General Market Index (GMI) table

With the GMI at 5 and above 4 for two consecutive days, this indicator is flashing a bullish signal.   I will be more comfortable if the QQQ holds on Tuesday and its short term trend turns up too.   The Worden T2108 indicator is in neutral territory, at 58%.   68% of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term strength.   Only 25% of the Nasdaq 100 stocks have an over-bought stochastic, compared with 53% of the Dow 30 stocks.   This difference reflects that the large cap stocks are currently out-performing the tech stocks.   As I wrote previously, after a weak market people tend to feel more comfortable buying the big blue chip stocks than the more speculative growth stocks reflected in the QQQ. The smaller growth stocks take off later, once people have profits. Both the QQQ and SPY are back above their respective 10 week averages, a sign of strength.

The QQQ reached a short term oversold level on December 19, and has bounced off of that level the past 4 days.   The QQQ is getting close to an overbought level, as measured by stochastics and Bollinger Band indicators I use.   I am therefore planning to move my stops up and/or write calls on my few long positions as soon as these indicators become over-bought. Over the past year, the QQQ has cycled between over-sold and over-bought. I am therefore not adding to any long positions right now.   I am still looking to short gold once the consolidation from the recent sharp drop is over.   This could take weeks.   Check out this weekly chart which shows GLD now firmly below its 30 week average (red line) and entering a major Stage 4 decline. Click on weekly chart to enlarge.

Friday was the 4th day of the current QQQ short term down-trend. Only 29% of the Nasdaq 100 stocks closed with their MACD above its signal line and both the SPY and QQQ have closed below their critical 10 week averages. I am in cash in my trading accounts and will start moving out of mutual funds and into money market funds in my university pension.   The longer term averages appear to be continuing Stage 4 declines. The weekly chart of the SPY (S&P 500 ETF) shows it to be back below a declining 30 week average (red line).   This is a very ominous pattern.   The QQQ has a similar bearish pattern.

If the market holds on Monday the new QQQ short term up-trend will have reached 5 days. At that point I will add to my position in QLD. It is also the 7th day since my GMI based strategy flashed a buy signal. While I am not ready to release our recent analysis of how this strategy has worked since late 2006, I can tell you that the strategy outperformed a buy and hold strategy while keeping me out of the market during market declines. While past results do not guarantee future results, I am confident enough to go long QQQ or QLD when the GMI has flashed a buy signal and remains bullish.

Meanwhile, the GMI remains at 6 (of 6) and the GMI-2 is at 5 (of 6).   The Worden T2108 is at 59%, in neutral territory.   78% of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term strength.   Both the SPY and QQQ have now closed above their 10 week averages for two weeks. The QQQ daily stochastics reached an overbought level and recently that has led to a rapid decline.   The fact that the market held on Friday is a very positive sign.   Continued strength would signal to me a change in trend and a break out of the trading range it has been in.

My scan of stocks with good fundamentals that hit a new high on Friday yielded 13 out of more than 5,000 stocks: ORLY,ARG,DCI,HIBB,QCOR,CRMT,FICO,HSNI,SWI,DXPE,GNRC,HPY,SMP.   Four of these also came up in my DARVAS scan: QCOR,FICO,SWI,DXPE. These stocks are worth researching for possible buys. As this weekly GMMA chart shows, QCOR has been a powerful RWB rocket stock for some time. Click on chart to enlarge.