IBD100

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.

The GMI and GMI-R are back to 2. There were 45 new highs and 279 new lows in my universe of 4,000 stocks on Friday.  The QQQQ is in the 8th day of its down-trend.  I am mainly in QID and hedged in covered calls on some of the strongest IBD100 growth stocks. The QQQQ is only 0.32 above its declining 30 week average (see weekly chart below). If the QQQQ closes below its declining 30 week average it will confirm a Stan Weinstein Stage 4 down-trend typical of bear markets. 

The SPY and DIA have already done so. Only 21% of the Nasdaq 100 stocks closed above their 30 day averages; the last time it was below 21% was during last March's decline.  It's beginning to look like the rise since last March was a retracement of the decline from the October 2007 top, and that a second leg down is beginning. The Worden T2108 indicator is now at 23%, still above the extreme low levels reached at the bottom of most declines.