3rd day of QQQ short term down-trend; Teach MarketWatch Contest Value of TA

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Monday and Tuesday are critical days for the new QQQ short term down-trend.   I have noted many times that I am more sure of a change of trend once it lasts for 5 days.   I have a small position in QID and TECS, two leveraged ETF’s that rise as   tech stocks decline.   If the down-trend continues Monday I will start to add to these positions. I am still fully long in my university pension, given the strength in the longer term trends, as evidenced by the GMI still being in a buy range. The Worden T2108 Indicator, at 67%, is out of overbought territory. However, only 30% of the Nasdaq 100 stocks closed Friday with their MACD above its signal line, a sign of short term weakness in tech stocks.

As I posted last week, I entered the MarketWatch Investing Columnist competition.   The rules invited people to submit charts, but they published my technical analysis (TA) piece without its chart, making it difficult to follow.   They subsequently told me that their contest site could not accommodate charts. Help me to send a message about the importance of   TA by voting (click like) for my submission at:   http://blogs.marketwatch.com/great-columnist/2012/09/25/buy-high-rocket-higher/ or by clicking here. If each of you could ask two other persons to vote positive we could blow away their statistics and send a message about the value of TA……..

Speaking of TA, I want to share with you this daily RWB chart that I created for the QQQ (Nasdaq100 ETF).   You will remember that a red/white and blue pattern reflects great strength in an advancing stock.   It occurs when the short term exponential averages (red lines) are well above the rising longer term averages (blue lines) creating a white space in the middle.   When the white space disappears the up-trend is   weakening.   If it ever turns into a daily BWR pattern, it signals a strong daily down-trend.   The daily chart below shows that the RWB pattern that began near the time of the GMI “Buy” signal in late July is now ending. The light blue dotted line is the closing price of the ETF. In an up-trend, the dotted line leads the red averages higher, and in a decline the reverse is true. Click on chart to enlarge. The red lines are pointing down and heading towards the blue lines. The last time the red lines were below the blue was in late July just before the current up-trend began. (If you think TA like this is valuable, please vote for my submission to MarketWatch, as described above. )

QQQ short term trend in doubt; AMZN shows promise

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If the QQQ stays level or rises on Friday my short term trend count will turn up again.   I remain fully invested in mutual funds in my pension account and am mainly in cash in my IRA and margin account.   If the up-trend resumes I will buy some QLD.   The Worden T2108 is 71%, in neutral territory.

I bought some AMZN on Thursday when the stock regained its 30 day average (red solid line) after an oversold 10.4 daily stochastics reading (not shown). I will exit the position if AMZN comes back below this critical average. Note the green line showing that the stock is in it top box above its latest base at an all-time high. I am looking for a rise to the top of its Bollinger band, around $263.

Day one of new QQQ short term down-trend; AAPL green line chart

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I am much more comfortable with   a change in trend when it reaches 5 days.   However, given the weakness we have experienced the past few days, I went to cash in my trading accounts.   Several of my green line break-outs have failed, not a good sign.   I am content to wait for the market to clearly show me which way to trade. The GMI is now at 3.   It would have to be less than 3 for two days to provide a sell signal. So my long term pension accounts remain fully invested. IBD still sees the market in an up-trend.

The MarketWatch contest people published my article on green line chats without the chart!   Below is the AAPL chart I was referring to in my submission.   Please vote for my column by clicking here and selecting “like.”

QQQ short term up-trend reaches 41st day, now in jeopardy; T2108 declines

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The GMI2 is 4, reflecting short term weakness.   Since this up-trend began, the QQQ has advanced almost 9% in only two months.   The market could not maintain that type of momentum indefinitely. A decline in the QQQ on Wednesday would trigger a short term down-trend in the QQQ.   However, with the GMI so strong, I will not touch my university pension accounts. I am cutting way back, however, on my trading accounts for now. This weekly chart shows   that the T2108, at 70%, is now out of extreme territory. Click on chart to enlarge.

KORS looking very strong, has green line break-out

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With the GMI and GMI2 at maximum readings I am still looking for promising stocks.   I wrote last week about LNKD and today I am highlighting KORS, which I own.   KORS came public in December, 2011, doubled, and then consolidated for about six months. I drew in a green line top on its monthly chart, indicating that the stock formed a top at an all-time high.   KORS broke above the green line in August and has spent five weeks trading back and forth just above the green line, which now serves as support.   Last Friday, however, KORS   surged to a new high on the highest   volume since August 14.   KORS has an IBD Composite rating of 99, the highest possible rating. Check out this weekly chart of KORS. Note the black spikes indicating a lot of trading volume during up weeks. KORS reports earnings on October 28.

Stocks that have come public in the recent past and that show movement to new highs often can have terrific runs when they prove themselves, as more mutual funds begin to notice and   accumulate the new stock. When I buy a stock that has a green line break-out I set my stop loss below the green line. If my analysis is correct, the stock should not close below the green line.

The GMI has been flashing a buy signal since July 30.   The only warning sign I see in the table below is the high T2108 reading (78%).   Readings above 80% can often persist for several months as a temporary top forms.