Market rally does not need a rest; QSII and a few others break-out to all-time highs


The media pundits claim the market needs to rest.   The market gets tired and needs to consolidate for a while–such utter nonsense! I wrote a few posts ago that the rebound in the indexes thus far is actually quite small, compared with the rebounds in the 30’s.   The Dow is   up only about 24% from the bottom, compared with about 100% snap backs from the bottoms in the 30’s.   The QQQQ is only in the 22nd day of its up-trend.   The up-trend that ended July 27, 2007,   lasted 80 days!   The current rally may have a lot longer to go.

Meanwhile, by following the market’s up-trend and the GMI , my account is now in   the black for the year and I am now working off the 5% loss from the prior year.   How am I doing it?   Just by buying the types of stocks that I list to the right of my post each day.   Long positions in stocks like AAPL, GMCR and NFLX have helped, along with some call options on QLD.   Now that so many stocks are in up-trends I am also writing cash secured puts in my IRA on stocks I hope never   to own.   I will write more about this interesting technique in a later post.

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Cash-secured puts did badly; Mainly in cash; GMI, GMI-R: 0; Financial Armageddon?

This month I lost money on many of my cash-secured puts. Too many stocks declined below the put option strike price and I had to buy the puts I sold back at higher prices. Selling puts is equivalent to buying stocks and selling call options on the shares. I learned again the lesson not to sell puts or covered calls during a weak or declining market. GMI0116 The QQQQ short term up-trend ended last week. Once the QQQQ fell into a down-trend, I closed all positions and bought a very little of QID, the ultra short ETF on QQQQ. If the QQQQ down-trend deepens I will buy more QID. Otherwise, I will stay mainly in cash. The GMI and GMI-R are both back to zero and the T2108 is at 59%–neutral territory. Only 27% of the NASDAQ 100 stocks closed with their MACD above their signal lines, down from 88% on January 2nd.

Are we near a bottom? Armageddon When three DOW 30 bank stocks, C, BAC and JPM, look like this weekly chart of BAC, I have to think that some kind of debacle is on the horizon. These declines came on huge weekly volume, indicating massive selling. When we factor in that these 3 banks and 7 other DOW 30 stocks fell more than 5% last week, I do not see a bottom, more like a black hole.   Read on to see the graph:

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GMI: 2; GMI-R: 3 QQQQ on critical level–very cautious

I am very cautious about the continuation of the QQQQ short term up-trend, now in its 24th day. There was only one new high and 33 new lows in my universe of 4,000 stocks on Tuesday. This is not the time to chase stocks at new highs. I am trying to hold onto my cash secured puts through Friday’s expiration. I have cut back QLD and am ready to sell all if the QQQQ declines. This is really a time to be mainly in cash again.