IBD

GMI: 0; 8 new highs and 556 new lows; Shame on Cramer

@ 12:01 am

The GMI remains at zero and there were 556 new lows and 8 new highs in my universe of 4,000 stocks. The market was in a free-fall Thursday and it looks like a bounce is here.  Cramer and all of the pundits keep telling viewers how to keep their money at work.  Everyone has that special stock that will buck the trend.  But since the QQQQ topped on July 19, it has fallen 9.7%  and 89% of the 412 IBD100 stocks I monitor declined, along with 88% of the Nasdaq 100 stocks and 95% of the S&P 500 stocks.  With odds like these, why try to pick the few stocks that will rise.  Instead, I go to cash and earn interest and/or buy puts or the ultra inverse ETFs.  Cramer was disingenuous Thursday night when he said that persons who went to cash in 1987 or 1998 would have lost thousands of Dow point rises in the following bull markets.  Does he really think that a person who sold out in 1987 or 1998 would have stayed out of all of the subsequent market rises????????  Shame on Cramer and all of the pundits who advise people to ride these storms out.   There is nothing like being on the sidelines during declines like this.  I prefer to wait for the all-clear (from the GMI)  before jumping on the next meaningful up-trend.

See my disclaimers below.

GMI:1; 10x more new lows than highs

@ 12:01 am

The GMI is still one and the GMI-S is zero.  There were 557 new lows and 52 new highs on Monday in my universe of 4,000 stocks.  While 78-97% of the stocks in the major indexes advanced, only 60% of my universe of stocks rose, along with just 56% of the stocks in the twelve IBD100 stock lists I have been following for the past year. So the advance Monday occurred mainly in the stocks typified by the major index ETFs (SPY, DIA and QQQQ).  The Worden T2108 indicator is 18%, up from Friday’s extreme low of 14%.  Monday was the sixth day in the current QQQQ down-trend.  I continue to be short or in cash until the GMI should signal an up-trend.

See my disclaimers below.

GMI: 2; GMI-L: 63; GMI-S: 19; IBD100 stocks underperform; Short or cash

@ 12:01 am

First of all, no one knows how long this decline will continue.  Trend followers only know a turn after it has occurred.  The GMI got me out of the market unscathed.  I am now sitting in cash and have retained my profits from the prior up-trend.  But, what to do now?  Gmi0727_2 The GMI is 2 and could fall to one as early as Monday.  Even my longer term indicators have weakened, with the GMI-L now at 63.  Nevertheless, the longer term up-tend of the QQQQ remains intact.  As long as the QQQQ remains above its rising 30 week average (now at 45.59), it remains in a Weinstein Stage 2 up-trend.  Note, however, that the SPY and IJR have both closed below their 30 week averages.    Hence there is a possibility that the tech stocks, reflected in the QQQQ, will continue to outperform other stocks, or follow the others down.

The Worden T2108 indicator (% of stocks above their 40 day average) is now at 15, definitely in market bottoming territiory.  But this is not the time to be a hero.  Even the IBD 100 stock lists have been slaughtered.  As this table shows, almost none of these momentum growth stocks are within 5% of their 52 week highs and only 2-3% of them hit new highs on Friday.  Ibdperf0727 At least three quarters of the stocks on the IBD 100 lists over the past year are now below their average price for the past 30 days, somewhat worse than the stocks in the Nasdaq 100 index.   Those of us who like to ride growth stocks to new peaks should be completely aware that this is now a low probability strategy.

My goal is not to try to anticipate a market bottom. I buy stocks breaking out to new highs, after they have recovered from a decline.  There will be plenty of time to buy (and write calls on) the new leaders after the market has bottomed. In fact, the easiest time to find the new leaders is to check the daily new high list once the dust has settled.  The few stocks that come through a decline like this and quickly break out to new highs are the ones I want to own. So I plan to sit in cash and nibble at some shorts while I wait for this market to turn.  In spite of what the pundits assert, there is plenty of time to make profits AFTER the market has revealed that it has turned. There is no need to anticipate the reversal; that is usually a futile and costly practice.  I will wait for the GMI to climb back above 3 before I test the waters again.

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