General Market Index (GMI) table

Blog post: Day 16 of $QQQ short term down-trend; Some end of decline signs I am looking for; Promising stock scan finds 2 shipping stocks at ATHs: $ZIM and $MATX, see chartss

@ 8:20 pm
GMI0/6
GMI-22/9
T210821%

Once a significant decline has begun, no one knows when it will end. Now that the QQQ is below its 30 week average (solid red line), the first thing I will look for is a close above that average. But as I showed in last week’s AAII Eastern Michigan Chapter webinar (will post link to recording here when I receive it), the index can whip-saw above and below that average. I therefore want to see the 30 week average curving up again. That is the definitive signal to get me back in. Other important early indicators of a possible bottom are the p/c ratio >1.10 and T2108 <10%. T2108 reached 12% last week and is now at 21%. The p/c ratio=.93 and reached 1.08 last week. If T2108 goes below 10% I will buy a little SPY and buy more only at higher levels after a bottom is in. Here is the weekly chart of QQQ.

Another chart I will monitor is my daily adapted GMMA. When it returns to a daily RWB up-trend it could indicate a short term bounce.

By definition, a trend follower follows the trend. I will get back in  long after a bottom is formed, not before.  Going in early in anticipation of a change in trend often leads to losses. If the 30 week average curves down it will signify to me the beginning of a major decline. At least that is what has signaled the start of prior bear markets, also shown in my webinar.

Just for fun I ran my TC2000 scan for promising stocks near their all-time-high and having strong technicals. Only 4 stocks appeared out of 777 in my  watchlist of stocks that have appeared in promising IBD and MarketSmith lists. These are: MATX, ZIM, MCK and COP. All 4 traded at all time highs (ATHs) last  week. Only in a market up-trend would I buy any of these. Here is the weekly chart for ZIm. Note that it retook its green line last week and reached an all-time high. After a major market decline any stock trading at its ATH is a potential leader.

 

Interesting that 2 of 4,  both ZIM and MATX, are in the shipping business. MATX is also above its last green line top.

The GMI= 0/6 and Red. It is so much easier to profit going long when the GMI is on a Green signal. I stay out and conserve my capital for the next sustained up-trend. Watch out for brief bear market rallies.They can be treacherous.

 

 

Blog post: 30 week average of $QQQ just starting to curve down; typically happens at the BEGINNING of a significant decline; Register for my AAII webinar below.

@ 9:40 pm
GMI0/6
GMI-22/9
T210822%

The charts tell a dire story. All major indexes ($IWM, $DIA, $SPY, $QQQ) are below their critical 30 week moving averages, which are beginning to curve down. A moving average turns down when the current period’s value being added to the total is below the value of the furthest period being dropped. The fact that the 30 week average is declining means the current week’s price is lower than the price 31 weeks earlier. How much more evidence do we need to show that the averages are weak. The put/call ratio (.88)  and T2108 (22%) are still not at the extreme levels typical of a bottom. And if many are looking for a bottom to hop back in, it is probably too early. When the media give up and expect a long bear market we will be near the bottom. I will never forget that the WSJ Heard on the Street column wrote, “if anything we are sure of, the market has further to fall” exactly on the day the bear market bottomed about 50 years ago.

The job of the trend follower is to get out of the way of a declining market and wait until there are signs of a bottom. So I am in cash in my trading account and in most of my university pension accounts. I don’t make recommendations. My policy is to share what I am doing and to let everyone make their own decisions based on their knowledge and risk tolerance level. I don’t worry about getting back in at the bottom. Just remember, if one sells out at $100 and the equity falls, I only have to get back in by $100 to not miss anything but the heartache of a substantial decline in  price and panic selling. Be careful. If this turns out to be a multi-month bear market, there will be many short snap back rallies which will suck you in and then clobber you. I will demonstrate this in my webinar for the AAII Eastern Michigan Chapter Tuesday evening. You may register for this free webinar here. 

Below is the weekly chart of $QQQ. Note the recent weeks of above average volume selling.

The GMI=0 (of 6) and on a Red signal. It is so much more profitable to buy stocks when the GMI is Green.