The T2108 was in single digits for six consecutive days before Tuesday. Anytime this index is below 10, the market is oversold and it is a good time to look for a rally. There were 6 new highs and 148 new lows on Tuesday in my universe of 4,000 stocks on Tuesday. Tuesday was the 16th day of the current short term down-trend of the QQQQ. It may take weeks before we find out whether Tuesday’s rise will hold. The GMI-R is now up to one (of 10). Perhaps the safest approach for me now is to take on some long positions and buy some puts for insurance, the strategy I described in my prior post.
Jim Cramer takes it personally…
Don’t mind me, but this video was even better than the one that started this whole mess:
How I use put options as investment insurance
There were 7 new highs and 1,221 new lows in my universe of 4,000 stocks on Friday. The QQQQ completed the 14th day of its short term down-trend within a longer term down-trend. I heard on Fast Money that the AAII survey has the most bearish reading ever. Furthermore, the momentum indicator in IBD for the Nasdaq 100 index futures is below 25%, the place from which rallies tend to begin. And with the T2108 at 7%, in deeply oversold territory, I am becoming reluctant to add more shorts right now.
Last week, a person who knows nothing about the market asked me how to short stocks. This is reminiscent of the stories of the shoeshine boys providing stock tips, near the roaring 20’s market’s top. The sentiment is just too negative right now. Does this mean the market has to turn up?