IBD

GMI: 0; GMI-R: 1; 32nd day of down-trend; up-trend coming?

@ 12:01 am

The GMI remains at zero but the GMI-R rose to one. There were only 45 new highs and 63 new lows in my universe of 4,000 stocks on Friday. Gmi0725

(Click on table to enlarge.) The market is marking time as it determines the next move.  The Worden T2108 indicator is now at 27%, in neutral territory.  Only 18% of the stocks on the IBD100 list published on June 2 closed Friday above their price on that date.  It has clearly been difficult to make money holding IBD type growth stocks during this down-trend. The QQQQ down-trend is in its 32nd day.  The prior down-trend that ended in March lasted 55 days and was followed by an up-trend that ended in June after 54 days.    So, this down-trend  is somewhat young in comparison with the duration of recent  market short term trends….

We are approaching an important critical point.  The QQQQ closed at 45.27.  If it can close above 45.91, I will begin to consider a change in the short term trend from down to up.  With the QQQQ MACD,12,30,9 above its signal line, there is a reasonable chance that the QQQQ is about to turn up.  72% of the Nasdaq 100 stocks closed Friday above their signal lines. Nevertheless, the challenge is not to anticipate a turn, but to wait until it has occurred.  The QQQQ might also bounce back down against resistance around 45.91.

 

 

GMI: 0; GMI-R: 1; T2108: 11%; 19th day of QQQQ down-trend; IBD New America stocks

@ 12:01 am

There were 14 new highs and 409 new lows in my universe of 4,000 stocks on Tuesday.  The T2108 indicator bounced back to 11%.  Time will tell whether this bounce will lead to a real turn.  I sold out my QID and began to make pilot buys in some of the IBD New America stocks.  Each day the IBD New America section presents a company that they think represents a promising visionary business.  I have created a watchlist of all New America stocks the past few months that I will monitor for break-outs.  The following nine New America stocks closed Tuesday within 5% of their 52 week high and may be worth watching:  NUVA,BABY,ACL,BMI,GHM,FLIR,TRLG,CELG,FCN. I own some of these.

GMI: 0; GMI-R: 0; IBD100 stocks outperform other stocks by 4 to 5 times!

@ 10:32 pm

The GMI and GMI-R are both zero.  The last time the GMI was zero was March 24 at the end of that decline in the QQQQ. That decline lasted 55 days.  The subsequent up-trend that ended in June lasted 54 days.The current QQQQ decline is only in its13th day and may therefore have longer to go. There were 44 new highs and 533 new lows in my universe of 4,000 stocks on Friday.  The last time there were more than 500 new lows was on March 17.  Only 9% of the Nasdaq 100 stocks closed on Friday above their 30 day averages. 

Nevertheless, there is some evidence that we may be near a bottom or at least a bounce.  The Worden T2108 indicator is now at 15%, a level where some past declines have ended.  In addition, according to IBD, the Investors Intelligence poll shows more bears than bulls, (39% vs. 34%) a rare occurrence indicative of the extreme bearishness of market letter writers that is typical near the bottom of declines….

I took a look at the performance of the stocks on the IBD100 list published on June 2. These are stocks that IBD analysts say are the strongest growth stocks in the market.  The list changes each Monday as weak stocks are deleted.  I often trade the IBD100 stocks and was curious as to how they have performed during the current decline. I was amazed to find that since their close on May 30 (the Friday close before this list was published) 51% of the stocks closed higher last Friday than they did on May 30.  Furthermore, 14% of the 100 stocks were up more than 10% and 5% were up more than 20%.  In the same time period, only 9% of the Nasdaq100 stocks advanced, as did 12% of the S&P 500 stocks and none of the Dow 30 stocks.  Clearly, during the current decline the odds of making money on the long side in the IBD100 stocks was 4 to 5 times greater than in the stocks represented by these other major market indexes.  Maybe those folks at IBD really do have a winning stock picking strategy!

In the meantime, I remain short the QQQQ through the QID, in cash, or hedged with covered calls on a few IBD100 stocks, as I wait for this decline to play itself out.