GMI: +6 but GMI-S slips to 38; Market deteriorating

@ 12:01 am

While the GMI stayed at +6, my more sensitive indicator of the short term trend declined from 75 to 38.  The QQQQ scored 0/4 while the SPY and DIA scored 1/4.  Only the small cap index, IJR, is strong with 4/4 indexes positive.  Gmi0202 Only 11% of the Nasdaq 100 stocks rose on Thursday, along with 21% of the S&P 500 stocks and 10% of the Dow 30 stocks.  Still there were 211 new highs in my universe of 4,000 stocks and 62% of the 341 stocks that hit a new high 10 days ago closed higher on Thursday than they did 10 days ago.  I consider Thursday to be the fifth day of the short term up trend in the QQQQ, but this trend is very vulnerable to a reversal……

The great traders, Darvas and O’Neil) have said that when the leaders cannot rise anymore, the rest of the market will soon decline.  AAPL and GOOG have broken their up trends.  For both stocks their 10 day averages are now below their 30 day averages.  Aapl Take a look at this chart of AAPL.  The stock has been declining on high volume and is now below its 10 day, 30 day and 50 day averages.  The chart for GOOG is much the same, except there was that huge gap down on Wednesday.  And Thursday night they shot another leader, ISRG, in extended trading.  These are signs of a deteriorating market.  I have moved my sell stops up and am not making new purchases.  The GMI-L is still strong at 81, so the longer term trend is still positive.  But remember, the short term indicators necessarily reverse before the longer term indicators.  With earnings season ending, there appears to be little ability to push stocks higher.

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

 

GMI: +6; Market steady; Perils of stop orders

@ 12:01 am

The GMI held at +6 and the Dow 30 stocks were strong in the face of a weak tech sector, led by the GOOG decline.  77% of the Dow 30 stocks advanced on Wednesday, but only 60% of the Nasdaq 100 and 58% of the S&P 500 stocks advanced.  Gmi020106 The GMI-L remains at 100 and the GMI-S reclaimed the 75 level.  My remaining indicators were level or stronger.  Wednesday was the fourth day in the short term QQQQ up trend (U-4)……….

In spite of this strength in the internal market indicators I remain somewhat defensive in view of the weakness in some of the market leaders.  The abrupt fall in GOOG shows the potential weakness of a stop loss order in a sudden gap down.  Persons with a close stop loss order on GOOG would have been hurt by the fact that GOOG opened Wednesday at 389.03, way below Tuesday’s close of 432.66.  For example, a sell stop at 429 would have been executed somewhere around 389.  The problem is not with stop orders–they provide necessary, though imperfect protection against a large loss. The problem is in holding a stock when it is about to announce earnings–especially if it has already risen a lot and other stocks are getting slaughtered even after releasing decent earnings…..

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

GMI: +6; GMI-S lower; GOOG; Markets forming top?

@ 12:01 am

The GMI remained at +6, but the market was weaker Tuesday.  Only 44% of the Nasdaq 100 stocks rose, along with 37% of the S&P 500 stocks and 30% of the Dow 30 stocks.  Gmi0131 There were 375 yearly highs in my universe of 4,000 stocks, down from 414 on Monday.  Tuesday was the third day in the QQQQ short term up trend (U-3). However, the GMI-S declined to 69 because of more weakening in the DIA indicators.  I mentioned yesterday that I wanted to see how the market reacted to GOOG’s earnings.  In extended trading the stock was down over 50.  The decline in AAPL and GOOG post earnings tells me more about the health of the market than the health of these two leading stocks.  If the strongest stocks weaken, the rest of the market will follow suit.  So, I am raising my stops and remain on the defensive.  The indicators are beginning to look toppy to me……

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