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The markets are very short term oversold. There were over 900 new lows on Monday, the most since August 24, the day of the flash crash. About 75% of the Nasdaq 100 stocks have a Stochastics below 20 and almost as many reached their lower 15.2 daily Bollinger Band. This is a very oversold market. With earnings season upon us, we are due for a relief rally. I will seek to short the major indexes when this rally loses steam, if one occurs. As this daily chart shows, the QQQ closed at 104.33 on Monday. Possible areas of resistance are around 109 and 112.

I suspect the flight to gold, for safety, may be over for now. GLD is backing down from its upper 15.2 daily Bollinger Band where it was quite overbought.

GLD remains in a multi-year BWR down-trend. See my prior post for an explanation of the BWR pattern.

By the way, AAPL has now formed a BWR down-trend. I wouldn’t go out on a limb for it…..

With the put/call ratio at 1.23 and with many stocks at oversold levels, we will likely get a bounce soon. But the major U.S. market indexes remain in  Stage IV down-trends. I might consider buying an inverse index ETF or some puts to profit from a further decline, but only after the market bounces and hits resistance. It is nice to be in cash on the sidelines.

By the way, this weekly chart of the Shanghai Composite Index shows it to have now begun a Stage IV down-trend. The best is yet to come….

I have told you before that I stayed safely out of the market during the 2000-2002 and 2008 market declines. I did so because I determined that the major indexes had entered Weinstein Stage IV down-trends. The SPY and DIA are now in Stage IV down-trends. Both are below their declining 30 week moving averages. The QQQ is also now below its 30 week average, although the average itself is now flat.  I am therefore in cash in all of my accounts, including my university pension. I actually have been in cash for some time, as I have written. It is impossible to know how far a down-trend will go. The best strategy for me is to wait for definite signs of a Stage II up-trend before I reenter the market on the long side. I fear we are much closer to the beginning of a major decline than to the end….

By the way, this weekly chart of GLD shows that in spite of its recent bounce, gold remains in a multi-year Stage IV down-trend too. (Red line is 30 week moving average.) Gold may not be a safe haven either.