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




Thursday, June 25, 2015

Reducing exposure to 50%

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NOTE:  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 on June 25th, my timer system is indicating that I should move to at least 50% cash.  So it is written.



Standard procedure has been to:

1) eliminate all positions that are underwater
2) if not at the desired cash target, start selling the positions just above the water line until the cash target is achieved.

Most of my positions are above the water line, so I'll be locking in some modest net gains using this method.  Only the strongest stocks will survive.

Dividend portfolios will not be subjected to this rule -- e.g., they will remain fully invested.

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The cumulative tick is the tell here:



It appeared that Tuesday and Wednesday were going to be break-through days, with the "white above red" indicating a constant buying pressure.  You can see that it began to fail yesterday, and today was more of the same.  Selling accelerated today at the end of the day, which obviously is not a good sign.

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Although the short-term timer and the long-term timer are still intact (on the long side), now is not the time to buy:


We're around 48% longs in the database, which puts us into equal probability that trades entered right now may or may not work out.  With weak markets, and the cumulative tick being negative overall, this is not the time to buy.

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Strategy:

Raise cash.  Set sell orders with a 1% TSL, GTC, effective after 9:45 on the first day of entry and let them ride until either 1) they execute or 2) the GGT timer transitions.  For the latter I'll let you know.





Thursday, June 4, 2015

Whipsaw ... back to 67% cash target

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NOTE:  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.

Once again the Cumulative Tick saved my tail, and hopefully, it saved yours.  Here's what it looked like at the end of the day:



Internally, the selling continued throughout the afternoon, e.g., it didn't reverse, which (generally) means that we haven't seen the local bottom.  Of course, your crystal ball is as good as mine.

The middle plot is a filter -- the negative values that occurred mid-day indicated that we were seeing over 500 stocks per minute that were ending on a lower price after the transaction than what they started.  This is significant, if only that the selling pressure was large.

The top plot is the 52-week high and 52-week lows.  The green (hi) and red (lo) traces show that nearly the same amount of stocks were making new highs as those that were making new lows.  When this has occurred in the past it basically has meant that we're not at a turning point -- so I'm expecting more of the same drift sideways, at least for the short term...

Timers

The short-term and intermediate-term timers have whipsawed back to "Cash", so money management says that we're back to a 67% cash target.  I didn't buy anything except dividend stocks yesterday and today (which have fared worse than expected by the way), so my powder is still quite dry.  The dividend stocks are more/less immune to the short and intermediate timers, but of course, a rising tide ... (and the converse is true too).

Strategy

I'm still in the mode of getting down to 33% equity / 67% cash.  I'll continue to sell my worse positions first, then work towards  the better positions, until I hit the equity target.

Note that I'm *really* close to the long-term timer triggering a sell signal.  I hope we don't trigger, and this is a danger of a moving average system in the face of a sideways market.  The longer we move sideways the more the moving averages decay, and eventually, they will flip the other way.  In fact, this is the exact situation we're in now with the short-term and intermediate-term timers -- since their period is so short, sideways markets really put havoc on their operation.

"Trade the market given to us, not the one we want ..."

We're in a great buying zone here, so as soon as things turn just a tad and confirm, we'll be ready to commit capital.

I'll post when the signals change....  until then, daily commentary (time permitting) will be on the Yahoo site.

Regards,

pgd

Signal Change as of Close of June 3

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NOTE:  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.

The problem with having multiple jobs is that investing often takes a backseat, so I'm always playing catch up.  This is my reality this morning.

I looked at the leaders yesterday and they did so-so, meaning, I wasn't too concerned about updating my internal timers, other spreadsheets, etc.  Hence, I missed this change of signal last night.

Despite the markets being very weak this morning last night's signal change is for "all in" -- 0% cash target, 100% equity target.  It's going to take some work to get there from here.




Within the Dropbox folder you'll see a bunch of text files:

Greenfield_Dividends
Greenfield_DividendChampions
Greenfield_LowBeta
Greenfield_Bargains
Greenfield_Leaders

All of these stocks have good, solid fundamentals in terms of EPS and revenues.  All are performing well, but be advised, the "_Bargains" are down in price, and the "_DividendChampions" stocks don't screen on price data, so they could be very low (but they pay steady to increasing dividends over many, many years of data).

