GMI: +2; a new indicator; TOL– another Cramer favorite weakens

The market was pretty much unchanged Thursday, but the GMI declined to +2.  Gmi825 This is because there were only 87 new yearly highs in my universe of 4,000  stocks.  67% of the Nasdaq 100 stocks advanced, along with 65% of the S&P 500 and 53% of the Dow 30 stocks.  The percentage of Nasdaq 100 stocks closing above their 30 day averages declined to a new low of 29%.  On July 19 the number was 78%.  Only 61 of the 235 stocks that hit a new high 10 days ago closed higher Thursday than 10 days earlier.  Only 22% of stocks are in a short term up-trend.  This is the 8th day (D-8) in the decline of the QQQQ index ETF

I added a new indicator to the table today.  It measures the percentage of stocks in my universe that closed within 5% of their 52 week high.  The number is 22%.  Put another way, 78% of stocks are more than 5% below their 52 week highs.  I think this indicator will provide another measure of the strength of the market and the likelihood of seeing stocks break to new highs…………………..

I can’t count the number of times I have bought puts on the housing stocks only to find them turn up again. Res But I think they may really be topping out now.  Look at this chart of the residential construction sector.  Note that the index is now below the 10 day, 30 day and 50 day averages.  The 10 day (dotted line) is now consistently below the 30 (red) and 50 (green).  This chart pattern is similar to a host of housing stocks such as:  BZH, PHM, LEN, RYL, KBH, MDC, DHI, TOL, CTX, MPH, HOV, to name only a few.  All of them have shown volume spikes recently on down days.  Even TOL, a Cramer favorite, could not retain its gain on good news and reversed to close down near its daily low on Thursday on unusually large volume.  This may only be a correction in housing, but it is consistent weakness among all of the leaders.  Is the roof finally about to cave in?

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IBD Meetup tonight; GMI rises to +3; Moderating interest rates?

A small group (about 7) attended the IBD Meetup tonight.  Attendance usually falls off when people become disillusioned with a declining market.  What was surprising to me was that although most attendees were confused by or hurting from the current market environment, no one (except me) was considering selling stocks short.  While a few were mainly in cash, all were actively trying to find stocks to buy.  This sentiment suggests to me that the market has further to fall.  When everyone wants to short stocks, I will be looking for a bottom……………….

Surprisingly, the GMI actually increased one point as of Wednesday’s close.  Gmi824This is because there were 123 new yearly highs. On the other hand, the percentage of stocks closing above their 10 week averages fell below 50%, to 47%.  This is the lowest percentage since I began tabulating it on June 16.  More ominous, all three ETF indexes (DIA, QQQQ and SPY) closed below their 50 day averages, and all on increased volume…………….

I did find one possible ray of hope. Tlt824  I am not sure what it means, but all of my interest rate indicators (short and long term) are suggesting some moderation in longer term interest rates.  For example, TLT, which tracks 20+ year treasuries, has broken above its 30 day average and the 10 day has actually crossed above the 30 day average.  Rising prices here indicate lower interest rates.  (Similar patterns can be found for IRF and SHY).  Is this simply a retreat to the safety of U.S. securities or does it represent some moderation in the pressures for future rate hikes?…………………………

Regardless, I am now almost 100% in cash in my IRA.  This market is too treacherous and enigmatic for me to trade. 

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Market still trendless; GMI: +2; DIA closes below its 50 day; IBD Meetup tonight

While the market weakened Tuesday, it refused to cave in.  Gmi823 The GMI remains at +2, but there are positive and negative signs in this market.  There were 90 new highs in my universe of 4,000 stocks, very close to the 100 needed to turn that indicator positive.  But there were also 36 new lows, the most since June 27.  The percentage of stocks in a short term up-trend rose to 26%, up from a low of 20% last Thursday. The QQQQ is in its 6th day of decline (D-6).  The DIA closed below its 50 day average for the first time since July 7.  However, the SPY and QQQQ held above their 50 day averages.  Only 23% of the Dow 30 stocks advanced, compared to 34% of the Nasdaq 100 and S&P 500 stocks.

The market still has not chosen a definite direction.  My IRA remains  mostly in cash with a few puts, but I remain ready to hop on the train when a real trend develops.  Wednesday evening is the IBD Meetup.  I am interested in assessing the members’ sentiment towards this market.

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