Thursday, April 14, 2016

Buying the Market - April 13th Close

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The latest issue of my newsletter is available for download.  Click the following link, which should automatically download the PDF: https://goo.gl/Laj4DS

If you want to be on the newsletter distribution, then please send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "NEWSLETTER" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox and newsletter users, if the need arises.

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Current Outlook

The markets have recovered from Friday's consolidation and are advancing higher.  Bad news from the banks, Alcoa, and others is being shrugged off.  This is a strong market, and I am picking strong stocks.

As of the close of markets on April 13, I am a buyer.  Two primary reasons for this:

  • The Cumulative Tick picture has improved dramatically
  • The Long-Cash Ratio jumped the 72nd strongest amount in about 1800+ trading days that I've recorded.
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Cumulative Tick

The Cumulative Tick is back to almost picture perfect with Wednesday's action:


Click on the image to enlarge.

I described this view in my last blog and in my newsletter, and I urge you to read those details.  The bottom plot shows an expanding cumulative tick and when this is occurring we have a buying market.  I do not want to be caught on the sidelines.  Everything on this chart indicates that the markets are buying right here.

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Long-Cash Ratio Table

The Long-Cash Ratio, or the number of stocks ranked "long" to those that are ranked "cash" or avoid by my system, jumped 37% over the previous day's value of 1.816.  This was the 72nd strongest move in the LCR and while history favors a pullback after this occurs, the pullbacks have been buying opportunities.

The middle of the table is completely green on all measured time frames.  This means that stocks are being bought and are being bought on volume, driving prices upward.  This is a clear entry signal.

The right side of the table foretold me on Tuesday that we could have an opportunity on Wednesday.  The green of the right always precedes the green on the left, and yesterday was no exception.


Click on the image to enlarge.

Strategy

In my personal portfolio I added 6 positions yesterday:

ADC
CMN
EFX
GGG
HPY
POOL

Each is rated "long" by my system and has solid fundamentals as well as current-market characteristics.

A few stocks did not trigger and I will lower my BUY STOP, in accordance with the guidance I put out in my newsletter:

