GMI declines to 3; New QQQQ short term down-trend; Getting defensive and raising cash


I have closed out most of my positions, with the current market weakness.   I still own an ultra bullish gold ETF, DGP.   The last time the GMI registered 3 was on November 23, during the last weak period in the market. IBD says we have had 5 recent distribution days for the Nasdaq and 4 for the Dow and S&P500 indexes.   Distribution days are high volume advances or declines in the indexes and are used by William O’Neil to help determine a likely change in the general market’s trend.   For more information on this terminology, see William O’Neil’s book, How to make money…, listed to the lower right. A few more declines would reduce the GMI quickly to confirmed sell territory. Meanwhile, the short term trend of the QQQQ has turned down, after 65 days of an up-trend. The longer term trend (weekly) remains up.

I therefore remain mainly in cash and will consider buying an inverse (bearish) index ETF like QID or SQQQ that rises when the market declines.   When I think the market’s trend is changing I slowly accumulate the appropriate ultra bullish or bearish index ETF.

The price of gold has been surging, as shown by the ETF, GLD. It will be interesting to see if it breaks through the area where it was turned back three times in Nov and Dec.

6 thoughts on “GMI declines to 3; New QQQQ short term down-trend; Getting defensive and raising cash”

  1. Hello Dr. Wish,

    just a quick question: when you say you closed out most of your positions, does that mean shorter term trading positions or did you also go in cash in your retirement accounts. I use your blog mainly as a guide for my retirement account and find it very helpful.

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  3. Noticeable support at s nd p 1300, oil backed off as did gold. I beleive the last few days of weakness in the market will show to be a great buying opportunity as the fear in the market looks to be leaving as quickly as it arrived. Long STP and PRU otm front month calls.

  4. Hi David,

    With respect to your opinion as I have seen a lot of very mean comments on this post recently, I disagree. If you look at some of the indexes in the Dj-30 and the Nasdaq daily charts, the volume looks very anemic. This is telling you that the retail traders that average down are buying in to get a quick buck or two. With that said, the indexes are retracing back to their 30 day SMA before another drop will take place. Only time will tell if the weakness in the market will continue and more institutional selling will take place. I would be defensive. Although, I will still keep any long term positions as things need to continue to deteriorate in order to be concerned.

  5. Chris, I didn’t think I was mean at all, (although that may be different in this post after reading yours) I am simply expressing my thoughts about the recent pullback, which is exactly all it is, just a pullback. There is no need to get excited and try to find some technical analysis that justifies the fear you have about this market deteriorating. Secondly, where have you been for past 2 years??? Since the market began the recovery in mar. 2009, volume has been noticeably low, especially on days when the market closes higher. Finally, your argument about retail traders should instantly be tossed out the window. Retail volume almost does not even matter in a given trading day. Institutions not only engage in transactions with extremely high dollar amounts, but they also make an exorbitant amount of trades compared to the normal retail investor. The only thing in your post that I do agree with is time will tell whether it is the end of the bull market or jus another hiccup in the bull market that is here to stay for an extended period of time.

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