Nicolas Darvas

Reader comment, received 11/23:

    I have used your blog as part of my trading strategy over the last six months. The CANSLIM method depends on the direction of the market. Your indicator is something that I look for in order to determine whether or not I am in the market. I use a number of
indicators and yours is the "tie breaker". Thank you!…………………………………………….

I use the GMI the same way as the above reader–to determine whether to be in the market on the long or short side.  I always trade consistent with the GMI…………………………………

This market keeps humming along in  a nice up-trend.  The GMI remains at a maximum +6 and detected this rally in its early stages.  Growth stocks at new highs have been strong.  There were 111 stocks that hit a new high 10 days ago that closed higher on Tuesday than they did 10 days earlier.  There were 351 new yearly highs in my universe of 4,000 stocks and 82% of the stocks that doubled in the past year closed above their 30 day averages. More than three times as many stocks (26% vs. 7%) are within 5% of a new high than a new low.  Two thirds of stocks closed above their 10 week averages and 59% are above their 30 day averages.  The Nasdaq 100 stocks lagged the market on Tuesday again, with 54% gainers, compare with 65% of the S&P 500 stocks and 77% of the Dow 30 stocks………………….

The monthly chart of the market can provide a context for the current trend.  This monthly chart of the Nasdaq Composite index presents a revealing picture of the strong uptrend from 1994-2000, followed by the substantial decline that bottomed in 2002.  Since the initial rise from the 2002 bottom, the Nasdaq has been basing with a slight up-trend.  The 30 month moving average (red line) has finally complete a rounding bottom and appears to be on the rise.  No one knows how long this up-trend will last.  However, to me, this pattern does not justify the fears expressed by many media pundits that the Nasdaq has come too far too fast.  While we clearly are not following the path of rapid increases that occurred from 95-2000,  the Nasdaq market does appear to be in the early stages of a long term up-trend.

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. 

The GMI is still firmly at +6, although the QQQQ stocks were a little less likely to rise Tuesday.  Only 51% of the Nasdaq 100 stocks advanced, compared with 64% of the S&P 500 stocks and 67% of the Dow 30 stocks.  Still, 57% of the 4,000 stocks I follow are in a short term up-trend and 65% are now above their 10 week averages.  There were 350 new highs and 80% of the 94 stocks that hit a new high ten days ago closed higher Tuesday than they closed ten days earlier.  Tuesday was the sixteenth day of the QQQQ up-trend (U-16).  26% of stocks are within 5% of their 52 week highs.  Enjoy this up-trend!

I wrote a piece about I-bonds several months ago, suggesting that these bonds were a good way to grow savings with protection from inflation.  Now it appears there have been some changes in the way the base for these bonds is calculated that can make them inferior investments.  Check out this recent article by Chuck Jaffe.

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. 

Nicolas Darvas attracts the fascination of many traders.  Some of my readers have asked for more information about this amazing dancer-trader.  While I know he is deceased, the best source on Darvas is the article (available for a small fee from the TIME magazine archive) that made him famous–Pas de Dough, May 25, 1959.  If anyone else knows a better source about Darvas, please send it in.  Also, check out my piece on his little known and rare final book, cited in my favorite posts link on Darvas, to the lower right.

The GMI closed the week at +6.  There were 323 new highs on Friday, the highest number since October 3.  Between 62-64% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes rose on Friday.  23% of the 4,000 stocks in my universe are now within 5% of a 52 week high, compared to 9% near a new low.  Friday was the fourteenth day (U-14) of the QQQQ up-trend.  Since this up-trend began on November 1, the QQQQ has risen +6.6%.  During this period, 81% of the 100 stocks in the Nasdaq 100 have advanced.  This again  shows that if we traded with the up-trend in the QQQQ average, we had an 81% chance of having a profit.  The top ten gainers during this period are:  LVLT (+40.8%), MRVL (+25%), AMZN (+18.9%); FAST (+17.7%), ATYT (+16.9%), QCOM (+16.3%), WYNN (+16.1%), INTU (+15.9%)MLNM (+15.4%) and GILD (+15.3%).  I  hope you owned some of these.  33 of the Nasdaq 100 stocks have gained 10% or more since this up-trend began.

The WPM shows improvement in all indexes, but the S&P small cap.  All five indexes are above their 30 day and 30 week averages.  But 82% or more of the component stocks in all these indexes but the small cap are above their 30 day averages.  In contrast, only 73% of small cap stocks are in a short term up-trend.  The small cap stocks are also least likely to be above their 30 week averages (61%).  Thus, while most stocks are participating in this up-trend, the small caps are laggards, for now.

Among the stocks that hit a new high Friday, have strong recent quarterly earnings and are up at least 60% in the past year are: GOOG, PLLL, CUTR, UBB, ISRG, IRIS, MDR, HUBG, MRVL, HOLX, RES, GHL, SUPX, CX, KYPH, CDIS,GOL and CERN.  (I own some of these.)  These stocks are prime rockets for further research and consideration.

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.