ETF

The GMI remains at 0 (of 6) and the more sensitive GMI-R remains at 2 (of 10).   Friday was the 44th day (D-44) of the current QQQQ  

The QQQQ is an ETF that mimics the NASDAQ 100 index, primarily nonfinancial tech stocks.   The QQQQ and the SPY (S&P 500 ETF) have closed below their 10 week averages for 9 weeks each.   It is when these indexes consistently close ABOVE their 10 week averages that I have made money in long positions in the past.   But we are experiencing an up-trend within this longer term down-trend.   88% of the NASDAQ 100 stocks and 84% of the S&P500 stocks now have a MACD above their signal line.

With this short term bounce, my small short positions are not doing well.   I am not ready to go long, however, with the GMI at zero.   The major market index trends are still down.   This is a time to remain mainly in cash and to wait to see if this bounce turns into a reversal of the longer term trends.   The market averages remain a long way below the key moving averages that I follow.   Guessing bottoms is for gamblers.   For me, a trend follower, I must wait for the trend to turn up, to go long.   If we got out of the market at much higher levels, we do not have to catch the bottom.   As long as we get back in at or below where we exited, we have done well and avoided the carnage.   The pundits try to scare us into the market by saying we will miss the quick percentage gains that occur right off of the bottom.   We don’t have to worry about finding the bottom, because we exited the market weeks ago. The GMI has been 0 or 1 since September 2 (DOW: 11,516)!

My general market indexes (GMI, GMI-R) remain at zero.  There were 2 new highs and 764 new lows in my universe of 4,000 stocks on Thursday.  The indexes are far below the levels which would suggest to me a change in trend.  Thus, the markets remain in down-trends and I will remain in cash.  Thursday was the 33rd day of the current short term down-trend in the QQQQ (Nasdaq 100 ETF)…..

During bear markets, the prudent thing to do is to create a watch list of stocks that are building bases and resisting the down-trend. 

One such stock is EBS.  It apparently owns the rights to the only FDA approved anthrax vaccine and it just got another large contract from the federal government.  EBS is one of the only stocks to hit new  highs this week on huge volume.  I do not own this stock but might be tempted if the market trend turns up. EBS reports earnings on November 6.  After this huge market decline EBS is one of the only stocks to emerge unscathed.  EBS is up about 64% from a year ago. Note, however,  that buying stocks at new highs in a declining market can be treacherous. I would love to buy a stock like this in a rising market.

The GMI and GMI-R remain at zero. 

There were 12 new highs and 328 new lows in my universe of 4,000 stocks on Friday.  This number compares with 988 new lows on July 15.  So this decline is not nearly as severe as last July's, thus far. Friday was the fourth day of the current new QQQQ short term down-trend.  Note that the Worden T2108 indicator is now at 42%, in neutral territory far above the extreme lows (below 20%) reached at prior market bottoms.

I have written before that the GMI indicators have helped me to be out of the market or to be mainly in cash during all significant market declines.

  This chart shows how the GMI has tracked the QQQQ since April 17.  It shows only changes in the GMI.  Note that during rises in the QQQQ, the GMI is usually at 4 or above.  When the GMI is below 3, I tend to get defensive.  Note that the GMI held at zero through most of July.  It then rose with the August rally and then fell quickly to 3, to 1 and now, to zero.  This ability of the GMI to track the ups and downs of the QQQQ was also evident in prior time periods.  While not perfect, I rely on the GMI to guide me when to enter and exit growth stocks, as reflected in the QQQQ (Nasdaq 100 index) ETF. Meanwhile, during the past 2 years, 5 consecutive daily declines in the QQQQ is extremely rare and we should expect a bounce on Monday.