Put Options

GMI: 2; Most stocks weakening; NDAQ, NTRI, GOOG too?

@ 10:30 pm

The market continued to weaken on Tuesday.  Gmi0808_2 The large caps were stronger than the techs, but not by much.  27% of the Nasdaq 100 stocks rose, along with 31% of the S&P 500 and 43% of the Dow 30 stocks. While 29% of my universe of 4,000 stocks rose, only 23% of the IBD 100 list from 5/15 rose.  Thus, even the growth stocks declined on Tuesday.  Tuesday was the 24th day in the current QQQQ decline. There were only 76 new highs and 98 new lows in my stock universe.  Only 16% of stocks remain within 5% of a new high, while 11% are within 5% of a new low. Only 37% of my universe of stocks closed higher on Tuesday than they did on 5/15.  With such odds, one should be short or in cash. 

My market indicators have weakened, although the large cap stocks (DIA, SPY) remain in an up-trend.  The GMI-S is now 50. I am content to remain mostly on the side lines, although on Tuesday I did buy put options on a former high flyer that appears to be topping. When you look at SBUX and HANS and WFMI, you can see how the market has turned against the bull market winners.  Even NTRI and NDAQ, and do I dare say, GOOG, are beginning to look sick.  This is not the time to hang onto stocks with big gains that are starting to look tired…….

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

GMI: +2; Weakness continues; in puts or cash

@ 8:16 am

The GMI is still at +2 as my internal indicators, especially for tech stocks,  continued to weaken on Monday.  Gmi0710 Only 26% of the Nasdaq 100 stocks advanced, compared with 61% of the S&P 500 stocks and 63% of the Dow 30 stocks.  There were only 67 new highs in my universe of 4,000 stocks and only one new high (PMTI) in the IBD 100 list from 5/15.  Since the IBD 100 list was posted on 5/15, 25% of those stocks have advanced, compared with 35% of the stocks in my universe.  With odds  like these it makes no sense to chase the IBD type of growth stocks, unless one is partial to casino action that favors the house.  The key to survival in the market is to play only when the odds are in one’s favor.  In this environment my IRA remains short with put options or in cash.  There will be plenty of time to jump upon this train when it finally sets a northerly course.

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

GMI: 0; 3 IBD 100 new highs; New ETF’s to short indexes–a bullish sign?

@ 8:03 am

The GMI remains at zero, but there were almost enough successful  new highs from 10 days ago (9/15= 60%) to turn this indicator positive.  While I typically call this index positive when 50% or more of the stocks that hit a new high 10 days ago close higher then they did 10 days ago, the numbers here are too small to do so. If it is above 50% again tomorrow, I will make the indicator positive.  Gmi0626 There were 36 new highs and 95 new lows in my universe of nearly 4,000 stocks.  65% of the Nasdaq 100 stocks advanced on Monday, along with 74% of the S&P 500 and 80% of the Dow 30 stocks. Monday was the 32nd day of the current QQQQ down-trend. 14% of the stocks in my universe are in an up-trend, compared with just 9% at the lows last week.  So stocks are getting stronger.

The IBD 100 growth stocks from 5/15 now look as strong as the stocks in my universe.  This contrasts with the way they acted during the recent decline, when they greatly underperformed other stocks.  Traders and funds were clearly unloading the premier growth stocks in the IBD 100 list.  Ibd0626Three IBD 100 stocks did hit a new high on Monday:  XPRSA, CLDN, OII.  Any of the IBD 100 stocks that could survive the decline of the past month and go on quickly to hit a new high is a stock worth watching.  69% of the IBD 100 stocks from 5/15 have a MACD above their signal lines, indicating growing strength.   Still, note that only 18 of these 100 stocks closed higher on Tuesday than they did on 5/15 when this list was published by IBD…….

There are now new ways for an investor/trader to short the major market indexes in an IRA without buying put options.  Inverse ETF’s have been born.  They move in the opposite direction of the indexes they track.  So, to short the Nasdaq 100 (QQQQ) index, one can buy  PSQ.  Other inverse ETF’s include:  SH (S&P 500); DOW 30 (DOG) MYY (S&P 400 midcap).  These ETF’s are thinly traded and should be researched carefully before buying. 

Maybe the dawn of a new set of inverse ETF’s is a bullish sign.  Typically, not long after investors are so interested in a sector that a relevant new ETF is issued, that sector is close to a top–check out XHB, GLD and SLV for recent examples.  Too many people may be interested in shorting the major indexes??!!  A new contrary indicator?

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