Thursday, August 20, 2015

Risky to Buy Stocks at this Time - August 19th Close

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Independent of some of the tweets I'm seeing from some well-known momentum masters, it simply is not a good time to get into a new round of stocks right now.  As evidence of this I present a simple chart:  the Cumulative Tick



Right-click on the chart to open in a new tab or window.

The top trace is the 52-week New Lows (red), the 52-week New Highs (green), and their difference (yellow).  When red is above green there are more stocks on the NYSE that are making 52-week new lows than new highs.  When the yellow trace is negative (it is at -589 in the picture) then we have a domination of new lows.

I [DON'T] buy stocks when we have such a strong domination to the downside. [EDITED THE ERROR]

The middle trace is a filter that I've created to watch algorithms in their buying/selling activity.  Right now it's set to 500/minute.  500 what?  500 NET stocks that are ticking lower (bids outpacing asks) per minute on the NYSE.  A transaction (buy or sell) occurs, and to get the next order filled, the price has to move up or down.  If it moves down that's a tick lower.  If it occurs 500 times per minute or more in aggregate then the red line moves down one mark.  If it occurs less than this it prints the same (previous) value, so you get a straight, horizontal line.  If you see a bunch of downward-directed lines then folks are selling their stocks -- they are unloading them.

You can see with the middle trace that we started to tick up -- the FED was giving their spin on things, and the market thought it was all good.  Unfortunately, once the market started reading the language and started to do their interpretation, it wasn't so good, so the markets resumed their spin down.  The afternoon peak in the 2nd plot occurred about 2:25 p/ET and the bears took over for the rest of the day.

The bottom trace is my cumulative tick.  It's an accumulator, nothing more, nothing less.  The real-time trace is white, the longest moving average is bright red.  When white is above red we're in good shape, and when white is above ALL of the lines, we're most likely in a short-term up-trend (just look back two days).  To get sustained buying of any confidence, I like to see white-above-red for 2-3 days without white crossing back below red.

The cumulative tick timer reset on 8/19, so I'm not in a hurry to buy new stocks.

Patience.

I'm working today, and doubt I'll be watching the markets much.  Sell orders on GGT "New Cash" recommendations have been placed, I've cancelled all outstanding buy orders in all accounts, including the Collective2 accounts, so there really isn't any need to waste time watching the markets today.

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Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Bargains:  https://www.collective2.com/details/95793176
Greenfield Dividends: https://www.collective2.com/details/94780986
Greenfield Leaders: https://www.collective2.com/details/94921209
Greenfield Low Beta:  https://www.collective2.com/details/95702992

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd


Thursday, August 13, 2015

All Timers are Recommending Cash - August 13 Close

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With the close of markets today, August 13, my short term, intermediate term, and long-term timers have transitioned to cash.



Correspondingly, the new target cash position is 100%, e.g., move out of equities at this time.

The LCR table moved to a bearish position today, indicating that despite the reversal yesterday (Wednesday), it's not safe to be in the markets, as the entire ocean is being drained (albeit slowly):


Right click on the image to open in a new tab or window.

The left side of the LCR table shows that the database long-cash ratio is dropping day-over-day, which means the air is slowing deflating out of the markets.  We're at low levels, with 0.526 indicating that for every 526 stocks that are recommended in some form of long, 1000 are recommended in cash, and the trend is dropping.  When this is occurring it's not a good time to purchase stocks.

The middle shows that all the slopes of the moving averages are now negative.  From very long, to very short moving averages, all are feeling this and all are pointing down.

The right side shows three consecutive days of downward-accelerating movement in the markets on all measured time frames -- on a day-over-day basis, more stocks than the previous day were moving to cash.  This is a downward acceleration.

There are exceptions, of course.  If we take all my "Greenfield" stocks (screening criteria is elsewhere in the history of this blog), and take those that are recommended long as an index, the index is relatively strong:


Right click on the image to open in a new tab or window.

Ignoring all the noise in the graph above (I'll explain some other time), the fact that all the various pricing moving averages are lower-left / upper-right AND they are not crossing tells you that the basket of Greenfield stocks are still good stocks (although if you look closely you can see that they are somewhat overbought and are struggling to make new highs).

