GMI: +1; IBD 100 stocks smashed again; stay with the trend

@ 9:12 pm

The GMI remains at +1, with 75% of the 12 stocks that hit a new high ten days ago closing higher on Thursday than they closed ten days earlier.  Gmi0608 But my other five indicators remain firmly in negative territiory.  There were 18 new yearly highs and 202 new lows  in my universe of nearly 4,000 stocks on Thursday.  Only 29% of the Nasdaq 100 stocks advanced, compared with 50% of the S&P 500 and 57% of the Dow 30 stocks.  Thursday was the twentieth day of the current short term QQQQ down-trend (D-20). 

The weakness in the Nasdaq 100 tech stocks was mirrored in the IBD 100 stocks.  Ibd0608 While 41% of my universe of stocks rose on Thursday, only 25% of the IBD 100 stocks advanced.  Only 9% of the IBD 100 stocks closed above their 10 day averages, while 30% of my stock universe did.  Only 10% of the IBD 100 stocks closed above their 30 day averages, compared with 26% of my universe of stocks.  Perhaps the most telling statistic is that only 11% of the IBD 100 list published on 5/15 closed higher on Thursday than they did on 5/15….

I remain in cash or short in my IRA via put options. Rather than trying to guess a short term bottom, a true technician waits for the turn to occur as shown by his technical indicators.  I will need to see a rise in the GMI to at least +3 before I will wade into stocks on the long side.  Meanwhile, with a down trend in place, every rally offers a chance to increase my short positions.

Why are human beings so prone to the long side?  Expert traders seize upon movement, up or down. As the great trader, Jesse Livermore, said, there is no bull side or bear side, only the right side— of the trend.

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

GMI: +1; Shame on IBD and Jim Cramer!

@ 12:01 am

The GMI rose on Wednesday to +1 because 50% of the 23 stocks that hit a new high ten days ago closed higher on Wednesday than they closed ten days earlier. However, with such a small number (14) of successful 10 day highs, this indicator is still weak and could turn negative on Thursday again.  There were 30 new highs and 72 new lows in my universe of 4,000 stocks.  Only 20% of the Nasdaq 100 stocks closed above their 30 day averages.  Gmi0607 Between 36-41% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Wednesday.  The QQQQ has closed below its 10 week average for the fourth week.  The QQQQ has been in a short term down trend for nineteen (D-19) days………..

Shame on IBD!  On Wednesday, after weeks of claiming that the market was in a rally, IBD wrote that, "Today’s Market Pulse notes that the market is in a downtrend, which has been the case for nearly a month."  IBD is a great newspaper, but they should have the integrity to admit that they have been repeatedly wrong on the market’s recent trend.  However, the GMI and my indicators have been calling the down trend for 19 straight days……………

Perhaps IBD is smarting from the terrible performance of the IBD 100 stocks.  Ibd0607_1 While 38% of my universe of stocks advanced on Wednesday, only 30% of the IBD 100 rose.  More of my universe of stocks closed above their 10 day (32% vs. 16%) and their 30 day averages (26% vs. 18%).  Note that since this IBD 100 list was published on 5/15, only 14% of these stocks have risen.  Thus, 86% of the IBD 100 stocks have declined or gone nowhere, along with the market……

Note also that more of my universe of stocks are within 5% of their yearly lows than highs (14% vs. 11%).  What this adds up to is that the market has been in a significant decline where it has been relatively easy to make money, as long as one stayed with the short trend.  My puts have done nicely during this period (see my post on 5/24 for an example of one of my shorts).  People short change themselves (no pun intended) to only trade on the bull side of the market.  Buying puts in an IRA (or taxable account) is one way to take advantage of the market’s decline while limiting potential losses.  We have all been brainwashed into avoiding the short side of the market.  Shame on Jim Cramer, who used to short the market while running his hedge fund, but refuses to advocate that his CNBC audience short stocks.  He and the other media pundits instead encourage people to try to find those rare stocks that can rise against the trend.  Why not take the easy way and trade the 80%+ of stocks that go with the major market trend…………………….

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

GMI: 0; IBD 100 growth stocks decimated

@ 12:01 am

Another losing day with the GMI firmly stuck at zero.  Gmi0606 There were only 17 new highs and 136 new lows in my universe of 4,000 stocks.  The longer term moving averages are now starting to weaken.  The GMI-L fell to 44 and the GMI-S is now at zero.  The extreme weakness in the short term indicators is now spreading to the longer term indicators.  If this weakness in the longer term indicators continues we may find the markets  in a significant  down trend……………..

The IBD 100 stocks have been decimated and are underperforming my larger universe of almost 4,000 stocks.  Ibd0606 34% of the stocks in my universe rose on Tuesday, compared with 19% of the IBD 100 stocks.  There were zero new highs in the IBD 100 stocks and <1% in my universe of stocks.  More stocks in my universe closed above their 10 day averages (35% vs. 32%) and their 30 day averages (25% vs. 20%).  Note that the wide majority of both groups of stocks have closed below their average closing prices of the last 10 and 30 days.  Only about one fifth of both groups of stocks are in a short term up-trend.  Furthermore, more stocks in my universe are within 5% of a new low (13%) than a new high (10%).  The IBD 100 stocks still have the edge in closing above their longer term 10 week and 30 week averages, but the gap has narrowed for the 10 week average (34% vs. 28%).  Of most significance, only 17% of the IBD 100 stocks published in the list on 5/15 closed higher on Tuesday than they closed on 5/15, compared with 32% of my universe of stocks…

When the premier IBD 100 growth stocks cannot hold up, the market is in a lot of trouble.  I hope that most of my readers went to cash or short when the GMI fell to +1 on 5/14.  Using the GMI indicators, I have avoided all significant market declines since 1995.  It is now time for me to wait on the sidelines, mainly in cash until the GMI strengthens.  I do own some put options in my IRA which have appreciated nicely during this decline.  I highly recommend O’Neil’s brief book on selling short……

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