If you are not a member of the Dropbox folder then you need to send an email to pduncan { at ] v t {dot ] e d  u (fixing the address of course) with DROPBOX in the subject line and I'll add you.  Note that you'll also get an invite from Yahoo Groups so that I can communicate with you -- Dropbox has no communication facility so we have a group to manage this.  If you join the Dropbox but refuse to join the Yahoo group I'll kick you out -- I don't want people who I can't communicate with.  Sorry to be blunt but it is what it is.

I'll be updating these lists as my time permits but these lists, despite them being created this past Friday, are still very solid lists.  

If you are so inclined, ensure that the stock is rated in some form of GGT "long" status before you invest.  If you don't know what this means then you need to read the files in the Dropbox folder.  There's a presentation there to get you oriented.

Buy strength.  Multiply the previous day's high by 1.001 and set your BUY STOP at this level.  If it's not hit today, lower it tonight and try again tomorrow.

For those of you on the alert list, NEON has already triggered for the day and I'm entering at or below VWAP.

The Cumulative Tick pattern is telling me that this signal is prone to failure:




The fact that everything has a negative slope means that you should be careful about entering.  Buy strength, not weakness.  Review past blog entries to have a better understanding at what you are looking at.

Nevertheless, the LCR table shows strength in the underlying database of 3000 stocks:

  

People are picking up stocks as the tool indicates, so unless it's all short covering (quite possible), we could be seeing the start of the next leg upward.  Again, take a look at past blog entries to understand this table.

Remember, do your own diligence.  Your crystal ball is as good as mine.  You are responsible for your own decisions and I am not.

Tuesday, May 26, 2015

Raising Cash, as of close of Tues, May 26

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Short note here -- I'll elaborate more this week.

With the close of markets today we're back to raising 67% cash.  The short-term timer as well as the intermediate-termed timer have both transitioned to CASH.  The long-term timer is long, but certainly weaker.

My strategy is simple:

1% trailing stop losses, GTC, effective after 9:45 ET
Sell weakest positions first -- the further underwater they are, the faster they will be on my sell list.

66% is my equity target.  Right now I'm about 77% invested, so I'm looking to unwind about 43% of my holdings.

Standard disclaimers apply.

Regards,

pgd

Friday, May 15, 2015

Signal Transition - Short-term timer fires LONG; Close of Markets May 14

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NOTE:  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.


Summary:  The short-term timer has transitioned to a LONG status.  This reduces the cash target from 66% to 33%.  Time to deploy capital.

Timer Status


With Thursday's action, we were pushed over the top and now the short-term timer is LONG.  The combination of both the short-term and long-term timers being LONG indicates that we should be buying the markets at the time, with a cash target of 33% / equity target of 67%.

LCR Table


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

The transition of the 5d and 8d to "green" kicked the short-term timer into gear.  The green on the right side of the table gave me confidence to start buying.

Cumulative Tick


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

The cumulative tick chart above is as of 11:49 a.m ET on Friday.

The trend since the 5/12 low has to come off the bottom in a controlled manner.  Overall, the transition of the "white" above "red" in the cumulative tick pattern shows me that buying is continuing today although the indexes are not showing the gains.  I like this setup, and I'm working hard right now to identify positions and place appropriate orders.

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Strategy

As always, I am placing BUY STOP orders on all candidates.  The level for the buy stop is 1.001% above the previous high.  The order is active after 9:45 a.m. ET.  If the order does not fill then I reduce the buy stop to the next level, provided that the stock or ETF still has a GGT long recommendation.

Pickings are thin right now, so I'm having to double up on size of positions in the transition from 33% equity to 66% equity.  This is okay, but it's not ideal.

All watchlists are updated and are in the shared Dropbox folder.  Stock and ETF transactions are also in the shared Dropbox folder.  If you are not a member, send a note to me at pduncan [ at } v % t } dot [ e d u   (fix the address as necessary - I messed it up because of the web bots who crawl for email addresses).  Use "DROPBOX" in the subject field.  Also expect to be added to my Yahoo! group, as it's the only way I can communicate with you.

Most of you know I attended Virginia Tech many years ago so the vt.edu after my name should be obvious.

Regards,

pgd