General Market Index (GMI) table

With people being blown up and losing their homes and family and pets, it seems difficult and insensitive for me to focus on making money…..

The market will turn when the news is very bad and we least expect it.The fact that there are more bearish than bullish newsletters, a very rare event, suggests that at least a bounce may be coming. But T2108, at 37%,  is far above the level where bottoms occur. And the p/c ratio, in the .80s, is not extreme. I am content to  wait on the sidelines mainly in cash and to watch closely. Growth stocks are underperforming now and few of the fallen leaders will retake their ATHs. We need to stop looking for bargains. The leaders will show up on the new 52 week high list, preferably reaching all-time-highs (ATHs). Stocks at ATHs last week are mainly  in agriculture, fertilizer, metals and defense.

Amazingly, 13 of the 15 stocks that came up in my ATH scan last week actually rose last week during a declining market.  One component of my scan requires the stock to have a weekly RS (SPY) at a 20 week high. Here are this week’s 18 candidates: (2 have earnings this week)

Six of them are from the oil and gas sector and five are from agriculture/food. Past performance is not guaranteed to repeat. But I think it is informative to see that some sectors have multiples stocks reaching ATHs. When I ran the same scan on industry indexes the following came up: oil and gas, agriculture, copper and medical distribution.

The GMI is 1, of 6, and has been Red since January 10.  It is so much easier to profit by buying long when the GMI is on a Green signal. When it is Red, many break-outs will fail.

If I had no inkling of the horrible news, I would say that the charts suggest to me that we are at the BEGINNING of a significant decline. The decline thus far has been slow. In 2000 and 2008 the declines got going after the indexes had entered Stage 4 declines, which they are just doing now……

I am sad to report that David died on 2/18 when the sailboat he and his daughter built in January capsized on a trip towards Baltimore amid huge winds. They both swam to shore but David died quickly of hypothermia and his daughter survived. This is a devastating loss to me, his family and my fellow colleagues. David began as the consummate librarian at my research center 20+ years ago and caught the passion for the stock market from me. He recruited TAs for the course, mentored them, managed the class, and arranged and ran all of my presentations about technical analysis.  A skilled programmer, he surpassed me at running TC2000. He was a kind gentleman of 62 and will be deeply missed by all who had the privilege of  interacting with him…..

The GMI remains Red and I am mainly in cash. The new market leaders will show up in the new high list. Think about it. Any stock trading near an all-time high (ATH) after a significant market decline is one that is likely being accumulated. Stocks that fell a lot will have to overcome selling as they try to advance as persons who rode it down and have losses try to sell out. A stock that can overcome such selling and reach an ATH is demonstrating  strong buying interest. I often run a scan on TC2000 that shows me any stock in my IBD/MarketSmith watchlist that was close to its ATH in the past week and that has a strong technical pattern evidenced in several weekly indicators. The scan  found 15 out of 482 stocks this weekend. All retook their rising 4 week averages last week. Oil and gas and agriculture stocks predominate. The stocks appear below along with their next earnings dates and closing prices. These stocks are worth researching and monitoring for one’s favorite entry set-up. But in a market down-trend, it is critical to use small positions and tight sell stops on any purchase, or even better to stay on the sidelines in cash.

The GMI is still at 0 and Red. It is too early for me to go back in. T2108 never reached single digits. However, note that another contrarian indicator, the Investor’s Intelligence poll of newsletters, shows almost as many bears as bulls, which is extremely rare and typically occurs near market bottoms. There were more bears than bulls at the bottom in 2020.

Weakest pattern, 4wk<10wk<30wk. Don’t catch a falling knife. Be short or in cash. If this becomes a Stage 4 down-trend, this is just the beginning of the decline.