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With AAPL showing strength, it looks like this market will move higher. Check out AAPL’s daily chart.

And its strong RWB pattern.

Stocks are breaking through their green line tops to all-time highs. Like SYNA

And IMAX

And MGA

And TCX

And CTRP

I like to hold stocks that break up through their green line tops (GLB) as long as they stay above their green lines.

A green line top occurs when a stock reaches an all-time high that it does not exceed for at least 3 months. By definition, an IPO may not have existed long enough to rest for 3 months. I rediscovered what Jesse Livermore once wrote. If an IPO opens strong and then recedes from its peak for a few weeks, buy it when it breaks to a new high.   As Jesse said, it means something has changed. FB did this quite a while ago, although it took it almost two years until 2013 (monthly chart) to hit a new high.

SHAK flashed the buy signal much more quickly, after 12 weeks (weekly chart). It pays to watch the IPOs for this truncated GLB pattern.

The GMI remains at 6 (of 6).

I have found that since 2006, the GMI has done a good job of keeping me on the side of the general market trend. It is my cardinal rule to trade consistent with the market trend.   While the GMI has helped me to exit the market in prior major declines, I have discovered an important limitation while examining GMMA charts. From the GMMA chart of the QQQ below, I can see that since early 2014, the GMI has issued 7 separate Sell signals (red arrows) followed by 7 Buy signals (green arrows). However, during this entire time the QQQ has remained in a strong RWB up-trend, with all of the shorter term averages (red) above the rising longer term averages (blue)!

It is clear to me that a GMI Sell signal should only be used by me   for short term trading decisions. Last week I posted that prior major market tops have been signaled when the shorter averages declined below the longer term averages. I should therefore probably remain invested long term in the market (at least in my university pension account) as long as the RWB pattern is in place, even when the GMI signals Sell. I am reinvesting my pension funds back into mutual funds. In the future I will use the GMI signals only to guide my shorter term trading in my more speculative accounts. I will heed the GMMA chart for longer term trends. One must never stop learning and adapting when it comes to the markets….

The GMI remains at 6 (of 6).

The GMI remains on a Sell signal and I remain largely in cash and hedged.   I do hold a few biotech stocks, see discussion below. This market is rebounding from a high volume decline. It remains to be seen whether this rebound will retake prior peaks or falter somewhere before. This week is very critical for determining the significance of this bounce. I would want to see the QQQ close the week above 99.30.   The QQQ is now below its 10 week average and I cannot make money on the long side when this is so.   There were 50 52-week highs and 134 new lows on Friday.   One possible sign of a meaningful bounce was the fact that the Worden T2108 hit an intraday low of 13% on Thursday.   That is a very oversold level. Put/call ratios were also over 1.0, signalling extreme bearishness among option traders. IBD sees the market in a correction. However, it is just impossible to know in advance whether we have a “dead cat bounce” or a meaningful bottom. I will start to buy the TQQQ when and if the QQQ short term trend turns up….

Meanwhile, my readers know that I have been focusing on the bio-tech area.   There are so many discoveries occurring in   drug research that this is one area that can buck the market trend. I have been scanning bio-techs each day for high volume break-outs.   I then look at monthly charts to see whether each is near a “green line break-out” to an all-time high. When a stock breaks above a high multi-month (at least 3 month) base, it often means something important is occurring within the company. Here are some weekly graphs of biotech stocks that have come to my attention.   Somewhere among these may be a company with the next new cure for a major disease. These companies are worthy of further research ( a review of recent news stories often explains why the stock surged) and monitoring for possible purchase. If any of these decline below their green line, I   become less interested in them. One approach I like is to buy a few shares (up to 25) of each just to keep them on my radar screen.   I   then slowly add more to those that prove themselves and exit those that fail. I am looking for multi-month or year long moves, not for a short bounce. Click on a chart to enlarge.

When a stock breaks out of a monthly, green line top to an all-time high it can be the beginning of a huge move.   As an example, look at this monthly chart of AMGN in 2012. Note also what happened after a failed green line break-out in 2006. When a stock comes back below its green line, it is a sign for caution. But a stock can fail, find support at the break-out, and then resume its rise.