Nicolas Darvas

GMI: +4; QQQQ too tough to call; Some food for thought

@ 9:36 am

The GMI fell to +4 on Thursday, at the same time that the internal indicators showed some strength.  Gmi1222 Between 71-77% of the Nasdaq 100, S&P 500 and Dow 30 stocks advanced on Thursday.  There were 145 new yearly highs in my universe of 4,000 stocks.  But only 46% of the 184 stocks that hit a new high ten days ago closed higher Thursday than they did ten days ago. Buying new highs has not been likely to show a profit.  The Daily QQQQ Index is too close to call.  Thursday was the third day of this down trend (D-3), which shows signs of weakening.  36% of stocks are now in a short term up trend, up from 33% on Tuesday and Wednesday. The percentage of yearly doublers that hit a new high yesterday rose to 13%.  I am doing some nibbling, but the market is on the dividing line between up/down trend.  I am placing small bets until I can determine the short term trend.  The longer term trend remains up, with 65% of stocks above their 10 week averages.  Stocks I am watching (some of which I own) are:  HUM, MSTR, SNDK, AAPL, CHS, GOOG…………….

The great traders (Livermore, Darvas, Loeb) all suggested that one should focus on a small number of leading stocks.  I often say that diversification leads to mediocrity in stock trading.  We want to concentrate in our winners and not have them diluted by our losers.  I just read similar sentiments by William Harnisch, who wrote that diversification is the "plain vanilla of investing." Some food for thought as you mix your egg nog…..

GMI: +6; Some leaders weaker

@ 6:26 am

No change in the GMI (+6) but the tech leaders are showing some signs of weakness.  Only 35% of the Nasdaq 100 stocks rose on Wednesday, compared with 65% of the S&P 500 and 63% of the Dow 30 stocks.  Gmi1214 There were 237 new yearly highs in my universe of 4,000 stocks, but only 10% of stocks that have doubled in the past year hit a new high on Wednesday.  Leaders that are downgraded by analysts or hit with bad news are gapping down.  AAPL (-3.9%) is just the most recent example, after CMTL and CUTR recently.  I am slowly being stopped out of my holdings because of my close sell stops.  I will be content to buy stocks back at higher prices when/if they strengthen. Wednesday was the 31st day of this rally (U-31).

NOTE:    A NEW SECTION TO THE BOTTOM RIGHT PROVIDES LINKS TO MY FAVORITE PRIOR POSTS.  THESE INCLUDE MY STRATEGY POSTS, DEFINITIONS OF THE GMI COMPONENTS, AND MY ANALYSIS OF WHY THE TRADING TECHNIQUES OF THE GREAT NICOLAS DARVAS WORK BEST DURING BULL MARKETS AT ALL-TIME HIGHS.

How have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com. 

GMI:+6; CUTR collapses; On stops and parachutes

@ 12:01 am

The GMI remains at +6.  Gmi1213 There were 256 new highs on Tuesday in my universe of 4,000 stocks.  Between 64-70% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced.  More than one half of stocks (53%) are now in a short term up trend.  Stocks that have doubled in the past year remain strong and 24% of them hit a new high on Tuesday.  Tuesday was the 30th day of the QQQQ up trend (U-30), and the QQQQ has closed above its 10 week average for the past six weeks……….

A few weeks ago CMTL crashed, and on Tuesday, CUTR, another leader, collapsed (-34%).  Cutr I have read the ostensible reasons for the drop, but I know from past experience that when leaders hit huge air pockets, it is often a sign of an extended market.  So, I raised all of my sell stops so that I can get out at the first signs of weakness. For CUTR, a stop loss at the ten day average (dotted line) or the 30 day average (red line) would have minimized losses.  The fact that CUTR had found support repeatedly at the 10 day average since its gap up in October, made it a good place for a conservative protective sell stop.  To trade growth stocks without stops is to go sky-diving without a parachute………………………..

NOTE:    A NEW SECTION TO THE BOTTOM RIGHT PROVIDES LINKS TO MY FAVORITE PRIOR POSTS.  THESE INCLUDE MY STRATEGY POSTS, DEFINITIONS OF THE GMI COMPONENTS, AND MY ANALYSIS OF WHY THE TRADING TECHNIQUES OF THE GREAT NICOLAS DARVAS WORK BEST DURING BULL MARKETS AT ALL-TIME HIGHS.

How have you used this site to inform your trading?  Can you send me some experiences I can post for others  (anonymously, with your prior permission)?  Please send your pearls of Wishdom to me at: silentknight@wishingwealthblog.com.