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.

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

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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GMI: +1; Market indexes deteriorate; earnings release website

The GMI has declined to +1.  Gmi923 Only 24% of stocks are in a short term up-trend.  This is the fourth day in the QQQQ down-trend.  Only 71 stocks hit a new high on Friday, out of 4,000 stocks in my universe.  While there were 118 successful 10 day new highs on Friday, this represented only 34% of all stocks that hit new highs 10 days earlier.  So, I still consider this index to be negative. Only 37% of stocks are above their 10 week averages and only 20% are within 5% of their 52 week highs. The extent of the deterioration in the market indexes can be seen in the WPM.

Wpm923

In contrast to last week, now none of the 5 indexes closed above their 30 day averages and only about one third of their component stocks closed above their 30 day averages.  The QQQQ index stocks look the weakest, with only 26% above their 30 day averages.  The Dow 30 stocks tracked by the DIA is now below its 30 week average–a very bad omen.  While the other indexes closed above their 30 week averages, it is noteworthy that only 37% of the Dow 30 stocks and about one half of the stocks in the other indexes are above their 30 week averages. 

This is a very weak market and I remain in cash and short, with few exceptions.  Earnings warnings will be coming out soon and driving some stocks lower. If you want to find out the dates on which specific companies will report earnings, go to this site.

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