GMI: +1; going to cash; on finding shorts

@ 10:39 pm

The GMI remains at +1 and Tuesday was the fourth day of the current short term decline in the QQQQ (D-4).  Only 41% of the Nasdaq 100 stocks rose, along with 33% of the S&P 500 stocks and 53% of the Dow 30 stocks.  Only 24% of stocks are in a short term up trend.  There were 42 yearly highs and 62 new lows in my universe of 4,000 stocks.  Gmi0516 I was surprised we got no bounce back on Tuesday.  My indicators have turned so negative that I transferred my pension funds out of mutual funds and into money market funds.  Maybe we should all go away in May,  until October.  My puts all rose on Tuesday.  In fact, one of my shorts, CCL, collapsed on Tuesday.  More and more, I am finding that stocks in trouble are telegraphing their declines in advance.  One needs only to read the high volume declines that they show weeks before the sudden drop.  Bad news is always hidden from the public while the insiders unload their shares (following the Enron trial?).  One must therefore look for the signs of high volume selling by the big boys in order to identify potential shorts.  If we wait for the bad news to become public before we short, we arrive late to the party…..

Please send your comments to:  silentknight@wishingwealthblog.com.

GMI: +1; Indicators weaken more; some submarines

@ 12:01 am

The GMI remains at +1, but just barely.  Gmi0515 There were 121 new yearly lows and 28 new highs in my universe of 4,000 stocks  on Monday.  The last time we had over 100 new lows was the end of October, 2005.  Only 31% of the 274 stocks that hit a new high 10 days ago closed higher on Monday than they did 10 days earlier.  On the other hand, 70% of the 37 stocks that hit a new low 10 days ago closed lower.  This is a clear indication that shorting stocks at new lows has been more likely to have been profitable than buying stocks at new highs. Similarly, there are 114 submarine stocks, compared with just 12 rocket stocks. These are stocks in solid down trends or up trends, respectively.  Only 31% of stocks are in a short term up trend and only 39% in longer term up trends.  11% of stocks are now within 5% of a new low.  Monday was the third day in the new QQQQ down trend (D-3).

I have sold  all of my stocks but one (AAPL).  All of my short positions (put options in my IRA) are profitable.  It has almost been too easy to make money on the short side.  Famous last words????!!!!……………..

People are much too scared of shorting stocks.  But the great traders always go with the trend of the market, up or down.  Buying  put options is a way to go short while limiting possible losses.  In fact, some of my put options expire next January, giving me lots of time for the down trend I have detected to grow.  It is very comfortable to be holding a put on a declining stock that has months to fall. The key is to detect the decline relatively early on.  I simply use TC2005 to scan the entire market for "submarines" that show a clear top about 4-6 months ago and a declining trend on large volume. I detected 114 submarines tonight.  They include:  CMTL, CHS, URBN, SO, GENZ, HOV and CMVT (I am short some of these).  Take a look at the weekly charts of these stocks and note the heavy selling and declining 30 and 10 week moving averages.  It is noteworthy that many of the submarines are utilities and housing stocks, suggesting that we are seeing industry-wide weakness, a good omen for shorting.

Please send your comments to:  silentknight@wishingwealthblog.com.

GMI: +1?; More new lows than highs; Put/call ratio over 1; cash is good

@ 11:32 pm

The GMI is almost zero.  The IBD growth mutual fund index is right next to its 50 day average and too close to call.  There were 112 new yearly lows and 32 new highs in my universe of 4,000 stocks.  The leaders, GOOG and AAPL appear to be weakening.  Gmi0512 Only 31% of the Nasdaq 100 stocks closed above their 30 day averages.  It appears that the QQQQ may lead the market down even though it barely participated in the up trend with the DIA.  Both the GMI-L and GMI-S indicators have weakened.  Only 13-15% of the stocks in the QQQQ,  SPY and DIA indexes advanced on Friday.  The only contrary sign I have noticed is that IBD reports that on Friday the put/call ratio was 1.12.  Readings over one usually occur at the end of a decline when the little guy bets on a further decline by buying more put options than call options.  The fact that the index was above one near the beginning of a decline suggests to me that many persons are expecting a market top.  In view of this extreme bearishness I would not be surprised to see a sharp and brief bear rally this week.  Regardless, I am buying long term in-the-money puts on stocks that appear to have topped out. In fact, my TC2005 market scans found more submarine stocks (111) than rockets (19) this weekend.  This in itself is a sign of a weakening market.  Also, 11% of stocks are now within 5% of their yearly lows. Be careful and don’t be afraid to go to cash.

Please send your comments to:  silentknight@wishingwealthblog.com.