GMI: +1?; More new lows than highs; Put/call ratio over 1; cash is good

@ 11:32 pm

The GMI is almost zero.  The IBD growth mutual fund index is right next to its 50 day average and too close to call.  There were 112 new yearly lows and 32 new highs in my universe of 4,000 stocks.  The leaders, GOOG and AAPL appear to be weakening.  Gmi0512 Only 31% of the Nasdaq 100 stocks closed above their 30 day averages.  It appears that the QQQQ may lead the market down even though it barely participated in the up trend with the DIA.  Both the GMI-L and GMI-S indicators have weakened.  Only 13-15% of the stocks in the QQQQ,  SPY and DIA indexes advanced on Friday.  The only contrary sign I have noticed is that IBD reports that on Friday the put/call ratio was 1.12.  Readings over one usually occur at the end of a decline when the little guy bets on a further decline by buying more put options than call options.  The fact that the index was above one near the beginning of a decline suggests to me that many persons are expecting a market top.  In view of this extreme bearishness I would not be surprised to see a sharp and brief bear rally this week.  Regardless, I am buying long term in-the-money puts on stocks that appear to have topped out. In fact, my TC2005 market scans found more submarine stocks (111) than rockets (19) this weekend.  This in itself is a sign of a weakening market.  Also, 11% of stocks are now within 5% of their yearly lows. Be careful and don’t be afraid to go to cash.

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

GMI: +4; Cramer contrary signal; techs and small caps weaken; raising stops and cash

@ 9:49 am

While driving to work Thursday, I opined that when the Today Show producers are so sure of the bull trend that they invite Cramer to appear and declare that the current bull market is like that of the 1920’s, this was a big indication of a market nearing its top.  Katie missed the opportunity to remind him how the bull market of the 1920’s ended………………

So, the GMI weakened to +4 and the QQQQ closed below its important longer term 30 week average for the first time since last October.  When a major index is below its 30 week average I get very defensive in the stocks represented by that indicator.  But the QQQQ is not alone.  The IJR small cap index short term indicators have weakened greatly (see the GMI-S index below) and this index ETF is now below its 30 day average, a sign of possible short term weakness.  The QQQQ looks miserable and may be on the verge of a major bear market even though it did not participate much in the rise in the DIA and SPY.Gmi0511 Only 10% of the QQQQ stocks advanced on Thursday, along with 11% of the SPY stocks and 3% of the "strong" DIA stocks.  Only 51% of the 4,000 stocks in my universe closed above their 10 week moving averages.  The QQQQ is now in its first day of a new short term down trend (D-1)……….

Given the above, I have raised my sell stops, raised cash and continued buying puts in construction stocks and others that appear to have topped out.  O’neil’s book on how to sell short has helped me a lot to determine the proper stock pattern for shorting.  To short in my IRA, I buy put options.  This in not the time for me  to be brave by holding stocks and hoping for gains…….

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

GMI: +6; Most indicators positive; success with the Peter Lynch approach

@ 12:01 am

The GMI is back to +6.  All long term indicators are positive, as are almost all short term indicators.  Monday was the first day in the new QQQQ short term up trend.  Gmi0508 There were 396 new highs in my universe of 4,000 stocks.  65% of stocks closed above their 10 week averages and 46% are in a short term up trend.  I am glad I own CMG.  This is the third stock that I bought based on my sons’ advice about an awesome company.  The others were XMSR, that I bought around $2 when my elder son discovered XM radio, and AAPL, based on their love of Ipods.  There is something to be said for the Peter Lynch method of buying companies who appear to have popular products that are noticed by family members.

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