives   than would be expected in the components of the Nasdaq100 and S&P500 Indexes.

Furthermore, I wrote in that post on May 2nd, that the charts of 2 Chinese online gaming stocks (NTES and PWRD) looked quite weak and posted a chart of PWRD (click and scroll to post from May 3). Here is the current daily chart of PWRD.   I noted with an arrow the bar on 4/30 which I was looking at when I wrote the post on 5/3.   Note the tremendous gap down that occurred in PWRD on 5/17.   Both NTES and PWRD are down more than 15% since I wrote about them, but PWRD is down more than 25%. It clearly is possible to scan the market for a set of stocks that are more   likely to decline, if the general market weakens……..

As to the general market, all of my indicators are negative.   So the GMI and GMI-R are each zero.   Friday was the 13th day of the current QQQQ short term down-trend (D-13).   The QQQQ and SPY closed below their 10 week averages for three weeks.   Only 2 of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term weakness.   The Worden T2108 Indicator, at 12%,   is still in an oversold area where bottoms or bounces typically occur.  The strength of the bounce that began on Friday will determine whether we are in a brief correction or at the beginning of a major new decline.   I am watching the indexes very carefully, and remain mainly in cash in my trading IRA.   If it looks like a major decline is likely, I will move to a money market fund in my university pension. This is a very treacherous market and not the time to be a hero.   The major markets   look very weak to me.