Rally gaining strength; Guppy chart reveals major turn

GMI4/6
GMI-R8/10
T210882%

If calling the short term trend of the market were easy, we would all be rich and retired.   Last week, my short term QQQQ indicator gave me a head fake and turned my daily trend count down.   That new downtrend lasted for two days and then the up-trend resumed.   However, I had indicated at the time that my short and long term QQQQ indicators were giving inconsistent readings, with the long term indicator remaining in an up-trend.   The new short term up-trend just completed its 3rd day.

The more that I analyze the market, the more I become convinced that I should rely on the longer term weekly trends to determine the market trend (see discussion of the Guppy chart below).   The QQQQ has been above its critical 10 week average for 11 weeks and the SPY for 10 weeks. But I have told you that I am a chicken, and would rather go to cash at the first sign of weakness and re-enter the market later, after the dust has cleared.   I actually have other, personal reasons, for why I am unwilling to enter the market right now.   I cannot trade successfully when I am stressed by other concerns. The only stock I own is ASIA, with a close stop loss.  

Read moreRally gaining strength; Guppy chart reveals major turn

New QQQQ short term down-trend begins; buying QID

GMI3/6
GMI-R5/10
T210877%

I am very cautious about the current market.   I believe that we have entered a new QQQQ short term down-trend.   On Friday there were just 11 new highs and four new lows in my universe of 4,000 stocks.   In addition, a number of leaders have broken down, including AIPC, QSII, ALGT and NFLX.   When rally leaders falter, it often is an ominous sign of things to come.

With the GMI now at 3, I am becoming more defensive.   I am getting out of QLD and will buy some QID (ultra short QQQQ ETF).   If this down-trend continues, I will make money in QID as the QQQQ declines.   I am concerned that only 20% of the QQQQ (NASDAQ 100) stocks had a MACD close Friday above its signal line.   The perplexing thing about this market is that my longer term weekly QQQQ trend indicator remains positive.   But any long term decline must, by definition, begin with the short term indicators declining. So, this may be a contained decline withing a longer term up-trend.   The key is to be cautious and wait for the market trend to reveal itself.   I remain mainly in cash.

Read moreNew QQQQ short term down-trend begins; buying QID