GMI: 0; IBD100 performance; Cash balances earning 4.8%?

The GMI is still at zero.  There were 300 new lows and just 16 new highs on Friday.  The last time we had more than 300 new lows (324) in my universe of 4,000 stocks was October 12, at a near term bottom.  However, many of my indicators, while low, are not at extreme lows.  For example, 14% of the Nasdaq 100 stocks closed above their 30 day average, compared with 9% on June 13.  Gmi0714 The GMI-S is now at 19, reflecting weakness in almost all of my short term indicators for the four major stock indexes.  The GMI-L is only a little better, at 31. 21-27% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Friday. Friday was the seventh day (D-7) in the current QQQQ down-trend and the ninth week that the QQQQ has closed below its 10 week average.  The IBD mutual fund index is below both its 50 day and 200 day moving averages and the 50 day is close to crossing below the 200 day.  Thus, the professional growth fund managers are suffering in this market, another indication to stay away from growth stocks now.

The IBD 100 stocks continue to be slaughtered.  Ibd0714 I think that the way IBD tracks  the performance of the IBD 100 is very misleading because they keep replacing underperforming stocks with better performing stocks.  When you look at the performance of the IBD 100 list published on a  particular date (5/15) we get a more accurate indication of how these types of stocks have performed.  Since 5/15, only 19% of the IBD 100 stocks have advanced, compared with 27% of the 4,000 stocks in my universe.  Only 26-27% of the stocks in each group closed above their 10 week averages.  None of the IBD 100 stocks and less than 1% of my universe of stocks hit a new high on Friday.  Need any more evidence that growth stocks have been a dismal investment since mid-May?

I am  100% in cash now, given my coming vacation.  Since mid-May it has  been almost too easy to trade profitably on the short side.  Buying deep in the money puts in my IRA has been a wonderful strategy for this market.  I urge all readers to get a copy of O’Neil’s book on shorting and to study the charts.  A current scan of the market using TC2005 yields 7 rocket stocks and 422 submarines.  Riding submarines down or staying in cash has been the best way for me to ride out the current market.  With Fidelity Cash Reserves paying me about 4.8% for the cash balance in my account, it is nice to be on the sidelines.  What is your brokerage firm paying you for your cash balances? You may be surprised/disappointed……….

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

GMI: 0; IBD 100 growth stocks decimated

Another losing day with the GMI firmly stuck at zero.  Gmi0606 There were only 17 new highs and 136 new lows in my universe of 4,000 stocks.  The longer term moving averages are now starting to weaken.  The GMI-L fell to 44 and the GMI-S is now at zero.  The extreme weakness in the short term indicators is now spreading to the longer term indicators.  If this weakness in the longer term indicators continues we may find the markets  in a significant  down trend……………..

The IBD 100 stocks have been decimated and are underperforming my larger universe of almost 4,000 stocks.  Ibd0606 34% of the stocks in my universe rose on Tuesday, compared with 19% of the IBD 100 stocks.  There were zero new highs in the IBD 100 stocks and <1% in my universe of stocks.  More stocks in my universe closed above their 10 day averages (35% vs. 32%) and their 30 day averages (25% vs. 20%).  Note that the wide majority of both groups of stocks have closed below their average closing prices of the last 10 and 30 days.  Only about one fifth of both groups of stocks are in a short term up-trend.  Furthermore, more stocks in my universe are within 5% of a new low (13%) than a new high (10%).  The IBD 100 stocks still have the edge in closing above their longer term 10 week and 30 week averages, but the gap has narrowed for the 10 week average (34% vs. 28%).  Of most significance, only 17% of the IBD 100 stocks published in the list on 5/15 closed higher on Tuesday than they closed on 5/15, compared with 32% of my universe of stocks…

When the premier IBD 100 growth stocks cannot hold up, the market is in a lot of trouble.  I hope that most of my readers went to cash or short when the GMI fell to +1 on 5/14.  Using the GMI indicators, I have avoided all significant market declines since 1995.  It is now time for me to wait on the sidelines, mainly in cash until the GMI strengthens.  I do own some put options in my IRA which have appreciated nicely during this decline.  I highly recommend O’Neil’s brief book on selling short……

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

GMI: 0; IBD 100 stocks stronger; Some shorts; Ocean City had light traffic;

The GMI remains at zero, in spite of the strength last week.  On Friday, 63% of the Nasdaq 100 stocks rose, as did 73% of the S&P 500 stocks and 87% of the Dow 30 stocks.  Gmi0526_2 However, there were only 28%  (8/29)successful 10 day new highs–stocks that hit a new high 10 days ago and closed higher on Friday than they did 10 days before.  In addition, there were only 64 new yearly highs in my universe of 4,000 stocks.  None of my 16 short term indicators for the SPY, DIA, QQQQ and IJR were positive–GMI-S= 0, and the GMI-L = 63.  Friday was the 12th day of the current short term down trend in the QQQQ.

I expanded the comparison of my indicators to include the IBD 100 stocks.  Ibd0526 I think it will provide valuable insights into the market to see how the highly rated IBD100 stocks’ performance compares with my universe of 4,000 stocks.  On Friday, 68% of the stocks in my universe advanced, compared with 79% of the IBD 100 stocks.  About the same percentages of stocks closed above their short term 10 day and 30 day averages.  8%-11% were in a short term up trend. Major differences appeared in the longer term indicators, however.  Thus, 31% of my universe of stocks closed above their 10 week averages while 51% of the IBD 100 stocks did.  90% of the IBD 100 stocks closed above their 30 week averages, but only 52% of my universe of stocks did.  Finally, twice as many IBD 100 stocks bounced above their 10 week averages last week (29% vs. 13%).  These differences are important and signify that the IBD 100 type of growth stocks are more likely to remain in longer term up trends and almost one third found support last week at their 10 week averages.  As long as these stocks hold above their 10 and 30 week averages, growth stocks remain in longer term up trends…….

While the markets have bounced and many growth stocks are holding up, there have been many declines in other stocks.  I scanned the market for stocks that appear to be breaking down. If the market continues to weaken this week, I will research buying puts on the following stocks:  RECN, PSUN, KOSP, RTSX, OXM, NMTI, WBSN and CMX.  All of these have had some high volume down weeks since reaching peaks several months ago. All are below their 10 week averages and their declining 10 week averages are below their 30 week averages…

I asked some friends about what it was like this weekend in Ocean City, on Maryland’s eastern shore.  The place should have been inundated with tourists–it was not.  I also talked with a real estate agent there who said there was a huge inventory of houses and condos that were not selling.  If other hot vacation markets are as weak, we may be seeing the effects of high gas prices and high interest rates.  Maybe the Fed will decide to pause as these trends become evident………

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

GMI: 0; IBD100 stocks lag; Bounce coming?

The GMI remains at zero, as the averages reversed off of their lows on Wednesday.  Between 53-65% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes rose on Wednesday. Gmi0524 But only 30% of the IBD 100 stocks rose, and only 21% closed above their 30 day averages. Only 35% of the IBD 100 remain above their 10 week averages. There were only 13 new highs and 163 new lows in my universe of 4,000 stocks.  This was the greatest number of new lows since last October.  Only 6% of stocks are in a short term up trend, a new record low.  Wednesday was the tenth day (D-10) of the current short term down trend in the QQQQ.  It remains to be seen whether stocks can manage to rally from here.  Regardless, the trend remains down and I will remain in cash or short.

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