GMI: +6; Indexes showing strength; Stocks I am watching; I-bonds

Well, things came through on Friday and the GMI is back to +6.  There were 272 new yearly highs and only 40 new lows in my universe of 4,000 stocks.  Gmi930_1 Almost one half (48%) of the stocks are above their 10 week averages and 30% are in a short term up-trend, up from 24% at the beginning of last week.  On Friday, 78% of the Nasdaq 100 stocks rose, 65% of the S&P 500 and 57% of the Dow 30 stocks.  The growing strength in the Nasdaq 100 stocks is evident in  the fact that 57% are now above their 30 day averages, up from a low of 28% on 9/22.  The Nasdaq may lead this market up.   We are now in day one (U-1) of the new QQQQ up-trend.

The WPM shows the broad reversal in the five indexes.Wpm930 All indexes are above their 30 day and 30 week moving averages.  Their component stocks also showed strength with 50-57% of the stocks closing above their 30 day averages.  Between 57-60% of the component s of all of the indexes but the Dow 30 (DIA, 43%) closed above their 30 week averages. The weakest stocks in the Dow include:  DD, WMT, MRK, AA, MMM, JNJ, DIS, PFE and GM–all well below their 30 week averages,  a key negative according to Weinstein’s stage analysis (see his excellent book, listed at right).

I closed out my shorts last week.  I remain very cautious until I see whether there is any follow-through this week.  Was last week’s strength merely end of quarter buying by the funds? I rarely see so many reversals in my indicators, which are designed to detect meaningful changes in trends.  I will need to see a few more up days for me to become confident enough to take on new long positions.  October has always been a difficult month, but October declines often set the stage for a good end-of-year rally. Stocks I am watching, some of which I own, include:  ADSK, CX, NSC, HTN, VLO, AAPL , ISRG and NX……………..

By the way, if you do not know about I-bonds, check them out here.  I use these U.S. government bonds for savings that I will not touch for a long time, instead of keeping the money in a bank.  I-bonds are protected against inflation and have been a great place to put my kids’ savings……….

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GMI: +4; Reversal coming?; Next week shoud tell

The market internals reversed Thursday and showed unusual strength.  The GMI rose to +4 and could rise to +6 with another advance tomorrow.  There were 240 new yearly highs in my universe of 4,000 stocks and the percentage of stocks in a short term up-trend has gradually risen from a low of 24% on 9/26 to 29% on Thursday.  Gmi929_1 The percentage of stocks closing above their 10 week average has risen from 37% on 9/23 to 47% by Thursday.  Between 78-83% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Thursday.  There were 105 successful 10 day new highs.

I am still cautious about this rally because it is occurring at the end of the quarter.  Mutual funds may be loading up on recent winners in order to look smart when they release their 3rd quarter portfolios.  (This tactic is called window dressing, because the unsuspecting investor cannot tell the exact date that these shares were acquired and the fund manager appears smart to have bought these winners.)  I am still inclined to wait until next week to determine the market’s probable direction.

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GMI: +2, little change Wednesday

I got back too late from the IBD Meetup to do a full post.  The GMI remains at +2 and there were no significant changes in my market indicators.  I think we will have to wait until next week when the end of the quarter "window dressing" by the mutual funds is finished.  Early October should reveal the market’s direction.

GMI holds +2; ISRG and ADSK; IBD Meetup tonight

Not much change in my indicators Tuesday.  The GMI remains at +2. Gmi927   Between 40-50% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes rose.  There were only 67 successful 10 day new highs–stocks that hit a new high 10 days ago and closed higher Tuesday than 10 days earlier.  Buying new highs has not been a strategy likely to show profits.  With only 25% of stocks in a short term up-trend, this is not the time to be positioned long on many stocks.

Nevertheless, I could not resist buying some ADSK and ISRG.  Isrg_1 Note the above average up volume Tuesday on ISRG as it broke above its 30 day average (red line, click on to enlarge).  ISRG looks like it has completed its consolidation after a huge move in July. Both stocks seem to be bouncing from support, probably in anticipation of good 3rd quarter earnings.  I bought these and immediately placed stop losses below their moving averages.  I am still mostly short and in cash.

Tonight is the monthly IBD meetup and I will be able to  assess group sentiment.

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GMI: +2; Last chance to unload positions?; Jim Roger’s bull market

I suspect Monday’s morning rally was a last chance to unwind long positions.  Given the internal weakness of the indexes described in my weekend post, this market is likely to be heading lower.  Gmi926_1 The GMI rose to +2, because there were 149 new yearly highs. 60% of the Nasdaq 100 stocks, 47% of the S&P 500 stocks and 50% of the Dow 30 stocks advanced on Monday.  The percentage of stocks above their 10 week averages increased to 42%.  Monday was day 5 in the current QQQQ down-trend (D-5)…………

Since September 12 when the QQQQ reached a minor peak, 82% of the Nasdaq 100 stocks have declined. During this same period, 82% of the 239 industry group averages tracked by TC2005 also declined.  In contrast, the following industry groups have advanced the most in this weak period:  Gold (+10.39%), Silver (+8.65%), Copper (+7.63%), Steel and Iron (+7.32%) and Metals and Mining (+5.75%), followed by a host of energy related industries.  Jim Rogers was correct when he proclaimed that we are in a major bull market in commodities.  Those of us who typically trade the tech growth stocks are probably missing this boat.

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