Slammed leaders and rising rates increase market risk; GMI: +6; shorts as a hedge

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Well, now I am a little concerned.  When stocks like GOOG and MSFT get slammed after reporting earnings, it may be time to take some money off of the table.  Yes, I know the GMI is still at +6, but if I wait for it to give a definite sell I will lose most of my profits.  If good earnings cannot support GOOG, then what type of news is left to support it?  Too many of the leaders are finding themselves in multiple point declines.  When the leaders get into trouble, the rest of the market is not far behind. Irx721 In addition, my short term interest rate indicator has gapped up and keeps hitting new highs.  Look at this ugly monthly chart of the indicator.  Note it took much less of an increase in rates from 1998-2000 to burst the market bubble.  Bonds also seem to be weakening.  Perhaps we are seeing the end of Alan’s conundrum.   I know I am not supposed to predict the market, but I have the feeling we are in for a rough period……………………….

The GMI remains at +6, but the 10 day new high index was weak today.  Gmi721_1 Only 92 of the 174 stocks (53%) that hit a 52 week high 10 days ago closed higher today than 10 days ago.  Only 17% of the Nasdaq 100 stocks and 16% of the S&P 500 stocks advanced today.  20% of the Dow 30 stocks advanced.  These are some of the weakest readings I have seen during an up trend–this was day 10 (U-10) of the QQQQ rally. There were 267 new highs in my universe of 4,000 stocks………………………………….

Maybe it is time to start looking for stocks to short, at least as a hedge.  I will run some scans soon.

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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.

1 thought on “Slammed leaders and rising rates increase market risk; GMI: +6; shorts as a hedge”

  1. We’ll have to wait and see how bad the follow through turns out to be on the GOOG sell-off. On the plus side, one of the stocks you highlighted a few days back, XWG, was up about 12%. Assuming you bought it, congrats on your gain.

    Noting your fondness for discussing Cramer:

    Was that live audience shown applause signs or was that a televised cult meeting the other day? Hope there’s no return to that format.

    Today Cramer said it hit him like a ton of bricks to buy CIB, which he said he’s read about in IBD. I don’t subscribe to IBD, but I found it interesting because as of yesterday (well before the show taping) a strategy lab contestant on the MSN Money/CNBC website had the exact ton of bricks idea sent by courier.

    Click my “name” to read about it for yourself.

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