GMI: 4; Day 4 of QQQQ rally; Stocks to watch

The GMI fell to 4 because there were only 90 new highs in my universe of 4,000 stocks on Monday. Gmi0821 Only 17% of the Nasdaq 100 stocks rose, along with 30% of the S&P 500 and Dow 30 stocks.  Still, the GMI-S is 100 and the rally remains intact.  Monday was the fourth day of the new QQQQ short term up-trend……

I am out of all of my puts and am now focusing on stocks to buy–but slowly.  If this is the real turn, there is plenty of time to accumulate new winners.  Some of the strong stocks I am watching (I own some) are:  NEU, SWY, EME, OCN, SPSX, CLB, NVEC and CHIC.  Look before you leap………

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GMI: 5?; GMI-S: 100; Short-term rally?; IAI

I leave town for a few days, and the market rallys.  In my defense, I remind you that my previous post did say that I saw some signs of strength in the market.  I noted a bullish divergence in the MACD and more new highs (94) than I had seen in a long time.  However, I failed to pay any attention to another major sign of strength given off by the market–its failure to decline after the terrorist plot in Britain was announced.  The market glass is always half full or empty and the way that the market responds to major events provides valuable clues as to how the masses are feeling towards stocks.  (The same is true about how the market responds to news regarding individual stocks.)  Gmi0818_1

So the GMI rose to 5 on Thursday and remains a 5? after Friday’s action, questionable because there were only 97 (very close to the 100 needed to turn that index positive) new highs in my universe of 4,000 stocks.  However, the GMI-S is now at 100, indicating that all of my short term indicators for four major stock indexes are positive. However, the longer term GMI-L is 63, and the Weekly QQQQ Index in the GMI is still negative.  The QQQQ is finally back above its 10 week average but remains below its key 30 week average.  In contrast, the SPY and DIA are above both their 10 week and and 30 week averages. Five times as many stocks in my universe are within 5% of their yearly highs than their lows (21% vs. 4%). 

As I read these statistics, it looks like the short term trends for the stocks represented by DIA, SPY, QQQQ and IJR are up.  The longer term trends for the large cap stocks (SPY and DIA) are also up.  Thus, this appears to be a tradeable rally and I closed out all of my short positions and have been slowly wading into the market on the long side.

The IBD 100 stocks are still underperforming. 23% of the IBD 100 stocks from 5/15 are in a short term up-trend, compared with 47% of my universe of 4,000 stocks.  Since the 5/15 IBD 100 list was published, 21% have risen, compared with 45% of my stock universe.  Only one of the stocks on the IBD 100 list from 5/15 hit a new high on Friday (DRIV), and only three of the stocks on the IBD 100 list for 8/14 hit a new high (DRIV, NVEC and PNFP)…

In my early years in the markets during the 60’s and 70’s, I noticed that after each major decline the new bull market would rise on record daily trading volume.  Back then, I remember the first time daily volume reached 10 million shares. This trend towards higher volume with each advancing market has continued to this day, so that now daily trading volume is measured in billions of shares. I therefore reasoned in my youth that it was pretty much a certainty that the stock brokerage industry (Darvas considered them to be the casinos) had to prosper with each new bull market.  So if I bet on any industry to recover from a declining market it would be the stock brokers(bet on the house).   But which brokers to buy? Iai  I want to diversify across a few of the big brokers so I do not get stuck with just one or two laggards. Fortunately, since May there is a new ETF that includes a number of stocks in the U.S. brokerage industry (IAI).    If this up-trend is for real, I will watch this ETF very closely……….

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GMI:1; Signs of strength?; Back in a few days

The  GMI remains at 1.  59-64% of the stocks in the Nasdaq 100, S&P 500 and Dow 30 indexes advanced on Monday. Gmi0814  There were a relatively large number (94) of new highs in my universe of 4,000 stocks.  Monday was the 28th day in the QQQQ decline……..

I am no longer going to report on the IBD100 list from 5/15.  Only 17% of these stocks closed higher on Monday than the day they were listed in May and they have greatly underperformed my universe of 4,000 stocks (+36% in the same period).  Given yesterday’s post showing that IBD changes two thirds of the list in a 3 month period, I see little value to tracking an old list.  I may decide to just track recent lists for a shorter time. Clearly the IBD 100 list is not useful in a down trending market…….

While the market has been in a down trend, I am seeing some signs of life in the markets.  First, there were 94 new highs in my stock universe on Monday.  Second, the QQQQ has a bullish divergence on its MACD (the MACD did not decline to a new low along with the QQQQ ).  So watch the QQQQ carefully.  A close above 37.39 (now at 36.7) would begin to change the GMI and make me look for a turn…………

I am suspending posts for a few days because I will be out of town. 

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