I would not trust any bounce this week because it may only be end of quarter window-dressing by the mutual funds. Given the continuing market correction and the uncertainty with regards to raising the debt limit, I transferred some of my university pension funds into money market funds today. I normally wait for a definitive Stage 4 decline before exiting, but I am not willing to risk losing a lot of money now. If I am wrong, I will move back into mutual funds. I remain in cash in my trading account with one little short position.
Friday was 24th day of QQQ short term down-trend; window dressing time
As we get to the end of the 2nd quarter, I expect that the mutual funds will dress up their portfolios with the best big name stocks. That way their quarterly reports will show them holding the stronger stocks. So we may see some strength this week. But all of my GMI indicators are negative. I remain on the sidelines, in cash.
23rd day of QQQ short term down-trend; on the sidelines
IBD still maintains “market in correction.” Many of my internal indicators show that we have come back from being severely oversold. For example, 53% of the Nasdaq 100 stocks now have their MACD above its signal line, up from a recent low of 5%. 93% have their slow stochastic above their long, up from 6%. Both of these indicators are sensitive to very short term moves.The Worden T2108 indicator looks like it has gotten down to levels reached at recent bottoms, see weekly chart below. I just have to wait to see if this bounce can turn the indicators in my GMI and GMI2 positive. Time will tell. Meanwhile, I enjoy life on the sidelines.
