GMI: 0; GMI-R: 0; IBD100 stocks outperform other stocks by 4 to 5 times!

The GMI and GMI-R are both zero.  The last time the GMI was zero was March 24 at the end of that decline in the QQQQ. That decline lasted 55 days.  The subsequent up-trend that ended in June lasted 54 days.The current QQQQ decline is only in its13th day and may therefore have longer to go. There were 44 new highs and 533 new lows in my universe of 4,000 stocks on Friday.  The last time there were more than 500 new lows was on March 17.  Only 9% of the Nasdaq 100 stocks closed on Friday above their 30 day averages. 

Nevertheless, there is some evidence that we may be near a bottom or at least a bounce.  The Worden T2108 indicator is now at 15%, a level where some past declines have ended.  In addition, according to IBD, the Investors Intelligence poll shows more bears than bulls, (39% vs. 34%) a rare occurrence indicative of the extreme bearishness of market letter writers that is typical near the bottom of declines….

I took a look at the performance of the stocks on the IBD100 list published on June 2. These are stocks that IBD analysts say are the strongest growth stocks in the market.  The list changes each Monday as weak stocks are deleted.  I often trade the IBD100 stocks and was curious as to how they have performed during the current decline. I was amazed to find that since their close on May 30 (the Friday close before this list was published) 51% of the stocks closed higher last Friday than they did on May 30.  Furthermore, 14% of the 100 stocks were up more than 10% and 5% were up more than 20%.  In the same time period, only 9% of the Nasdaq100 stocks advanced, as did 12% of the S&P 500 stocks and none of the Dow 30 stocks.  Clearly, during the current decline the odds of making money on the long side in the IBD100 stocks was 4 to 5 times greater than in the stocks represented by these other major market indexes.  Maybe those folks at IBD really do have a winning stock picking strategy!

In the meantime, I remain short the QQQQ through the QID, in cash, or hedged with covered calls on a few IBD100 stocks, as I wait for this decline to play itself out.

2 thoughts on “GMI: 0; GMI-R: 0; IBD100 stocks outperform other stocks by 4 to 5 times!”

  1. I haven’t observed that kind of performance in past declining market periods, so it may be due to the current unusual situation of many of those stocks being affected by two markets at the same time, the equity market and the commodity market.

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