GMI: 2; GMI-S: 25; In cash or short

@ 12:07 am

The GMI is now at 2, and there is no reason to fight the down-trend.  I hope you got out when I did when the GMI weakened on Tuesday and Wednesday.  Gmi0726 There were 513 new 52 week lows in my universe of 4,000 stocks on Thursday, the most  since I began posting in May, 2005.  There were only 46 new highs.  This is not a market to be long in.  The Worden T2108 indicator is now at 19.  Extreme readings at bottoms in 2001 and 2002 have been as low as 7.  So we could go lower, but we are in a level where bottoms occurred in 2004-2006.  The thing that bothers me is the brutal selling in financials, homebuilding real estate and retail.  It looks like the market is predicting a major down-turn in consumer spending and a financial meltdown…..

Cramer’s four tech horsemen (AAPL, AMZN, GOOG and RIMM) held up on Thursday.  He thinks one should still buy tech stocks.  However, the bear gets to everyone and it is likely this decline will not end until these stocks cave in too. If I have learned anything the past 40 years, it is that most stocks follow the market averages and it does not pay to be long in anything in a market down-trend.  Keep in mind, however, that according to my indicators, the QQQQ (the Nasdaq 100 tech stocks) is still in an up-trend, even though the Nasdaq composite (that also includes financial stocks) is in a down-trend.  It is time for me to be short or in cash, even though we may get a bounce soon.

See my disclaimers below.

GMI: 3; GMI-S: 38; Waiting for QQQQ to turn

@ 12:01 am

My Daily SPY Index turned negative on Wednesday, bringing the GMI to 3 for the first time since it was below 4 on March 19. (I posted "3?" on one day since then but I subsequently corrected it to 4 because I had jumped the gun on one indicator that required 2 days down before turning).  The short term GMI-S is now 38.  The Worden T2108 indicator is 31, still not in the range of past market bottoms, typically below 25.

I am content to remain in cash for now.  By following my gut I did miss out on further gains in GRMN and AAPL, but I am coming away with almost all of my profits from the past three months.  I am fortunate that many of my holdings were called away on Saturday because this week’s decline has hit these stocks hard.

I always play the odds, and the risk of being long appears to me to be too high for now.  The SPY and IJR  look very weak, but the QQQQ and DIA are behaving relatively stronger for now.  Two daily closes of the QQQQ below 48.50 and the DIA below 136.30 would signal an imminent decline.  Perhaps it would be best to just take August off, as many traders do.  After earnings are out there will be little good news to propel stocks higher.  And that ominous September-October period is just around the corner.

Please see my disclaimers on my prior post.

GMI: 4; in cash + QID

@ 12:01 am

The market has weakened considerably, with the GMI now at 4.  The Worden T2108 indicator is now at a new low with 32% of stocks above their 40 day averages, still above the level at which bottoms occur (below 25%).  There were 342 new 52 week lows in my universe of 4,000 stocks and only 91 new highs.  The brokerage stocks are getting slaughtered, suggesting that the general market and underlying financials are weak.  This is not the time to be brave.  I am in cash with a small position in QID in case this decline continues.  QID goes up twice as much as the QQQQ falls.  Be careful.

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