General Market Index (GMI) table

The QQQQ short term up-trend completed its 24th day on Friday.   During the time of this up-trend, the QQQQ has risen +8.9%, the SPY +6.3%, and the DIA +6.4%.   On the other hand the ultra long index ETF’s have done much better, QLD +18.5% and the TYH +26.7%.   So, we see again the virtue of buying the ultra long index ETF’s at the beginning of a QQQQ short term up-trend.   Eight QQQQ short term up-trends have lasted between 31-86 days in the past couple of years.   So the current up-trend may have a ways to go.   After we enter earnings season we also enter the November-April part of the year during which most market gains have occurred.   So   I remain 100% long in mutual funds in my university pension and largely long in my trading IRA and margin accounts.   If I listened to the news and the media pundits, rather than my indicators, I would be scared out of equities.

So my GMI is at 6 (of 6) and the GMI-R is at 10 (of 10). The Worden T2108 is at 86%, near over-bought territory but it can remain there for quite a while.
The SPY and QQQQ have closed above their critical 10 week averages for 6 weeks, a major sign of strength in the up-trend. Only 44% of the Nasdaq 100 stocks closed with their MACD above its signal line, down from 63% last Friday, a sign of some short term weakness. As I wrote last week, I believe the strength in IBM augurs well for a strong Dow and a strong tech rally in the near future.

Meanwhile, my undergraduate students are about to begin their virtual stock trading competition.   To help them select stocks this week I ran a special scan of all stocks in my IBD 100 and New America watch list. This scan looked for stocks that have recently hit a new high then became oversold and just bounced off of or broke above their 30 day averages.   It also filters stocks on revenue growth and a few other technical criteria.   This list of stocks (see scan results below–click on to enlarge)   is a starting point for them to research to see if a stock meets their other fundamental and technical criteria.   All students must have an objective set of trading rules approved by me before they can trade. My TC 2007 tab shown below lists a host of fundamental and technical criteria (EPS change most recent quarter, prior quarter and annual; PE, price/price a year ago; % change in revenue last quarter;   P/S ratio and ROE) and the list is sorted by ROE. If they buy one of these stocks, they should place a stop order to sell (GTC stop loss) somewhere below the stock’s 30 day average.   Good luck students!

With options expiration behind us, the next major event that may cause the stronger growth stocks to go higher is the end of quarter mutual fund window dressing.   This event will be followed by release of quarterly earnings beginning in mid-October, followed by election results. All of these events might give the market a reason to rise, but we may have the typical October swoon somewhere in here.   But with   the GMI at 6 (of 6), I remain long in my IRA and 100% invested in my university pension. The QQQQ short term up-trend has now completed 9 days (U-9) and the QQQQ and SPY have now closed above their 10 week averages for three weeks. The Worden T2108 indicator is at 75%, which is high but not at an extreme over-bought level yet.   94% of the Nasdaq 100 stocks closed with their MACD above its signal line, a sign of short term strength. While the media pundits appear to be focusing on the idea that the S&P500 index is at the top of its recent trading range, it appears to me that tech stocks, as measured by the QQQQ have already broken out of their range. Tech stocks may lead the market higher, with so many new developments exciting people, such a cloud computing (CTXS, FFIV) and electric cars (PPO, SQM).   And the fact that such market leaders as PCLN, NFLX, CMG and AAPL continue to rise, bodes well for the market.

A major characteristic of rocket stocks in strong up-trends is that their short term averages are well above their rising longer term averages.   I think that the weekly GMMA provides an extraordinary way for identifying such stocks. AAPL provides a great example, below. Note that this weekly chart (click on to enlarge) has all of the shorter term averages (black) well above their rising longer term averages (red).   AAPL has consolidated the past 5 months but appears to be getting ready to break to all-time highs.   I own some AAPL, and if it breaks out, we could see a strong move up. This weekly GMMA chart shows the typical chart pattern of all rocket stocks that I buy.