The concept can be used to check various portfolio strategies, and as many of you know, the Greenfield Bargains portfolio is having a rough time of it:



Right click on the image to open in a new tab or window.

This is a plot of all the stocks that are current long in the Greenfield Bargains portfolio.  Basically, you can see that it's flat in performance, and what this means is that it's going to be really hard to make money in this portfolio if the stocks in the portfolio are struggling.  Because this portfolio invests in stocks that are quality stocks BUT are beaten down, it is no wonder that this is a hard portfolio to move upward in the present climate.

Contrasting, my best performing portfolio is the Greenfield Dividends portfolio.  Here's the same presentation:



Right click on the image to open in a new tab or window.

Again, note the lower-left to upper-right price appreciation and the moving average lines.  This portfolio is intact.

Because I'm sure someone will ask, here's the Low Beta portfolio:



Right click on the image to open in a new tab or window.

You can see that the Low Beta portfolio is intact and advancing, although it's not made much progress over the past week.

The Cumulative Tick is the biggest tell -- despite the mid-day reversal on Wednesday, today ended on a nasty note with a sell-off in the last 60 minutes, almost to the perfect 3 p/ET start time:


Right click on the image to open in a new tab or window.

As I tweeted earlier in the day (around 11 a/ET), 52 week new lows were outpacing 52 week new highs.  You can see this in the top trace.

The middle trace was more/less flat -- indicating no program selling or buying.  If you are looking for a reason to be optimistic I guess that would be one.

The bottom trace is the cumulative tick and this one shows that the end-of-day tick started selling off (look at white trace).  It's starting to cut through the moving averages (bad), and if it drops below the lowest one (purple), all of the moving averages will start heading south with a negative slope.  Again, that is not the time to be buying stocks.

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Strategy:

The Dividend portfolio remains 100% invested.  It does not follow the timers. As I showed above, it's doing very well in this climate.

The Bargains portfolio will be closed and cash will be raised.  The target is 100% cash.  I plan to use a 1% stop loss, reset daily for the C2 portfolio, but use a 1% trailing stop loss for the TradeStation accounts.  In both cases orders are not valid until after 9:44 a/ET.

The Low Beta portfolio, although stronger than the Bargains portfolio, is under pressure.  I'll raise cash quickly if I see it falling apart.

The Leaders portfolio is only partially invested.  I will not add to it in this climate, but I'm not closing it fully either.  Stocks that move to a "New Cash" recommendation will be sold using the same method above as the Bargains portfolio.  In fact, this applies to all portfolios without exception.

In short:  choppy waters make the management a pain in the tail.  The easiest portfolio is the Dividend portfolio.

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Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Bargains:  https://www.collective2.com/details/95793176
Greenfield Dividends: https://www.collective2.com/details/94780986
Greenfield Leaders: https://www.collective2.com/details/94921209
Greenfield Low Beta:  https://www.collective2.com/details/95702992

GGT Stock File (for AUG 13):  https://www.dropbox.com/s/tz6irmsncgkh18l/GGT20140503-Stocks-15AUG13.xlsm?dl=0

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd




Sunday, July 26, 2015

Market Overview as of July 25 2015 Weekend



You may have to change the default resolution to 720p -- use the little "gear" in the lower right corner to do this.

Tuesday, July 21, 2015

Short term cautionary

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Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you.  It helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.  If you miss a signal this system will most likely produce sub-par results, which isn't my fault.

Yesterday, Monday, July 20th, saw the S&P 500 and the NASDAQ, as measured by the SPY and QQQ respectively, hit new highs.  On a day-over-day basis for the past 6 trading days the SPY and the Q's have moved 1.65%/day and 3.04% per day.  Putting this in perspective, the SPY normally averages 0.15%/day and 0.34%/day using the past 50 trading days, so these are huge daily gains and are well outside the norm.  My own GGT index, which is an unweighted, stock volume above 100Kshares/day index of nearly 3000 stocks has moved upward 0.15%/day for the last 6 days and is averaging -0.01%/day over the last 50 trading days.

