GMI: +4; Market comments suspended

In respect for the calamity and suffering in the gulf, I am suspending market analysis for now.  I will continue to update the GMI daily.  Gmi902 I hope everyone will do their part to come to the aid of our fellow human beings who face almost insurmountable circumstances over the coming months and years. President Lyndon Johnson once said something like, a society’s greatness is judged not by how well some people prosper, but by how well it takes care of the poor and disadvantaged in its midst.  May our country have the will and the courage to be great.

Stealth bull market? GMI: +4; Pressure off short rates

Stealth bull market?  The indexes are concealing a strengthening market.  There were 353 new highs Thursday, the highest since July 29. Gmi901  The GMI rose to +4 because 57% of the 63 stocks that hit a new high 10 days ago closed higher on Thursday than 10 days earlier.  With the increasing number of stocks hitting new highs, this indicator will also be over 100 soon.  56% of stocks closed above their 10 week average, the most since August 15.  37% of the Nasdaq 100 stocks rose on Thursday, 51% of the S&P 500 stocks and 43% of the Dow 30 stocks.  29% of stocks are in a short term up-trend, the most since August 15.  28% of the 4,000 stocks in my universe are within 5% of their 52 week highs.  Since Katrina arrived on Monday, 8/29, through Thursday’s close, 70% of the stocks in my universe have advanced………………….. 

In my last post, I showed you that the longer term interest rates were falling and continuing a several week decline.  Take a look at the chart of the very short term interest rate indicator. Irx901 For the first time since last May, this index is below its 30 day average (red line, click on to enlarge), suggesting that speculators think that the Fed may relieve the pressure on interest rates.  All we need now is an announcement from the Fed to that effect, for the stock markets to skyrocket. On the other hand, such a move would signal to all that the economy is critically weak………………….

So, I am accumulating good stocks.  I am being cautious and wading in slowly.

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Dreaded September? GMI: +3; Stocks show strength; Katrina-induced lower interest rates?

Well it’s September and everyone expects a difficult month. So, guess what?  Do you really think the market will accommodate mass opinion?  I hate to say so, but I think this market is turning.  Declines do not begin when the news headlines shriek of calamity, as they do now.  Did you notice that the market is holding in the face of all of this bad news?  I think that means the selling is over, for now.  I am selling my puts and looking to buy.  Of course I will only begin to wade in and will wait for the GMI to give a definite buy signal. Gmi831  But the GMI moved up again Wednesday, to +3.  The IBD Growth Fund Index is now just above its 50 day average.  And would you believe 248 new 52 week highs on Wednesday!  Many stats improved: 25% (+4) of stocks are in a short term up-trend and 53% (+9) are above their 10 week average.  Between 80%-84% of the stocks in the Nasdaq 100, S&P 500 and the Dow 30 advanced on Wednesday.  That makes two out of the past 3 days that about 80% of stocks rose.  The QQQ and the SPY are now above their 10 day averages, the first sign of a possible reversal.  The percentage of stocks within 5% of their 52 week highs rose to 27% (+7).  It may be time to look at stocks near new highs again.  Speaking of new highs, both HPQ and  MSFT, which I noted in my prior post, advanced on Wednesday.  And many of past year’s winners are showing new signs of life:  HANS, FTO, BTU, CCJ, CAT BMHC, ACR, ATVI, ADSK, DNA, CELG, ALKS, CVH, BBH.

I am not embarrassed to change from bearish to cautiously bullish.  Each day provides new data, and when the indicators change, I must turn on a dime–no pride is involved.  The idea is to make $$, not to be right. A big ego is lethal in this business—in all business……………

The pundits are saying that bonds are rallying (and rates are falling) because the Katrina catastrophe will reduce future economic activity. Tlt831  However, the following chart of an ETF (TLT) that tracks the 20 year bonds, shows that long term bonds were rising, and rates were falling, since August 9, long before the hurricane.  Unless we believe that prescient traders foresaw the hurricane debacle weeks before it hit, we must conclude that the economy was weakening and rates were falling long before the hurricane, and that Katrina’s damage merely intensified the pre-existing trend.  Identical patterns can be found in ETF’s that track shorter term bonds (SHY and IEF)…………………

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