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With the Wall Street Journal talking about a possible depression and the ominous technical picture I see, it is best for me to be on the sidelines in cash. I have gone to cash in my trading accounts and reduced my exposure to equities in my university retirement accounts and will sell the rest when we get a good bounce. I have lived through many weak markets the past 60 years and suspect that the current decline has just begun. As several great traders have opined, all stocks are bad unless they are going up. Stocks are only worth what someone will pay for them. Value is a myth. When the psychology turns and the masses become scared, they sell and all stocks decline. I prefer to sell early and not get caught up in the panic selling near the bottom. One indicator that has helped me to detect a bottom is when T2108, now at 26%, declines to below 10%. Too many people have made money the past two years and have no idea what a major decline can do to one’s portfolio. It took 25 yers for the market (the Dow) to exceed the 1929 top. So, yes, the market always comes back. No one knows what the market will do and I can change immediately if my indicators tell me to. The key to trading success is to control risk and step aside when the trend is down.  Stay tuned….

All of the shorter term averages (red) are rising above the longer term averages (blue) in a RWB up-trend. The daily closes are shown by the dotted line. Note the oversold bounce marked by a blue dot in the second daily chart. I plan to explain my blue dot indicator in my presentation at the Boston IBD Meetup online in May. More details about this meeting in a future post.

With QQQ now below its 30 week average, the Stage 2 up-trend is in serious jeopardy. I have begun to transfer university retirement accounts out of mutual funds. I do not want to give up the substantial gains they made the past 2 years. I would rather be safe than sorry. If the market holds I can always reinvest. If the 30 week average should curve down, I will take all remaining funds out of stocks. That strategy saved me from most of the declines in 2000 and 2008. The 30 week average is the solid red line in this chart. The last time QQQ closed the week below the 30 week average was last September, for one week only. Tops usually take a few weeks, with false rallies, to set up so I may be early. Youths under 30 can wait out any significant decline. I can’t.