Darvas

QQQQ remains in short term up-trend within a longer term down-trend; IBD100-Nicolas Darvas type stocks near all-time highs

@ 2:42 pm
GMI1/6
GMI-R4/10
T210838%

This is an extremely difficult market for me to interpret.   The QQQQ completed the 3rd day of a short term up-trend, and the QQQQ completed its first week back above its 10 week average.   There were 6 new highs and 25 new lows in my universe of   4,000 stocks on Friday.   The last time there were more than 100 new highs was September 19, 2008.   And there are very few stocks that have recently hit a new high and continued climbing.

The GMI is at 1(of 6), and the more sensitive GMI-R is at 4 (of 10).   On the other hand, 94% of the Nasdaq 100 stocks closed with their MACD above its signal line, a testament to the recent strength of the QQQQ.   With the T2108 at 38%, the market is no longer severely oversold, but it could still move up. Note that the QQQQ has been above its 10 week average for one week, while the SPY has been below it for 10 weeks.   Unlike the QQQQ, the SPY contains financial stocks…

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Buying Nicolas Darvas type stocks; New QQQQ short term up-trend

@ 12:04 am
GMI2/6
GMI-R5/10
T210845%

My short term indicators are coming back, although we are not out of the woods yet.   The GMI is now at 2 and the more sensitive GMI-R is at 5 (of 10).   The QQQQ short term down-trend ended after 21 days, and an up-trend has begun.   However, there were only 11 new highs and 17 new lows in my universe of 4,000 stocks on Wednesday. When the QQQQ is in a short term up-trend, I buy QLD (the Ultra long Nasdaq100 ETF)   and look for growth stocks.

Some of the stocks I have written about have came back to life, including TSYS, AMZN and NFLX.   I own some of these.   I ran my “Darvas” TC2007 scan, looking for stocks that would   meet the criteria that he used to select growth stocks.   Among the 11 Darvas stocks in my 4,000 stock universe are six that have also been on the IBD100 lists during the past year:   NFLX, SNDA, GMCR, QSII, LINC and SXL.   I especially like NFLX, GMCR and QSII because they are close to their all-time highs, which was a major requirement used by Darvas when he traded his way to two million dollars during a 2 year period in the late 50’s.   There is no guarantee that these stocks will do well, but I like to make pilot buys in such stocks, put in a stop loss, and then let the market tell me which, if any, will be winners. I then slowly buy more of the winners. To do well in the market, one has to keep the many losses small and pile into the few big winners.

Comparison of Current Bear to Bear Markets of 1929, 1973-74, 1987 suggests Dow 3,500 possible

@ 12:01 am
GMI0/6
GMI-R0/10
T210813%

I am getting tired of listening to all of the pundits saying that the current decline resembles the 1974 bear or the 1987 bear markets.   How about looking at some data!   So, I used my TC2007 market price history database to compute how much the Dow Jones Industrial average declined in prior bear markets after the market’s peak.

The results, presented in the table below, are quite revealing and unsettling if one is looking for a near term bottom.   I would be interested to learn if you agree with my analysis.

Twenty days after the Dow had peaked, the Dow   was down 7-10% in each of these beginning bear markets. By 40 days post Dow peak, the 1987 decline had already bottomed out (-41% by day 39) and rebounded to -26%.   The ferocity of the 1929 bear was evident early on, showing a 40% decline by day 40.   In comparison, the 1973 and 2007 bears appear puny, registering only 4% to 8% declines by day 40.   The 1973 and 2007 bears tracked each other quite closely until 260 days post the Dow peak.   By day 260, the 2007 bear was actually showing a greater than the decline that started in 1929 (-40% vs. -38%) and was more than twice the decline shown in the 1973 bear market (-17%). Since day 260,   the current bear market has resembled the 1929 bear market closely, with declines being about 14 percentage points smaller.   I would conclude then, that the current bear market is tracking much closer to the one that began in 1929 than to the 1973 and 1987 bears.

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