Stealth bull market? GMI: +4; Pressure off short rates

@ 12:01 am

Stealth bull market?  The indexes are concealing a strengthening market.  There were 353 new highs Thursday, the highest since July 29. Gmi901  The GMI rose to +4 because 57% of the 63 stocks that hit a new high 10 days ago closed higher on Thursday than 10 days earlier.  With the increasing number of stocks hitting new highs, this indicator will also be over 100 soon.  56% of stocks closed above their 10 week average, the most since August 15.  37% of the Nasdaq 100 stocks rose on Thursday, 51% of the S&P 500 stocks and 43% of the Dow 30 stocks.  29% of stocks are in a short term up-trend, the most since August 15.  28% of the 4,000 stocks in my universe are within 5% of their 52 week highs.  Since Katrina arrived on Monday, 8/29, through Thursday’s close, 70% of the stocks in my universe have advanced………………….. 

In my last post, I showed you that the longer term interest rates were falling and continuing a several week decline.  Take a look at the chart of the very short term interest rate indicator. Irx901 For the first time since last May, this index is below its 30 day average (red line, click on to enlarge), suggesting that speculators think that the Fed may relieve the pressure on interest rates.  All we need now is an announcement from the Fed to that effect, for the stock markets to skyrocket. On the other hand, such a move would signal to all that the economy is critically weak………………….

So, I am accumulating good stocks.  I am being cautious and wading in slowly.

Please send me your feedback at: silentknight@wishingwealthblog.com.

Dreaded September? GMI: +3; Stocks show strength; Katrina-induced lower interest rates?

@ 12:01 am

Well it’s September and everyone expects a difficult month. So, guess what?  Do you really think the market will accommodate mass opinion?  I hate to say so, but I think this market is turning.  Declines do not begin when the news headlines shriek of calamity, as they do now.  Did you notice that the market is holding in the face of all of this bad news?  I think that means the selling is over, for now.  I am selling my puts and looking to buy.  Of course I will only begin to wade in and will wait for the GMI to give a definite buy signal. Gmi831  But the GMI moved up again Wednesday, to +3.  The IBD Growth Fund Index is now just above its 50 day average.  And would you believe 248 new 52 week highs on Wednesday!  Many stats improved: 25% (+4) of stocks are in a short term up-trend and 53% (+9) are above their 10 week average.  Between 80%-84% of the stocks in the Nasdaq 100, S&P 500 and the Dow 30 advanced on Wednesday.  That makes two out of the past 3 days that about 80% of stocks rose.  The QQQ and the SPY are now above their 10 day averages, the first sign of a possible reversal.  The percentage of stocks within 5% of their 52 week highs rose to 27% (+7).  It may be time to look at stocks near new highs again.  Speaking of new highs, both HPQ and  MSFT, which I noted in my prior post, advanced on Wednesday.  And many of past year’s winners are showing new signs of life:  HANS, FTO, BTU, CCJ, CAT BMHC, ACR, ATVI, ADSK, DNA, CELG, ALKS, CVH, BBH.

I am not embarrassed to change from bearish to cautiously bullish.  Each day provides new data, and when the indicators change, I must turn on a dime–no pride is involved.  The idea is to make $$, not to be right. A big ego is lethal in this business—in all business……………

The pundits are saying that bonds are rallying (and rates are falling) because the Katrina catastrophe will reduce future economic activity. Tlt831  However, the following chart of an ETF (TLT) that tracks the 20 year bonds, shows that long term bonds were rising, and rates were falling, since August 9, long before the hurricane.  Unless we believe that prescient traders foresaw the hurricane debacle weeks before it hit, we must conclude that the economy was weakening and rates were falling long before the hurricane, and that Katrina’s damage merely intensified the pre-existing trend.  Identical patterns can be found in ETF’s that track shorter term bonds (SHY and IEF)…………………

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Market held Tuesday; GMI: +2; Oil/energy stocks at new highs; HPQ, MSFT ready to rise?

@ 12:01 am

The market had every excuse to have a big decline Tuesday, but it held well above its lows.  The GMI actually increased 1, to +2.  Gmi830 This is because there were 116 new yearly highs.  There were only 32 successful 10 day highs–stocks that hit a new high 10 days ago and closed higher Tuesday than 10 days earlier.  There have therefore been few profitable new high breakouts recently.  Between 29%-30% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 stocks advanced Tuesday.  This was the eleventh day in the QQQQ decline (D-11)………………..

The new highs list Tuesday was filled with oil and energy related stocks:  BTJ, PHX, MDR, CHK, ARD, FTO, GI, IMO, PXD, VLO, TSO, ECA, EIX, DMLP, HOC, BEXP, OII, BR, TXU, SUN, XTO, RRC, PDS, EQT, GRP, TNT, AYE.  These account for almost a quarter of all new highs in my universe of 4,000+ stocks.  I have been writing that more than 70% of all stocks follow the trend of the market averages.  If we want to find those stocks that are rising (counter-trend) in this weak market, it would seem that we must focus our attention on the energy and oil sector.  An ETF in the oil sector is OIH………………..

Most of the Dow 30 stocks look technically weak.  Two exceptions that I think may be promising include HPQ and MSFT.  Yes,  MSFT may be finally moving, after 3 years. Msft  Did you notice that MSFT (I own some) traded this month higher than it has since early 02?  In the first week of August, MSFT had a high volume advance, peaking at 27.94.  Since then there has been a rounding consolidation pattern with nicely declining volume and the stock appears to be holding up well the last few difficult days.  I would not be surprised to see a rise beginning soon.  As long as the consolidation low holds, so will I……………….

Please send me your feedback at: silentknight@wishingwealthblog.com.