IBD

Well, I missed a post and the Wish contrary indicator still works.  If I am so tired/frustrated that I do not post, it usually marks a short term bottom.  Fortunately, I still had some long holdings along with my puts on housing stocks, which recovered on Wednesday.  So, did any of my indicators give us a hint of a bottom?  On Monday I wrote that only 30% of stocks were in a short term up trend, the least since March 10  (27%).  What I did not notice was that March 10 was the bottom of the decline in the QQQQ (@ 40.19) in March.  So the next time we see this indicator around 30% we should be looking for a short term bounce OR a serious decline. History rarely repeats itself exactly in the market.

Tonight was IBD Meet-up night.  For the first time, no one but I attended.  In prior months, when people were so demoralized that few attended the monthly meeting, it represented a good time to buy.  So tonight’s action may represent a screaming buy signal.  Perhaps people have been so whipsawed by this market that the 200 point rise on Tuesday merely shoved car loads of salt into everyones’ psychic wounds.

My indicators have bounced back with the GMI now at the maximum reading of +6.  The GMI-L is now at 100 and the GMI-S at 88.  39% of stocks are now in a short term up trend.  The QQQQ is the strongest index right now.  The QQQQ is now in its 16th day of its short term up trend.  There were 554 new highs in my universe of 4,000 stocks on Wednesday.  An amazing 38% of stocks are now within 5% of their 52 week highs. 67% of stocks closed above their 10 week averages…..

I know it seems insane that the market would rise with $72 oil and rocketing gold prices.  But we know that when the market wants to move one must jump on board or get out of the way.  The failure of the housing stocks to hold their gains on Wednesday is an ominous sign and suggests that that sector just had a short covering rally on Tuesday, and not a real bottom.  When the euphoria over current earnings dissipates, we might see these stocks and others come crashing down.  Beware the Ides of May………..

Please send your comments to:  silentknight@wishingwealthblog.com.

I’m back after a vacation.  Well, it was more than a vacation.  I have been burnt out on this market.  Nothing I have done worked and my account has gone nowhere. The March IBD meetup had only four persons, including myself.  All of us were complaining about the difficulty we are having trying to trade this market.  And then I had an epiphany.  I realized that moving averages are useless for providing signals in a trendless market.  Take a look at this chart of the QQQQ.  It is clear to me that, except for the false breakout in January, the QQQQ has been in a flat channel.  This index has gone nowhere since last November.  Why should we expect to have made any money trading tech stocks in this period?  Notice that during this time the index has gone back and forth over the 30 day (red) and 50 day (green) moving averages.  Thus, the averages and the GMI have been giving erratic, contradictory signals.  The QQQQ had a nice rise on Wednesday but I will believe this rally is for real only if the index closes above the upper channel line (around 42.10) on higher volume soon.  If it bounces off the line, I will expect a decline back to the area around 40.19. 

I have a renewed sense of respect for the value of trend lines. Look at the nice up trend in the IJR small cap index.  This index has been rising since early October.  In contrast to the QQQQ stocks, traders in small cap stocks probably made money in this period.  Why do trend lines work?  I guess because so many people think they work.  Why should I care to understand the reasons, so long as the lines help me to predict probable levels of support and resistance.

The GMI remains at +6.  There were 231 successful 10 day new highs (stocks that hit a new high 10 days ago and closed higher Wednesday than they did 10 days earlier) in my universe of 4,000 stocks.    There were 373 new 52 week highs and only 16 new lows.  86% of the Nasdaq 100 stocks rose, along with 78% of the S&P 500 stocks and 77% of the Dow 30 stocks. More than one half (51%) of stocks are in a short term up trend and 65% are in a longer term up trend.  The GMI-L (longer term) remains at the maximum reading of 100.  The GMI-S is at 75.  The QQQQ and IJR appear to be stronger than the DIA and SPY indexes. 39% of all stocks are within 5% of a new high.  It looks to me like the forgotten tech stocks may be about to join the bulls’ party……

Gert:  Please get well soon; we miss you.

Please send your comments to:  silentknight@wishingwealthblog.com.