COR
CUBE
GVA
STOR

There are other stocks that look good here too, with THO, ULTA being a couple of them.

~~~~~~~~~~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "DROPBOX" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.  The stocks I have listed here are not recommendations -- they are seeds for you to do your own research.

Regards,

pgd

Monday, April 11, 2016

Reducing Exposure as Markets Pull Back

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The latest issue of my newsletter is available for download.  Click the following link, which should automatically download the PDF: https://goo.gl/Laj4DS

If you want to be on the newsletter distribution, then please send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "NEWSLETTER" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox and newsletter users, if the need arises.

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Current Outlook

From my GGT perspective, we are consolidating.  The percentage of long-rated stocks has dropped a significant amount this past week, somewhat easing the overbought pressure of the prior weeks but this should be considered expected and positive behavior as long as we do not drop too far.  My Long-Cash Ratio table indicates short-term bearishness and we do not yet have any indication of strong resumption of the uptrend.  My Cumulative Tick indicator is cautionary with a very weak uptrend.

Percent "Long"-Rated Stocks

I have been writing about an expected pullback in the Percent Long value, and this week delivered what I was looking for:

Click on the image to enlarge.

The chart reflects the number of stocks in my database that are rated “long” – those that are outperforming their historical optimized averages.  We closed Friday at 64.3%, down significantly from the 76.3% value reported the week prior.  This means that 12% of the stocks in the database (net) fell below their historical, optimized upward-performance levels, so they became “cash”-rated.  The solid red line is at 63.6%, so we are entering territory where we could potentially play a bit – or not.  If history is any indicator, we tend to move lower from this level, potentially falling into the white zone or even into the lower green zone before recovery.  Falling into the green zone, then reversing upward would be an ideal situation.  Broader market index levels are directly correlated with the fall of the Percent Long value, so be aware that we may see some weakness as we roll into the start of earnings week.

Long-Cash Ratio Table

Closely correlated with the Percent Long value is my Long-Cash Ratio, which is reported in the far left column in the following table:

Click on the image to enlarge.

The LCR fell a significant amount since the last time I reported the value, which was on April 1st (3.225).  This value is a ratio of the number of stocks that are “long” rated, to those that are “cash” rated.  The latest reported value is 1.802 and the present trend is falling.  The middle/left side of the table, the area titled “Slopes of LCR EMAs”, reflects moving averages of the series of LCR values.  Despite some positive movement in the indexes on Friday, the LCR continued to fall, and as you can see, we have negative values (slopes) through the 55d moving average. 

Falling LCR values, in multiple time frames, is bearish.  I do not purchase stocks when the LCR value is falling – no exceptions.

The right side of the LCR table shows the rate of change of the left side, also known as acceleration.  You can see some green creeping in with Wednesday and Friday’s action, but in both cases neither one was strong – neither spanned all measured periods.  Acceleration (the right side) always precedes slope (the left side), so if I do not see strong action on the right side, there is little hope that the left side will confirm movement into the markets.

The tipping point I am looking for to place orders is for the 8d moving average on the “Slopes of the LCR EMAs”, highlighted in a dark border, to turn green.  Right now it is red and has a value of -0.15.  Do not concern yourself with the value, but the fact that it is red tells me that Monday (today) will not be a buying day.  We could see a sudden reversal on strength, and this could trigger me to start to place buy-stop orders as early as Monday night.

Cumulative Tick

Another cautionary signal is provided by my Cumulative Tick chart:


Click on the image to enlarge.

The top line reflects the number of 52-week new highs (52W-NH, green), the number of 52-week New Lows (52W-NL, red), and the difference (yellow).  When green is above red we are in an expanding market, with stocks trading in the higher portion of their 52-week ranges than in the lower.  We are currently expanding.

As a broad signal, the 52W-NH signal is a great overall “gate signal” to watch.  With little exception, I require that more stocks are making new highs before I enter the market.  The current signal is “long” (green above red and has been for several weeks).

The middle trace indicates algorithmic buying/selling.  The indicator resets each day.  When it moves down rapidly, stocks are being sold off and are completing the transaction at a price lower than the previous transaction (“tick down”).  When the trace moves steadily upward, stocks are being bought, with the latest price higher than the prior transaction (“tick up”).  Straight-line movement upward is indicative of sustained buying and straight-line movement downward is indicative of sustained selling.  Hence, I get a good view of the algorithms and what they are doing on a day-to-day basis by reviewing this indicator.

The middle trace shows back-forth action throughout the week.  You can see that Thursday was a really bad day – with almost sustained selling throughout the day which picked up in the afternoon and stabilized about 2:45 p/ET.  Friday started strong but faded throughout the day, ending lower than the peak.  This back-forth action shows rotation, and it also shows indecision within the markets. 

Obviously, when mixed signals exist, caution is advised.

The bottom trace is my canary on a short-term basis.  The white trace is the cumulative tick – a running total of all tick transactions that occur on the NYSE.  Movement upward of the white trace shows instantaneous buying; drop of the white trace shows instantaneous selling.  Moving averages are applied to this value to give me the ribbon presentation.

Here are my conclusions:  first of all, we are below where we started the week – this supports the observation of falling Percent Longs or a falling LCR.  We broke below the solid red moving average line on Thursday, and for me, this is a major shot across the bow of the ship.  We finished the week with a very tight spread between all of the cumulative tick moving averages, and this means that the trend upward trend, indicated by the 52W-NH dominance, is in jeopardy.

Timer Table

The table shows my timer system back to 1/7/2016.  Three timer periods are indicated:

  •        Short:  generally a week to two in length.
  •        Intermediate:  Can be several weeks to a month.
  •        Long:  several months are not uncommon.



Of course, there are exceptions at the turning points or when the market is trending horizontally and is not moving upwards or downwards with any force.  You can see this behavior between March 18th and March 31st, when some intermediate-termed weakness was observed, but it wasn’t enough to cause the short-term timer to move to Cash.

