Rally gaining strength; Guppy chart reveals major turn

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If calling the short term trend of the market were easy, we would all be rich and retired.   Last week, my short term QQQQ indicator gave me a head fake and turned my daily trend count down.   That new downtrend lasted for two days and then the up-trend resumed.   However, I had indicated at the time that my short and long term QQQQ indicators were giving inconsistent readings, with the long term indicator remaining in an up-trend.   The new short term up-trend just completed its 3rd day.

The more that I analyze the market, the more I become convinced that I should rely on the longer term weekly trends to determine the market trend (see discussion of the Guppy chart below).   The QQQQ has been above its critical 10 week average for 11 weeks and the SPY for 10 weeks. But I have told you that I am a chicken, and would rather go to cash at the first sign of weakness and re-enter the market later, after the dust has cleared.   I actually have other, personal reasons, for why I am unwilling to enter the market right now.   I cannot trade successfully when I am stressed by other concerns. The only stock I own is ASIA, with a close stop loss.  

Read moreRally gaining strength; Guppy chart reveals major turn

Tech rally looks real; Daily Guppy chart looks good

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My indicators keep getting stronger.   The GMI is 4 for the first time since August 20, 2008.   There were more new highs than lows (22 vs. 6) in my universe of 4,000 stocks on Thursday.   The Worden T2108 indicator is at 83%, the highest reading since 89% on January 6.   This is typically an over-bought reading, but in July, 2003 when the market began the new bull market after the preceding bear market, the T2108 reached 93% as the new bull market got going.   Thus, the current high reading may represent the burst of buying after a long bear market.   Finally, the daily Guppy chart of the QQQQ suggests the beginning of a new up-trend.  

Read moreTech rally looks real; Daily Guppy chart looks good

Is the bear market over? Check out my “Guppy” charts

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Everyone wants to know if the bottom of this bear market is finally in place. The truth is that only liars and lucky people can really call a bear market bottom close to its occurrence.     I noticed years ago that the pundits on TV usually felt comfortable calling a new bull market about six months after the actual bottom.

The true trend follower rides the current trend until his/her indicators suggest a new trend has begun.   But all trends are not   equal.   Within a longer term down-trend there are short term up-trends.   Currently, we have had a daily up-trend within a weekly and monthly   down-trend. Day traders who monitor trends by the minute or hourly, for example, can trade numerous up and down trends within the longer term trend.

Thus, each person needs to determine his trading time interval when trying to trade trends.   And one can trade different pots of money using different time trends.   So I will not commit my university pension money to the long side of the market when the weekly trend is down.   I stay in cash during such periods. But I may trade with my IRA funds during a daily up-trend that is occurring withing a weekly down-trend.   However, I have had more success trading consistent with the weekly trend and tend to stay mainly in cash even in my IRA during a weekly down-trend.   It is hard to resist buying some recovering stocks during a rally like we have just had, even though my longer term trends are still down.

Read moreIs the bear market over? Check out my “Guppy” charts