Obviously, there is a huge disconnect in the markets.  As many of you know, I generally state that the indexes can be manipulated, and I think we're seeing the heavy weights in the various major indexes pulling the numbers upward in a disproportionate manner.

My Cumulative Tick chart tells a tale of extreme caution:


Right-click on the image to open in a new tab or window.

The chart has 3 primary plots.  The top one is the NYSE 52-week New High (green) and 52-week New Lows (red), with their difference (yellow).  When red is above green more stocks on the NYSE are hitting a 52-week new low than those that are topping out.  In robust markets green is above red, the opposite of what we presently have.

The middle trace is a "strength" filter.  It basically looks at trades/min, in this case 500/minute minimum, and if the net bid/ask on 500 transactions per min is positive, it clicks upward by the amount over 500.  If the net bid/ask on 500 transactions per min is negative, it clicks downward by that amount.  What you're seeing is that more/less, throughout the day, there was selling pressure.  This is evidenced by the negative start and minimal recovery throughout the day.  As the day wore on the value accelerated to the downside -- meaning -- more people were net sellers on the day rather than those that were buyers.  Again, this was as the SPY and the QQQ's were hitting new highs.

The bottom trace is the most important one.  The white line is the instantaneous cumulative tick, and it measures net buying/selling on a minute-over-minute basis without any filters.  When it moves up all the moving averages respond, and as you can see, when it moves down, all the moving averages also respond.  The white line was in a solid downtrend all day long, and this means that while the SPY and Q's were making new highs, the market was selling into the highs on a short-term basis.  The fact that the white line is now below the solid red line means that net selling has surpassed the gains of the past 10 days of buying, and the trend is clearly downward from here, at least on a short-term basis.

Another warning shot, at least on a short-term (daily) basis is my Long-Cash Ratio (LCR) table:

Right-click on the image to open in a new tab or window.


The left side of the table shows that the LCR has stalled at a local level of 0.639 -- up from a minimum of 0.332 back on 7/9.  It made no substantial forward progress on Monday.  This value means that in a database of nearly 3000 stocks that over 1800 are in some form of "cash" status (avoid) and the remaining stocks are in some form of "long" (potential for having a position).  Since the value has stalled, NEW purchases should be suspended, at least for the short-term.

The green on the left is indicative of slopes of the LCR moving averages.  Slope values are rates of change, and you can see that the longest slope values are still negative -- we have not completely turned the market upwards despite the gains from 7/9.  The day-over-day increase in the slopes is encouraging, BUT, the growing amount of green on the left does not tell the full story.

On the right we see lots of green with some newly-emerging red.  This side of the table shows the "slope of the slope", or acceleration of the LCR on multiple time frames.  This tells me how fast we're moving into a new market condition, and the growing red on the very right bottom of the table tells me we're stalling on a short-term basis.  Day-over-day, the shorter moving averages are failing to continue upward and are actually decreasing, so again, short-term entry of new positions is going to be with much higher risk.

The good news, at least on the intermediate-term or long-term view, is the following chart:

Right-click on the image to open in a new tab or window.

This chart plots the number of stocks that are "long" in the database -- e.g., those that are outperforming their historical averages -- and you can see that 1) we're in the green, and 2) the trend is moving upward.  The "green" component means that it is less risky, on an intermediate-term and long-term view, to buy (relative to being in the red zone at the top), and that once the LCR table shows some improvement, it may be time to add to positions.

Hence, I'm bearish on a short-term (1-3d) basis, and optimistic on a longer-term basis.

Strategy:

Aside from adding to my dividend portfolios (which are fully invested at all times unless the market is completely unraveling on all time frames -- it's not), I'm on the sidelines.  I am not adding to my Leaders, Low Beta, or Bargains portfolios with the exception of already pending orders.

My cash target right now is ~ 66%, meaning I'm holding 66% of my portfolios in cash.  Exposure at this point is limited.

