GMI: 0; IBD 100 stocks shine; Waiting for confirmation of up-trend

@ 10:22 pm

Well, we finally got the long awaited bounce.  While the GMI remains at zero, some of my indicators strengthened Thursday.  Gmi0525 A lot of stocks advanced– 74% of the Nasdaq 100 stocks rose, along with 82% of the S&P 500 stocks and 90% of the Dow 30 stocks.  The last time we had percentages like this was January 3.  The interesting thing is that 95% of the IBD 100 stocks (as of 5/15) advanced.  IBD 100 stocks had been among those most battered during this decline. It is therefore noteworthy that people bought the growth stocks yesterday.  We will continue to monitor the IBD 100 stocks for a resurgence of growth stocks, but with the IBD growth mutual fund Index below its 50 day average, I am not ready to buy these stocks.  When these super managers can’t make money in growth stocks, neither can I.

In spite of this strength Thursday, there were only 36 new highs and 30 new lows in my universe of 4,000 stocks.  My TC2005 scan of the 4,000 stocks yielded 160 "Submarine" stocks but only 10 "Rocket" stocks.  Only 8% of the 4,000 stocks are now in a short term up trend and only 27% closed above their longer term 10 week  averages.  For now, these indicators have bouncedoff of their extreme lows.  Still, only 21% of the Nasdaq 100 stocks closed above their critical 30 day averages and only 12% of stocks are within 5% of a new high.  There were again very few successful 10 day new highs.  Only 9% of the 209 stocks that hit a new high ten days ago closed higher on Thursday than they closed ten days ago.  Buying stocks at new highs has, thus, been a losing proposition.  On the other hand, shorting stocks at new lows 10 days ago would have been profitable in 58% of the cases.  Thursday was the eleventh day (D-11) in the current QQQQ short term down trend. 

Putting this all together, I remain largely in cash, while holding puts on a few stocks in my IRA.  It will take a few more days for me to determine whether this is a dead cat bounce or the beginning of a meaningful up-trend.  I am reluctant to buy more puts now.  This is because the put/call ratios and letters from readers suggest a lot of retail interest in put options.  When that happens we usually get at least a bounce–the market does not usually accommodate the bets of option players.

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

GMI: 0; IBD100 stocks lag; Bounce coming?

@ 12:01 am

The GMI remains at zero, as the averages reversed off of their lows on Wednesday.  Between 53-65% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes rose on Wednesday. Gmi0524 But only 30% of the IBD 100 stocks rose, and only 21% closed above their 30 day averages. Only 35% of the IBD 100 remain above their 10 week averages. There were only 13 new highs and 163 new lows in my universe of 4,000 stocks.  This was the greatest number of new lows since last October.  Only 6% of stocks are in a short term up trend, a new record low.  Wednesday was the tenth day (D-10) of the current short term down trend in the QQQQ.  It remains to be seen whether stocks can manage to rally from here.  Regardless, the trend remains down and I will remain in cash or short.

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

GMI: 0; GMI-S: 0; BMHC-Stage 4?

@ 12:01 am

The GMI remains at zero, but now all 16 of my short term indicators are also negative, with the GMI-S=0.  Gmi0523 Only 29%of the Nasdaq 100 and S&P 500 stocks advanced on Tuesday along with 40% of the Dow 30 stocks.  Only 7% of the 4,000 stocks in my universe are in a short term up trend, the lowest since I started keeping records a year ago.  Only 21% of stocks closed above their longer term 10 week averages, the lowest since last October.  There were 25 new highs and 88 new lows.  Tuesday was the ninth day (D-9) in the current QQQQ short term down trend.  In spite of this confirmed down trend it is noteworthy that the media pundits continue to look for stocks for the public to buy.  You would think they would have learned something from the last bear market.  This is the time to be in cash or short until the market confirms a change in trend.

I thought you might like to see another stock that I have shorted.  Given the down cycle in housing and construction, it was not hard to spot the decay of this leader. BMHC had a 7x increase since mid 2003.  Now look at the weekly chart as the big boys unload the stock.  Bmhcshort There are many high volume down weeks as the 30 week average curves down and the 10 week average (dotted line) breaks below the 30 week (red line).  The stock  peaked about seven months ago and the back and forth movement seems to be over as the stock failed to regain the 10 week average.  This stock may be starting a long Stage 4 decline, a la Weinstein (see book to right).  BMHC has many of the characteristics O’Neil mentions for a good short sale.

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