GMI: +4; Cramer contrary signal; techs and small caps weaken; raising stops and cash

While driving to work Thursday, I opined that when the Today Show producers are so sure of the bull trend that they invite Cramer to appear and declare that the current bull market is like that of the 1920’s, this was a big indication of a market nearing its top.  Katie missed the opportunity to remind him how the bull market of the 1920’s ended………………

So, the GMI weakened to +4 and the QQQQ closed below its important longer term 30 week average for the first time since last October.  When a major index is below its 30 week average I get very defensive in the stocks represented by that indicator.  But the QQQQ is not alone.  The IJR small cap index short term indicators have weakened greatly (see the GMI-S index below) and this index ETF is now below its 30 day average, a sign of possible short term weakness.  The QQQQ looks miserable and may be on the verge of a major bear market even though it did not participate much in the rise in the DIA and SPY.Gmi0511 Only 10% of the QQQQ stocks advanced on Thursday, along with 11% of the SPY stocks and 3% of the "strong" DIA stocks.  Only 51% of the 4,000 stocks in my universe closed above their 10 week moving averages.  The QQQQ is now in its first day of a new short term down trend (D-1)……….

Given the above, I have raised my sell stops, raised cash and continued buying puts in construction stocks and others that appear to have topped out.  O’neil’s book on how to sell short has helped me a lot to determine the proper stock pattern for shorting.  To short in my IRA, I buy put options.  This in not the time for me  to be brave by holding stocks and hoping for gains…….

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