You can follow my portfolios here:

Greenfield Bargains:  https://www.collective2.com/details/95793176
Greenfield Dividends: https://www.collective2.com/details/94780986
Greenfield Leaders: https://www.collective2.com/details/94921209
Greenfield Low Beta:  https://www.collective2.com/details/95702992

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As always, you are responsible for your own investment decisions and I am not.  Please do your diligence, and please take ownership for your actions.

Regards,

Paul



Saturday, July 11, 2015

A question/answer about Collective2 Portfolios

I received a question this week about the portfolios I'm running at Collective2 and I presume that more than one person has the same question:

"Going forwards, do you have a preference as to which strategies are performing the best and with the least trades?  [D]o your past studies seem to favor the GF Leaders or the Low Beta?  Is the Low Beta dependent on all 3 of your timers and the GGT just like the leaders strategy?"

I have four "Greenfield" portfolios at Collective 2:

Greenfield Bargains:  https://www.collective2.com/details/95793176
Greenfield Dividends: https://www.collective2.com/details/94780986
Greenfield Leaders: https://www.collective2.com/details/94921209
Greenfield Low Beta:  https://www.collective2.com/details/95702992

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It is hard to compare portfolios because they have different objectives and are subject to different initial conditions as well as market conditions.  This being said, let's look at the portfolios.

Of the four,  Greenfield Dividends has been running the longest, since June 3, 2015.  It is presently up 4.8% YTD, and according to Collective2's  statistics, is currently at 51.2% Annualized Return including trading costs.  I presume that it will continue on it's path but your crystal ball is as good as mine, and one month does not make an annual value.  My expectation is that it will be positive for the year and meet the performance of the S&P in terms of gain, but will outperform in terms of drawdown (e.g. lower volatility).

There have been 39 trades in the account, including the 25 buy-ins, so an additional 7 trades have been bought and 7 trades have been sold according to the system rules.  14 trades over 5 weeks is probably a good number, so 2-3 trades per week may be a good feel for this portfolio.

In comparison, I traded this strategy prior to introduction at C2 from 7/9/2014 to 6/26/2015.  Portfolio sizing was a bit different then (targeting 40 positions, modeled on another portfolio I saw at Seeking Alpha), and about half-way through the year I reduced it to 25.  There were a total of 279 round-trip trades over the course of the year, with 130 being winning and 144 losing (5 were a wash).  This is a 47.4% win loss.  The total return in the portfolio was 6.4%, inclusive of dividends and fees paid to TradeStation.  Dividend yield was 1.774% over this period, and is in a tax-deferred account.  The average win per position was 2.9%, not including dividends, and the average loss per position was -1.4%.  Only in the last 3 months I did restrict buying to when the long/cash ratio was below 50% (-ish) and this improved numbers (I don't have the exact calculation but I do have the trades, and the trend is clear to me).  Also in 2015 I started updating the coefficients more frequently with a new process/computer, and this resulted in my detecting when to get out of a stock much faster.  I also started keeping the portfolio 100% invested about 3 months ago, and this allowed me to ignore the drawdowns and participate on the rebounds.

Over the same period the SPY returned 5.53%, so the dividend portfolio outperformed the SPY by a thin margin.

Of course, the past is no indicator of the future, so beware.

While not an apples-apples comparison, the last year's test has given me the confidence to publish the portfolio at C2, and the results there are independent of my writing.  I will either succeed or not...

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Greenfield Leaders has a great track record, at least prior to listing at Collective2.  For the period 5/5/2014 to 6/9/2015 the portfolio has a 42.3% realized gain.  Volatility is higher though, as these stocks tend to have higher betas.  Note that this period was one of QE2 and where the markets were doing well, so it's hard to say if the performance can be replicated.  Part of the success certainly was money management -- the Greenfield Leaders portfolio moves in and out of the market with active management, so if you're looking for a low maintenance portfolio, this one is NOT going to make you very happy.  There were a total of 129 round-trip trades over the past year, with 61 of them being winners and 66 being loosers, and 2 considered "wash" trades within +/- 1% gain/loss.  The average win/loss are largely moot with this portfolio, as the position sized is determined by captial asset model methods and can vary from something as large as 22.7% to something as small as 0.7%.

