GMI corrected: 0 all week; we need Cramer back

@ 12:01 am

I finally got a copy of IBD and found that the IBD Growth Mutual Fund Index has been below its 50 day average all week.  So the GMI has actually been zero since Monday.  Gmi0517_1 When the growth mutual fund managers cannot make money, neither can I–on the long side.  But I have had hefty short positions in my IRA in the form of puts, for the past 2 weeks.  So Wednesday was a gift.  Only 15% of the Nasdaq 100 stocks rose along with 9% of the S&P 500 stocks and 3% (one) of the Dow 30 stocks.  There were 23 yearly highs in my universe of 4,000 stocks and 134 new lows.  Only 19% of stocks remain in a short term up trend and 28% are in a longer term up trend (above their 10 week averages).  Wednesday was the fifth day (D-5) of the current QQQQ short term down trend.  The GMI-L has fallen to 63 and the GMI-S is now at 19.  Thus, both my long term and short term indicators for the major averages have deteriorated.  I will use any rally to increase my short positions.  More stocks are within 5% of a new low (13%) than a new high (10%).  With inflation back and interest rates headed up, the markets are headed for some tough times.  When they invite Cramer back on the Today Show, this time to talk about a depressed economy and an unending bear market, it will be time to go long again.

Please send your comments to:  silentknight@wishingwealthblog.com.

GMI: +1; going to cash; on finding shorts

@ 10:39 pm

The GMI remains at +1 and Tuesday was the fourth day of the current short term decline in the QQQQ (D-4).  Only 41% of the Nasdaq 100 stocks rose, along with 33% of the S&P 500 stocks and 53% of the Dow 30 stocks.  Only 24% of stocks are in a short term up trend.  There were 42 yearly highs and 62 new lows in my universe of 4,000 stocks.  Gmi0516 I was surprised we got no bounce back on Tuesday.  My indicators have turned so negative that I transferred my pension funds out of mutual funds and into money market funds.  Maybe we should all go away in May,  until October.  My puts all rose on Tuesday.  In fact, one of my shorts, CCL, collapsed on Tuesday.  More and more, I am finding that stocks in trouble are telegraphing their declines in advance.  One needs only to read the high volume declines that they show weeks before the sudden drop.  Bad news is always hidden from the public while the insiders unload their shares (following the Enron trial?).  One must therefore look for the signs of high volume selling by the big boys in order to identify potential shorts.  If we wait for the bad news to become public before we short, we arrive late to the party…..

Please send your comments to:  silentknight@wishingwealthblog.com.

GMI: +1; Indicators weaken more; some submarines

@ 12:01 am

The GMI remains at +1, but just barely.  Gmi0515 There were 121 new yearly lows and 28 new highs in my universe of 4,000 stocks  on Monday.  The last time we had over 100 new lows was the end of October, 2005.  Only 31% of the 274 stocks that hit a new high 10 days ago closed higher on Monday than they did 10 days earlier.  On the other hand, 70% of the 37 stocks that hit a new low 10 days ago closed lower.  This is a clear indication that shorting stocks at new lows has been more likely to have been profitable than buying stocks at new highs. Similarly, there are 114 submarine stocks, compared with just 12 rocket stocks. These are stocks in solid down trends or up trends, respectively.  Only 31% of stocks are in a short term up trend and only 39% in longer term up trends.  11% of stocks are now within 5% of a new low.  Monday was the third day in the new QQQQ down trend (D-3).

I have sold  all of my stocks but one (AAPL).  All of my short positions (put options in my IRA) are profitable.  It has almost been too easy to make money on the short side.  Famous last words????!!!!……………..

People are much too scared of shorting stocks.  But the great traders always go with the trend of the market, up or down.  Buying  put options is a way to go short while limiting possible losses.  In fact, some of my put options expire next January, giving me lots of time for the down trend I have detected to grow.  It is very comfortable to be holding a put on a declining stock that has months to fall. The key is to detect the decline relatively early on.  I simply use TC2005 to scan the entire market for "submarines" that show a clear top about 4-6 months ago and a declining trend on large volume. I detected 114 submarines tonight.  They include:  CMTL, CHS, URBN, SO, GENZ, HOV and CMVT (I am short some of these).  Take a look at the weekly charts of these stocks and note the heavy selling and declining 30 and 10 week moving averages.  It is noteworthy that many of the submarines are utilities and housing stocks, suggesting that we are seeing industry-wide weakness, a good omen for shorting.

Please send your comments to:  silentknight@wishingwealthblog.com.