I wrote earlier this week that I was mainly in cash in my trading accounts because of the frenetic nature of the market, responding vigorously to each announcement about the fiscal cliff negotiations. It remains to be seen whether Tuesday’s sudden snap-back rally will hold. If it does, the GMI and QQQ short term trend could reverse again. I do not trust changes in the short term trend until they reach five days. I remain on the sidelines in my trading accounts. On the other hand, IBD has changed its view of the market to, confirmed up-trend. They are typically very good at determining the market’s trend.
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GMI flashes “Sell”
With the GMI having registered less than 3 for two consecutive days, it has now flashed a Sell signal. Friday was also the second day of the new QQQ short term down-trend. I am in cash in my IRA and margin accounts. I want to see what happens with the resolution of the fiscal cliff negotiations before I re-renter the market. Because of the limitations on trading, I am still 100% invested in mutual funds in my university pension–for now. Only two of the four oversold market indicators I watch are oversold, indicating this market could fall further. One of them, the Worden T2108 indicator, is at 52%, in neutral territory.
Day one of new QQQ short term down-trend
I will become more confident of this new short term down-trend if it can reach day 5. For now, I own some calls on SQQQ and am almost 100% in cash in my margin account. Things are too volatile for me to trade right now. The prior 21 day short term up-trend of the QQQ generated no trading profits. Another day with the GMI below 3 will send a GMI Sell signal. Stay tuned. (I have two types of signals. The first is the QQQ short term trend count. The second is a more significant general market, GMI signal. I take both signals into consideration in timing the market.)