At C2 the Greenfield Leaders portfolio has struggled since I started it on 6/10/2015.  It is down -0.4% right now, but is above the S&P500 over the same period by about 0.5%.  It is less than 33% invested, per money management rules, so effectively it's not doing much in the market either way.  The portfolio invests in stocks that are good candidates to move higher.  I have no idea on how it will perform in the future, but obviously, since it costs me money to list at C2, and since I have my personal money in the portfolio (at TradeStation), I think it will take off if the markets take off.  I'm patient.

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Greenfield Low Beta portfolio has done quite well in my pre-C2 trials (with real money).  It tends to be a low volatility model, but this can change if market conditions change (any stock can move to a high-beta condition -- it isn't sold under the existing rules).  Since 5/12/2015 my personal portfolio of these stocks is up 10.8%, and it is only 1/3 invested.  Again, future performance cannot be based on past, so beware.

At C2 the Greenfield Low Beta portfolio is up a minor amount since I started it on July 4th, 2015.  The 2.5% return is solidly outpacing the S&P500, AND, the portfolio is only 1/3 invested.

Note though that this portfolio, like the leaders portfolio, is subject to money management rules so will have frequent trades.  If you're looking for a low-maintenance portfolio, this one probably isn't going to be very satisfying.

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Greenfield Bargains portfolio is another solid performer prior to Collective2, with an annualized gain of 32.4% from 10/16/2014 to 6/9/2015.  This portfolio is fully subjected to money mangement rules, and because many of the stocks are GGT "cash" rated (because they have been beaten down in price), position allocations can be fairly high when a buy signal occurs.  This may fly against your view of "putting all your eggs in many baskets" as I've invested in a few as 4 stocks with this portfolio.  Volatility is high, but again, performance is high (so far).

Money mangement in the Bargains portfolio has been a bit different compared to the others.  For the Bargains portfolio, when I'm holding just a few positions, if the signal says to transition from 100% equity to 66%, I sell 34% in each position, locking in gains.  This means more book keeping, and it drives cost-basis calculations crazy.  this is a complicated portfolio, but I like it for my retirement account where much of the purchases / sells are transparent, so it works for me.

Note that I only have a small portion of my monies in this account right now -- it's sitting at 33% equity (at best) if you look at the GGT signals.

If you're looking for a low maintenance portfolio, this one has a few positions, but you'll need to move quickly so again, you may not be very happy with this one.

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This is all a long way of answering the question as "Greenfield Dividends" probably will provide the best performance for the least amount of work.  Leaders, Low Beta, and Bargains are all subject to the same money management rules, so will be moved in and out of as market conditions dictate.  Bargains probably has the lower position count / higher allocation per stock, so it may be a good alternative relative to the others.  Low Beta *should* be an outperformer, but in the present market conditions, it is not.

As with all my ramblings, you are responsible for your own decisions and I am not.  Please do your homework, and please take ownership for your actions.

Regards,

pgd

Wednesday, July 1, 2015

On the edge of the cliff - Close of markets July 1st

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I'm on a train heading back from a wonderful wedding in NYC -- so this will be short and not have any graphics.

With the close of markets today my system is calculating a move to cash -- all of it.  There are caveats though, so let me explain:

1) We are very, very oversold here.  Not extreme, as once-in-a-lifetime oversold, but enough to tell me I should be getting my shopping list together.  We're at a level that has only occurred 3x in the past 2 years, putting it in context.

2) Not all of my "go-to-cash" indicators are confirming.  I use several, and I typically (for backtesting rules) require that they all are heading in the negative direction.  They aren't.  Hence, we have an internal war going on.  I have one of many indicators that is now south, which at a minimum is a warning shot across the bow.  A serious warning shot.

3) Of significance is that a) average volume is up, b) no real progress is being made in the cumulative tick (it's horizontal, not moving up, but not moving down), and c) the long-cash ratio actually moved up a tad with today's action.

