I was away all weekend and this post will therefore be short. No changes in any of my indicators. We remain in a down-trend and the safest place to be is on the sidelines in cash or a little short. There were 2 new highs (EBS and DRS) and 155 new lows in my universe of 4,000 stocks on Friday. Buying stocks at new highs is unlikely to be profitable right now. On the other hand, 822 (96%) of the 854 stocks that hit a new low 10 days ago closed lower on Friday than they closed 10 days ago. Thus, shorting stocks at new lows 10 days ago was likely to have been profitable. When considerable numbers of stocks that hit new highs keep advancing I will go back to buying IBD100 type growth stocks again.
Month: October 2008
GMI: 0; GMI-R: 0; T2108: 3%; 33rd day of QQQQ short term down-trend; EBS breaks out
My general market indexes (GMI, GMI-R) remain at zero. There were 2 new highs and 764 new lows in my universe of 4,000 stocks on Thursday. The indexes are far below the levels which would suggest to me a change in trend. Thus, the markets remain in down-trends and I will remain in cash. Thursday was the 33rd day of the current short term down-trend in the QQQQ (Nasdaq 100 ETF)…..
During bear markets, the prudent thing to do is to create a watch list of stocks that are building bases and resisting the down-trend.
One such stock is EBS. It apparently owns the rights to the only FDA approved anthrax vaccine and it just got another large contract from the federal government. EBS is one of the only stocks to hit new highs this week on huge volume. I do not own this stock but might be tempted if the market trend turns up. EBS reports earnings on November 6. After this huge market decline EBS is one of the only stocks to emerge unscathed. EBS is up about 64% from a year ago. Note, however, that buying stocks at new highs in a declining market can be treacherous. I would love to buy a stock like this in a rising market.
GMI: 0; GMI-R: 0; T2108: 2%; only 347 new lows; puny decline compared with October, 1987; comfortably in cash
The GMI and GMI-R remain at zero and the Worden T2108 indicator is at 2%. In spite of the decline on Wednesday, there were only 347 new lows (and 1 new high) in my universe of 4,000 stocks. Compare this with over 2,000 new lows for each of three days last week. This means that in spite of the declines in the averages, most individual stocks are not as low as they reached last week. It will be interesting to see if the number of new lows is contained again the rest of this week. The media pundits got it wrong again. On October 19, 1987 the Dow fell 22.61% (-508), a far cry from Wednesday's puny 7.87% (-733) decline. Meanwhile, I (and you?) comfortably watch this market from the sideline, almost totally in cash.