Since last week we have “whipsawed”.  Whipsawing occurs when trends are close to thresholds that would cause them to change state, and they move a little in one direction, then a little in another.  The end result is a confusion of signals, and generally frustration for those trying to follow those signals.

On Monday, April 4th, we closed the day with the timer system reverting back to a “raise-cash” state, with a target of about 67% in cash.  You can see that the recommendation has remained throughout the week.  Correspondingly, I unloaded positions that were more than -3% below my buy point at the end of any given day.  This ensures that the weakest stocks are eliminated from my portfolio, simply because it is unlikely that those stocks that I am holding at this point in the cycle will move upwards.

If fundamentals remain solid with these stocks that I have unloaded, they will be on my watch list for purchase, most likely at equivalent or lower prices.  The timer system indicates a larger percentage of cash should be my target, and this is what I am pursuing.

Strategy:

  1. Taking the day off from buying.
  2. End of day will be a re-evaluation.  I'm on my way to Denver for a day so it will be late.
  3. If overall status changes within my system I will post late tonight or early tomorrow.


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Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "DROPBOX" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


Monday, April 4, 2016

Whipsaw? Upcoming Buying Opportunity? Let Us Be Careful Here

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Note, I will be in San Antonio, Texas from April 5 through (potentially) April 10th.  If you are in the area let me know by calling/texting my cell or sending me an email (leave a message below if you have neither and I'll contact you) and if schedule allows, I would enjoy meeting face-to-face.

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The latest issue of my newsletter is available for download.  Click the following link, which should automatically download the PDF:  https://goo.gl/CtQfQU

If you want to be on the newsletter distribution, then please send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "NEWSLETTER" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox and newsletter users, if the need arises.

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Timer Table

With the close of markets on Monday, April 4th, my timer system has reverted to a conservative position, specifically a target of 67% cash, and the short-term and intermediate-term timers moving to cash.


In taking a closer look at the long-term timer, we could be as close as 11 days (or shorter, of course) if we continue dropping at the rate that we saw day.

Price action today was not that bad.  The Russell 2000 eeked out a 0.01% gain, the DOW dropped -0.31%, the NAS dropped -0.46%, and the SPX dropped -0.32%.  Volume was lighter today than the previous two days.  So what gives?

First, we are close to thresholds.  The timer structure is built such that the short timer is independent of the intermediate, and both are independent of the long-term timer.  What this means is that we can get the pattern you see above -- where the intermediate fails for a significant period of time -- yet the short-term remains intact (more or less; 3/28 was an exception).  The reversion of both the short-term and intermediate-term timers with today's action points to a significant reduction in the number of stocks that are long -- price action on individual securities moved them to cash.

Let's look at the Long-Cash Ratio table:

LCR Table:

Here's the updated table after tonight's close:


Click on the table to view a larger version.

I wrote about the table in my latest newsletter; download a copy here ( https://goo.gl/CtQfQU ) if you are interested in further details.

The left side of the table shows that we moved from 3.225 to 2.793.  Presently, we have 2257 stocks long in the database and 808 that are in cash.  107 stocks actually moved to the "New Cash" side, meaning that they experienced a price or price/volume collapse, whereas only 24 achieved "New Long", which means they moved up on price and volume.  What is important here is that the net is downward, and hence, the large drop.

The middle of the table reflects the slope of a number of moving averages of the value on the far left.  When the value is pointing up it is positive and green; when it is pointing down it is negative and red.  You can see that today's action was strong enough to take the left side of the table to the same level as on 3/28.  Any further continued action downward will add red to the left side of the table, and this may/may not be a good thing, e.g., we may encounter a buying opportunity, or perhaps it will pass us.

The right side of the table shows more red.  This is the change in the left side of the table, or the change in slope.  Again, this is done on varying time frames, and is important.  Red on the right always precedes red on the left, and you can see that we have two days of solid red indicators.

Conclusion?  The markets are slowing -- the number of stocks that are outperforming their historical behavior (optimized) is less and less on a day-over-day basis.  This is not an expanding market when this occurs, but it could be a buying opportunity.

What I'm interested in seeing (for a buying opportunity) is that we get a complete set of red rows on both the left and right side, then we see green start on the right, eventually leading to green on the left.  We're not close to this as of today's close.  Here's an example of what the "signature" table looks like:


Click on the table to view a larger version.

Notice the green on the right, and it leads the green on the left.  Note that the table on the left is red and then turns green.  This is a good setup, provided other conditions exist too.  I'd like to see that before I move aggressively back into the market.

Cumulative Tick

Today's cumulative tick chart was the weakest that I've seen 3/24 and before that, 3/15.


Click on the table to view a larger version.

The white trace is the most important component of this chart.  It fell rather aggressively today, showing that there was net selling on the NYSE.  Another day of this same behavior could force it below the solid red line, which will certainly put this market under pressure.

I will post, after the close, if this chart turns more bearish.

Strategy

Compared to my previous entry, as well as my newsletter, my strategy is slightly modified:


  1. (Modified) I am not going to buy stocks on Tuesday with the LCR and Timer Table changing state.  I still have alerts set.
  2. (Modified) I presume the up-trend will continue, until it doesn't.  
  3. I am reviewing selling cash-secured puts on liquid contra ETFs for April expiration.  While volatility drops prices for options are dropping too, which improves metrics.
  4. I am reviewing selling cash secured puts on quality stocks that I wouldn't mind owning at a lower price.  Many stocks have moved higher in this market, and I missed some of the action.  Selling a CSP will allow me to collect a premium and if put to me, would allow me to purchase the stock at a lower price.