The indicator that has historically kept me out of trouble is a very simple one and my crystal ball tells me it may whipsaw back to the "get invested" side, perhaps this week, and probably violently if some sort of Greek deal is worked out.  It literally is the difference of two exponential moving averages -- the 13d and 65d, and right now the 13d is below the 65d.

Again, I don't think that it's going to last.

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Strategy -- relatively simple.  I'm already working to maintain 66%-ish cash in my leader's portfolio, and I'll continue to do so on Wednesday.  The portfolio can be viewed in real time here:

https://www.collective2.com/details/94921209

As far as my dividend portfolio, I bought two of three stocks today and will try to get into the 3rd one on Wednesday.  The dividend portfolio is targeting being 100% invested (it's goal is income, with price appreciation being secondary), and I've filled 24 of 25 positions.  The portfolio can be viewed in real-time here:

https://www.collective2.com/details/94780986

So, no changes, I'll start working on the shopping lists and will post them in the Dropbox folder.

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Standard disclaimers apply, as usual.


Monday, June 29, 2015

Knee-jerk in Markets Signals Move to 66% Cash - June 29 Close

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Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you.  It helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.  If you miss a signal this system will most likely produce sub-par results, which isn't my fault.


With the close of markets today (Monday, June 29th), my money-management system says move to at least 66% cash.  This is in response to the Greek Tragedy that is unfolding overseas and is impacting perceptions in the Euro zone.

My take on it?  The GDP of Greece is about $242B in 2013.  Using 2012 numbers, which aren't too far off of 2013, this places it somewhere between Connecticut and Louisiana or Finland and Pakistan.  The amount of debt is somewhere in the range of $317B.  Yes, I'm sure there are nuances here and there, but the point is the same:  this really isn't a big deal as far as money is concerned.   The issue is one of perception, and while that matters, I do believe that today's sell off is actually a buying opportunity.  Not tomorrow (Tuesday) mind you, but soon.  We are incredibly oversold.

But, let's not look at the market we want, let's look at the market we have:



Both the short-term and intermediate-term timers are now in cash.  While I can see the details and you can't, the long-term timer is a whisker above it's transition point to cash.  If it flips I doubt we'll stay there long -- again, we are very, very oversold.

The rationale for the transition of the short-term timer is simple:  the LCR table has moved all red (again):


Right-click on the table to open in a new tab or window.

What is important here is that we had a sea of red on the right long before today, hence the move to 50% cash on Friday.  That was easy.  

On the left side of the table you see a "16".  This was the 16th strongest down day, in terms of real LCR change, since September 2008.  Ouch.  Looking back, I do expect to see a short-term bounce -- whether it will continue upward or reverse downward is anybody's guess.  Your crystal ball is as good as mine.

Again, the big tell to not get overly committed to the long side has been the cumulative tick:


Right-click on the figure to open in a new tab or window.

We've had nothing but sustained selling in the markets for the better part of the last 4 days, independent of what the indices are doing.  You can look back at other blog entries to understand what you're looking at but suffice to say, the smart money has been net selling for at least 4.5 days, and this, over and above the LCR timer table, tells you to take things much slower.  I'm glad I have been.

Until the white trace moves above the bright red trace (bottom plot) and stays there I doubt I'll get too committed in the markets.  You can tell by the slopes that today's selling accelerated to the downside as the day wore on.  Ideally, we want to see some sort of "V" pattern here, and it didn't come.  We're probably not done with this yet.

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My strategy is simple.  I'm unloading positions to get to at least 66% cash in my Leader's portfolio.  I'm starting with the stocks that are performing the worse and working towards the best ones.  You can follow this portfolio here:

https://www.collective2.com/details/94921209

For my dividend portfolio, I'm simply selling the positions that have signaled "New Cash".  As of tonight there are none, so I'm going to continue to hold the 22 positions that I currently own.  Note that my target is 25 positions, and I'm most likely going to attempt to fill those 3 starting tomorrow night.

You can follow the dividend portfolio here:

https://www.collective2.com/details/94780986

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Standard disclaimers apply.

Regards,

pgd