ETF

GMI: 3; GMI-R: 7; buying QLD; Bear Stearns gave plenty of advance warning of its collapse

@ 12:01 am

The GMI rose to 3 (of 6) and the GMI-R to 7 (of 10).  There were 39 new highs and 21 new lows in my universe of 4,000 stocks on Tuesday.  70% of the Nasdaq 100 stocks have now closed above their 30 day averages and 94% of my 16 short term indicators for four index ETF’s (DIA, QQQQ, SPY, IJR) are now positive.  The QQQQ is now in its sixth day of its short term up-trend.  I have closed out my shorts and am accumulating QLD , an ultra ETF that aims to move twice as much as the QQQQ (Nasdaq 100 index)…

I am  incredulous of the media pundits who claim that the recent plunge in Bear Stearn’s stock to $2.00 was sudden or unexpected.  Bsc
This weekly chart of BSC (click on to enlarge) shows that the stock peaked in January, 2007 and declined below its 30 week average (red line) in May, 2007, a key danger signal.  A few weeks later the 10 week average (dotted line) broke below the 30 week average.  Over the next five months the stock was in a sustained down-trend.  In the week following the last week displayed in this chart the stock collapsed from around $60 to below $10.  The ignorant media focused only on that last week of a selling climax, and missed the point that the collapse was preceded by a long six month down-trend during which anyone who follows technical analysis should have exited BSC or shorted it.  (Cramer hates charts and told his audience not to exit the stock.) A story claiming sudden unexpected selling by nefarious hedge funds must sell more papers……………. 

GMI-1; GMI-R: 3; RICK- a stock for a “bare” market?

@ 12:01 am

The GMI is now 1 and the GMI-R is at 3. (Click on chart to enlarge.)  The lack of major movement in the market can be seen in the fact that there were only 12 new highs and 42 new lows  in my universe of 4,000 stocks on Friday. Gmi0328
A growth stock strategy of buying stocks at new highs will not work in an environment when only 12 stocks out of 4,000 can hit a new high in a day.  The QQQQ has remained below its 10 week average for most of the past 19 weeks, and the SPY, for 20 weeks.  I have learned that my strategy of buying rockets going to new highs works best when the averages are consistently above their 10 week averages.  While the QQQQ remains in the fourth day of its short term up-trend, this up-trend is in jeopardy.  The QQQQ is only.21 above my key support level.  If it fails to close above this level today, I will begin to close out my few long positions and go back to cash.  The SPY (S&P 500 ETF) and DIA (Dow 30 ETF) have already broken down.  My indicators get me out of declining markets fast.  This market could be getting ready to create a whole new leg down and I am a chicken.  The key is to conserve capital in order to be ready for the next real up-trend, which can last for months.  It is not a good time to be scared into the market by the pundits who say that we will miss the next rise.  A worthwhile rise will provide plenty of time to get aboard………

It has been said that during a recession, the sin (SAG?) stocks (Sex, Alcohol, Gambling) tend to buck a down-trend.  Human beings will probably give up their lattes long before they abandon these other vices.  So I was amused when my TC2007  scan of the market for winners identified RICK.  Rick runs upscale adult nightclubs for "businessmen and professionals" reminiscent of the old Playboy clubs. Rick

In addition to providing  adult entertainment, RICK also operates adult entertainment internet websites catering to people with, shall we say, diverse tastes. This daily chart of RICK (click on to enlarge) shows why I think it may be interesting to watch.  After doubling  in one month in December 2007, the stock consolidated and formed a nice downward trend.  Last Friday the trend line was broken on above average volume.  Some pundits have  suggested that Elliot Spitzer would have done much better to have invested his $80,000 in RICK, which rose as much as 30 fold since 2003.  If I decide to buy this stock during a possible recession, maybe I should visit one of Rick’s Cabarets and check out some of the company’s assets, and their bottom line…..

Newdisclaimer

GMI: 3; GMI-R:7; New QQQQ up-trend; QLD and covered calls

@ 12:01 am

The GMI is now at 3 and the GMI-R is at 7.  February 27 was the last time the GMI was as high as 3.  More important, Tuesday was the first day of a new short term up-trend in the QQQQ.  The down-trend that just ended lasted 55 days.  No one can accurately predict how long this new up-trend will last, but I have to trade with the trend.  If this up-trend  ends abruptly, I will just go back to cash.  I trade in my IRA where there are no tax consequences from getting in and out of a position.  And by using a deep discount broker, commissions are not a factor.  I have therefore been buying the QLD, an ultra ETF that aims to move up (or fall) twice as much as the underlying QQQQ ETF (Nasdaq 100 index) moves.  I have also started to buy some strong growth stocks and to write April calls on them.  I am very happy to sell calls for a 3-6% premium for a one month period.  Yes, I give up any  appreciation in the stock above the strike price.  But I will be very happy to make 3-5% each month on my portfolio. When one sells covered calls to speculators, one profits similar to the way that casinos do.  I am taking money from  persons who are gambling on a rise in the options I sell them.  I use technical analysis and an option scanning service to identify stocks on which to write call options. I also only write calls that will expire within one month and take limited positions in any one stock.  As always, however, the key to success is to trade consistent with the general market’s trend.  I only write calls during a market up-trend. In future posts I will provide examples of some of these trades.

Newdisclaimer