General Market Index (GMI) table

HELE has been a super rocket stock since 2010. This weekly chart shows that HELE has resumed its strong RWB pattern after coming out of a base in October. HELE gapped up and broke above its green line top to an all-time high on huge volume on October 9.  It has  retested its GLB several times since.

Last week, HELE again bounced off of its green line top and may be getting ready to begin a new advance. The way I would play such a pattern would be to buy it and place a sell stop around $99.90. If I am wrong I am risking about a 4-5% loss. If I am right, I might catch a ride on a rocket! We’ll see this week if this turns out to be a timely set-up.

How did I find HELE? It came up in one of the rocket stock scans I built in TC2000. It identified 15 stocks out of about 5500 that had my desired pattern of a rocket stock (RWB) and bouncing off of support. (The other stocks were: ICE, USCR, PNFP, ALKS, TTC, RAI, NDAQ, LFUS, THG, UFCS, NXST, PRA, DLR and ADP. Of course, these need to be researched to see if any are worthy of purchase.) To learn more about my methods, go to my free December 2012 TC2000 webinar link on the right of this post. (By the way, I am doing an AAII workshop in Virginia this February–more details to come.) Whether HELE rises this week will depend a lot on the general market’s trend. Here is the GMI table. The GMI remains on a Buy signal.

I seldom get a very unexpected result from my scans. However, just for fun, I ran my scan for RWB stocks bouncing off of support focusing only on industry indexes. I found that only one industry, financial exchanges, came up! This monthly GMMA chart shows a clear RWB pattern for the financial exchanges index. (I am just discovering the benefit of a monthly GMMA chart that shows the longer term trends.) Clearly, the  financial exchange index has been in a strong RWB pattern for almost three years.

However, the weekly GMMA shows that this index  recently emerged from a year long consolidation in November, 2015.

What is driving this index? Perhaps an environment of rising interest rates increases the business of financial exchanges, as does the trading of commodities, which are getting very volatile, reflecting oil’s decline? Higher trading activity and margin interest rates will lead to higher profits for financial exchanges. The 4 stocks (out of 5) measured by this financial exchange index that all have weekly RWB patterns are: CME, CBOE, NDAQ and ICE. This is very interesting food for thought and may be worthy of my own financial exchange…….

Curiously, there were still more now lows than highs on Friday.   This may be because the SPY and DIA are not as strong as the QQQ, which is composed mainly of nonfinancial tech stocks.   The QQQ is clearly in the beginning of a RWB up-trend and heading to new highs.

But the SPY and DIA (not shown) are not as strong. The SPY is well below its summer peak and has no white separation between the shorter (red) and longer (blue) moving averages.

Still there are a lot of stocks breaking out and worthy of research. NTES is a recent GLB, as this weekly chart shows.

And LOW may be completing a cup and handle formation and a possible GLB.

I am keeping an eye on KITE for a possible GLB this week. KITE is presenting on their latest drug research at a December conference.

Meanwhile the GMI remains at 5 (of 6). Go to my December 2102 TC2000 free webinar (link to right or click here) to learn more about the GMI and my trading strategy.

I wrote weeks ago that I had exited the market in all of my accounts and wanted to see how the rebound from the summer lows proceeded. (I cringed as the market recovered.) The market is now at a very critical point.   The indexes could not hold new highs and have turned down. As I posted last week, a major market leader, AAPL, was looking very weak. The biotech leaders have also been slaughtered or wounded. The GMI could flash a Sell signal after Monday’s close. I have reviewed recent GMI Sell signals and found that while such a Sell signal on   September 1, 2008, kept me out of the markets during most of the subsequent huge market decline, during the market’s recovery since then, a Sell signal has often come at the bottom of a small decline and the GMI reversed to a Buy shortly afterwards. I do not know which scenario will unfold this week. However, I note that the 10.2 daily stochastics for all of the indexes are approaching very oversold levels and the indexes are below their lower 15.2 daily Bollinger bands. The put/call ratio Friday was also 1.16, suggesting a short term bounce. These market indexes rarely remain so oversold for more than a day or so. I expect a lower opening on Monday because a lot of people typically panic   and decide to sell after a major Friday decline. However, now we must add to that the horrible news from Paris for investors and traders to ponder over the weekend.

If the indexes have an early day sell off on Monday and can maintain a recovery through just before the close, around 3:45 PM, I will hold my breath and consider buying an index ETF (SPY or QQQ). If the indexes then continue to hold over the next few days I will increase my position. Because I am out of the market and not suffering losses during this market weakness it is much easier for me psychologically to consider wading back into the market in my trading accounts. I also suspect we will still get some strength in the markets during the last few weeks of the year as the institutions adjust their holdings to look good (window dressing) for their year end portfolio reports to their investors. Remember, major advances are typically preceded by a market decline.   (During the decline the smart money buys the stocks we are selling and holds them through the subsequent rise–as the saying goes, stocks go from weak hands into strong hands.) However, if the market indexes do not hold next week, I will remain on the sidelines, safely observing the carnage from a distance.

My current and former university students should easily understand the above. Others who want to understand my trading strategy   better might view   my free December 2012 TC2000 webinar, which is posted to the right of this page, or click here.