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Well, this was a strange day. The GMI went back to +6 as the number of successful 10 day new highs rose to 105. There were 292 new 52 week highs and only 23 new lows in my universe of 4,000 stocks. HOWEVER, only 27% of the Nasdaq 100 stocks rose, compared with 48% of the S&P 500 stocks and 67% of the Dow 30 stocks. This is the exact opposite of what has been occurring. The Nasdaq is now either leading the market down, or not following the big caps up–take your pick. We are in day 22 of the QQQQ uptrend (U-22).
The market closed way down from its intra-day high today, a sign of weakness and maybe, a short term top. Most important, the QQQQ closed below its 10 day average for the first time in 26 days. The steep rise may be over–at least until the QQQQ closes above its 10 day again. A possible scenario is that this beginning of the month weakness will set us up for a roaring end of month/quarter finish. But, just to be safe, I will move my sell stops up to prevent me from losing more of my gains. I was stopped out of my position in SHLD today when it released disappointing earnings and gapped down to end in a 13 point loss. SHLD stopped right on its 50 day average (green line). Earlier in the week QSII and CMN had similar steep declines, which I reviewed. I have often noticed that when we get sudden steep declines (air pockets) in winners, it often portends a weak market. I am therefore getting a little defensive even though I am confident in the uptrend. So I will move up my stops and take some profits if they are triggered. I can always buy back my stocks once this weak patch is over. To be a successful trader one must not fall in love with one’s stocks. As William O’Neil has said, all stocks are bad unless they are going up.
I am also keeping an eye on the short term interest rate indicator. A few weeks ago I wrote that it looked like it had stabilized, as it penetrated its 50 day average (green line). But it resumed its rise, suggesting that speculators think more rate hikes are coming. That is never good news for the market. I guess getting smacked by SHLD today has made me a little gun shy. I am always a chicken and run at the first sign of a weak market. Remember–preservation of one’s capital keeps you in the game to play another day.
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Please remember that the stock market is a risky place, especially now. I am not providing recommendations for you to follow. My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs. While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog. Please consult with your financial adviser and a mental health practitioner before you enter the stock market, and please do not take unaffordable risks in the current market environment. See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.