Technical Analysis

GMI: 0; GMI-R: 0; T2108: 3%; 36th day of QQQQ short term down-trend; LPHI; My TA course

@ 12:01 am

All my market indicators are back to zero.  There were 6 new highs and 109 new lows in my universe of 4,000 stocks on Tuesday.  The market indexes I follow (SPY, DIA, QQQQ)  remain in down-trends.  Tuesday was the 36th day of the current QQQQ down-trend.  The short term down-trend in the QQQQ that ended on March 24, lasted 55 days, and the one that ended on August 5, lasted 39 days.  So, we may have a ways to go before we get a reversal of the current short term down-trend.  Such a reversal would occur within a longer term down-trend but could still be a trade-able rally.  For now, I remain in cash and a little short and keep a watch list of promising stocks to buy when the market turns.  My latest  candidate is LPHI, which hit a new high on Tuesday and is within 5% of its all-time high.  LphiThis is a promising monthly chart of LPHI. I might be tempted to buy

LPHI if it closes above its peak price of 42.32.  LPHI has appeared on the IBD100 list

and has solid earnings and a PE below its earnings growth rate. I will

watch LPHI along with EBS, which I mentioned a few days ago. Stocks

that can survive this market near their all-time highs are potential rockets

in any rallying market. If we want to catch a rocket to the moon we must jump on one pointing towards the moon and that is rising to new heights.  I don't want to buy stocks at bargain low prices.  Think how many times past stock market stars hit new highs over and over again as they climbed to the heavens. I love bear markets because there are so few stocks hitting new highs that it is far easier to spot the new leaders….

Thank you for those of you who inquired about my college course on technical analysis.  Unfortunately, the course is limited to just 20 honors students each year for one semester.  You can still get an idea of the course by reading the books in "my best trading books" section to the far lower right of this blog.  These are the books that made a difference to my trading success over the past 40 years and my students read all of them during the first four weeks of the semester. They then design their individual trading strategy and begin a 10 week trading simulation with a virtual margin account worth $100,000.  They also learn how to use TC2007, a terrific technical analysis tool,  to scan the market for potential stocks to buy or short. I use TC2007 to compute all of the statistics I display in this blog.

GMI: 0; GMI-R: 0; 2,832 new lows on Friday; T2108: 1%; Our embarassing failure to educate youth about the market

@ 12:01 am

The GMI and GMI-R remain at zero.  On Friday, there were 23 new highs and 2,832 new lows in my universe of 4,000 stocks.  This is the largest number of daily new lows since I started this blog three years ago. The Worden T2108 indicator remains at 1%, about as low as it gets.  This is the time to be on the sidelines in cash.  No one knows when this down-trend will end.  Friday was the 29th day of the current short term down-trend in the QQQQ…

It is amazing how Jim Cramer is now claiming to have been urging people to be in cash.  The truth is that he and the other market pundits have been urging people to buy stocks all the way down.  At  no time did any of them say to go mainly to cash.  Cramer has repeatedly ridiculed the use of charts.  But it is the chart patterns that warned me to get out of this market recently, and in 2000.  I started this blog to give the little guy (and gal) a chance to learn  how to discern the market's trend.  When the trend is down one should not be looking for stocks to buy.  One goes to cash or goes short.  There will be plenty of time to ride the next up-trend once it has proven itself….

It is a crime that we do not teach people how to think for themselves when they invest their hard earned money. High schools and universities should require students to attend classes in financial planning and investments. I teach an honors course at the university  and my students have a thirst for knowledge about the market. They often report that my class on technical analysis  is the most practical course they have attended and that it should be required for all students.  Why do we fail to educate our youth about such an important topic?  Think how many of our ageing baby boomers are now looking at greatly reduced assets for retirement. It is painful to me to consider the ramifications of this colossal failure to educate our citizens about how to manage their stock market investments.

GMI: 3; GMI-R: 7; buying QLD; Bear Stearns gave plenty of advance warning of its collapse

@ 12:01 am

The GMI rose to 3 (of 6) and the GMI-R to 7 (of 10).  There were 39 new highs and 21 new lows in my universe of 4,000 stocks on Tuesday.  70% of the Nasdaq 100 stocks have now closed above their 30 day averages and 94% of my 16 short term indicators for four index ETF’s (DIA, QQQQ, SPY, IJR) are now positive.  The QQQQ is now in its sixth day of its short term up-trend.  I have closed out my shorts and am accumulating QLD , an ultra ETF that aims to move twice as much as the QQQQ (Nasdaq 100 index)…

I am  incredulous of the media pundits who claim that the recent plunge in Bear Stearn’s stock to $2.00 was sudden or unexpected.  Bsc
This weekly chart of BSC (click on to enlarge) shows that the stock peaked in January, 2007 and declined below its 30 week average (red line) in May, 2007, a key danger signal.  A few weeks later the 10 week average (dotted line) broke below the 30 week average.  Over the next five months the stock was in a sustained down-trend.  In the week following the last week displayed in this chart the stock collapsed from around $60 to below $10.  The ignorant media focused only on that last week of a selling climax, and missed the point that the collapse was preceded by a long six month down-trend during which anyone who follows technical analysis should have exited BSC or shorted it.  (Cramer hates charts and told his audience not to exit the stock.) A story claiming sudden unexpected selling by nefarious hedge funds must sell more papers…………….