GMI declines to +3; Down trend begins

@ 12:01 am

Well, the GMI declined to +3 and the new down trend has begun.  Gmi1220 Only 33% of the 359 stocks that hit a new high ten days ago closed higher on Tuesday than they did ten days earlier.  There were only 78 new yearly highs in my universe of 4,000 stocks and 84 new lows.  More new lows than highs is a serious omen. 44% of the Nasdaq 100 stocks rose on Tuesday, along with 51% of the S&P 500 stocks and 33% of the Dow 30 stocks.  Only 33% of stocks are in a short term up trend and only 6% of stocks that have doubled the past year hit a new high on Tuesday.  The leaders are stalled. I am 100% cash in my trading account.  While the indicators suggest that the longer term up trend is intact, the rally that began in October is over and Tuesday was the first day in the new short term down trend (D-1)………………

We will have to wait to find out whether this down trend turns into a longer decline. For now, the odds of making money on the long side are against us.  In fact, since the QQQQ topped out on 12/6 at a peak of 42.31, the index has declined by 2.36% and 63% of the Nasdaq 100 stocks closed lower on Tuesday than they closed on December 6.  Wonder why we have losses the past couple of weeks?  Two to one odds are just too negative for me to trade on the long side. This is a time to be on the sidelines or at least to play short stop…………….

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GMI declines to +4; Up trend in danger; Mainly in cash

@ 12:01 am

Monday saw a major reversal in many stocks and severe deterioration in the market internals.  Gmi1219 The GMI is now at +4.  There were few successful 10 day new highs–only 37% of the 233 stocks in my universe of 4,000 stocks that hit a new high ten days ago closed higher on Monday than they did 10 days before. Breakouts are failing. The daily QQQQ Index is very close to going negative–it needs one more down day.  Only 17% of the Nasdaq 100 stocks advanced on Monday, along with 15% of the S&P 500 stocks and 30% of the Dow 30 stocks.  Only 37%  (-9) of stocks  are in a short term up trend and only 19% of stocks are within 5% of a new high.   Still, 62% of stocks closed above their 10 week averages, and the QQQQ is above its 10 week average, so the longer term up trend is intact.  This was the 34th day of the QQQQ up trend (U-34) but another down day will indicate a reversal in the short term trend……….

All but one of my positions have been stopped out and I am mainly in cash.  This market is too risky for me to be long.  Even GOOG had what may turn out to be a minor top on Monday. It touched 446.21 and reversed on heavy volume to close down (-5.55), at 424.60.  Too many of the leaders have stalled.  Be careful.

Have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com. 

GMI: +6; QQQQ weakening; All that glitters: GLD

@ 12:01 am

The GMI is still at the maximum level of +6, but I see some serious indications of weakening.  Gmi1216 While there were 148 successful 10 day new highs (stocks that hit a 52 week high 10 days ago and closed higher on Friday than 10 days earlier), they constituted only 47% of the 313 stocks that hit a new high ten days earlier.  There were 173 new highs in my universe of 4,000 stocks on Friday, but only 23% of the Nasdaq 100 stocks advanced.  The S&P 500 stocks (44%) and the Dow 30 stocks (40%) had more advances, but still less than 50%.  Only 46% of stocks are in a short term up-trend, the lowest percentage since November 9.  More bearish was the fact that only 53% of the Nasdaq 100 stocks closed above their 30 day averages, the least since October 28, just before the current rally began.  This time, however, we are coming off of a major advance, and this weakness might signify the beginning of a decline instead of the end. The QQQQ has closed above its 10 week average for seven consecutive weeks and Friday was the 33rd day of the up trend (U-33).  The percentage of stocks closing above their 10 week average is 69%, and suggests that the longer term up trend is still intact. 

The WPM shows the major short term weakness in the QQQQ as well as in the S&P Wpm1216_1small cap stocks (IJR). Only 53% of the Nasdaq 100 component stocks and 54% of the S&P small cap stocks closed above their 30 day averages.  The other indexes appear to be stronger, with the S&P 500 (SPY) stocks doing the best (72%).  The longer term indicators are stronger for the Dow 30 stocks (77% above their 30 week averages) and the S&P 500 stocks (71%)…….

I have moved all of my sell stops to just below their moving averages and have been getting gradually sold out.  Two days of closes of the QQQQ below 41.30 (closed at 41.58) would make me exit this market.  I have successfully avoided market declines since 1995 because I am such a chicken.  The key to successful trading is to conserve capital so as to be able to remain in the game. I can always wade back in when the market strengthens………..

BE CAREFUL OF GOLD! Too many pundits are touting its value.  Look at the weekly chart of the ETF that tracks the price of gold (10x).Gld  There was a high volume reversal this week with a high of 53.73, a low of 49.93 and a close of 50.09, down 2.31 for the week.  The weekly volume was the highest since this ETF began trading at the end of November, 2004.  This may not be the ideal time to test our "mettle" by chasing gold. This most recent rise began in mid-November after a six week consolidation.  Better to buy on the breakout from a new consolidation, rather than after a substantial rise from a base…………

Have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com.