While a number of my internal indicators are getting stronger, the market indexes failed to break through important moving averages on Monday. The GMI is at 0, and the GMI-R is at 3. The Worden T2108 Indicator, at 27%, is moving up out of oversold territory. On Tuesday, the averages will likely either break above their key moving averages or resume the decline. Monday was the 28th day of the QQQQ short term down-trend.
The GMI has moved up to 1 (of 6), because the 10 Day Successful New High Index turned positive, and the GMI-R is at 4 (of 10), reflecting the strength in my very short term trend indicators. The Worden T2108 is now out of bottom territory, at 25%. The number of NASDAQ 100 stocks with their MACD above its signal line is now up to 70%, indicating short term strength. Still, Friday was the 27th day of the current short term down-trend in the QQQQ (D-27), and the QQQQ and SPY have closed below their key 10 week averages for six weeks. I cannot trade profitably on the long side when the key indexes are below their 10 week averages.
There is a very interesting article in Barron’s online about the strong likelihood we are entering a bear market. When a big publication like Barron’s has the courage to publish such a bearish article, it sometimes serves as a good contrary indicator. So it makes me stop and question whether I should get on the bear bandwagon. Right now it is important to respect the current down-trend and to try not to anticipate a change in trend. When a real change occurs, I will have plenty of time to jump on board. I am therefore content to wait for my indicators to detect any turn. I remain mainly in cash, holding some GLD and a few shorts.
While the market closed strong on Tuesday, it has a long way to go to change to an up-trend. Every bounce must be met with skepticism until it proves itself. I remain in cash, GLD and short in my IRA. (I have not yet moved from mutual funds to the money market fund in my university pension, however, primarily because of limits they have on trading to time the market.)
By the way, a stock that hit another new all-time high on Tuesday is RDY, a drug manufacturer in India. This stock should be added to our watch list for possible purchase when the market trend turns up.