~~~~~~~~~~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "DROPBOX" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Money Management Model Transitions to 100% Invested

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If you are on the blog page in a browser, please subscribe to this using the "Follow by Email" link to the left.  Having your email helps me see the number of folks reading this.

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Note, I will be in San Antonio, Texas from April 5 through (potentially) April 10th.  If you are in the area let me know by calling/texting my cell or sending me an email (leave a message below if you have neither and I'll contact you) and if schedule allows, I would enjoy meeting face-to-face.

~~~~~~~~~~~~~~~~

The latest issue of my newsletter is available for download.  It has far more detail than what is posted here (no sense writing it twice).  Click the following link, which should automatically download the PDF:  https://goo.gl/CtQfQU

If you want to be on the newsletter distribution, then please send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "NEWSLETTER" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox and newsletter users, if the need arises.

~~~~~~~~~~~~~~~~

From a broad perspective, my timer model is indicating that I should target full investment of all funds:


Friday, April 1st's action indicates that all my timers -- short, intermediate, and long are now back on the "long" side.  Despite the overbought region of the markets, the trend upward (or at least horizontally) is intact and there is nothing except our own fear of being overbought that is keeping us out of the markets.

The Cumulative Tick chart reinforces this position:


The top portion of this figure shows the number of stocks hitting a new 52-week high (green) compared to those hitting a new 52-week low (red), and the net (yellow).  You can see the strength in this market – green is well above red for the entire week.

The middle portion of this figure shows algorithmic buying.  I presently have it set to 500 stocks per minute on the NYSE.  When algorithmic buying occurs, 500 stocks (or more) per minute tick upwards in price and this is recorded as an advance upward.  When algorithmic selling occurs, 500 stocks (or more) per minute tick downwards in price and this too is recorded.  Continual advance upward of this line shows solid, sustained buying.  Horizontal advance shows lack-luster buying/selling, and continual decrease downward of this line shows solid, sustained selling.  Tuesday’s action shows a great example of the market reaction to the FOMC’s statements – heavy buying after Ms. Yellen make her remarks, and it was followed on Wednesday.  Thursday and Friday were relatively quiet.

The bottom portion of the figure shows a moving average ribbon of the cumulative tick.  Essentially, when the white trace (real-time) is above the solid red (longest moving average – about 3 days in length), we are in a short-term uptrend.  You can see that the white trace did not make much leeway upwards on Thursday / Friday, so the gains of Tuesday and Wednesday were being digested.

 As long as the white trace is above the red trace in the Cumulative Tick plot, the market trend is upward, at least on a short-term basis.

Personal Holdings:

My own holdings are showing a topping behavior:


You can see that the MACD presentation is already rolling over for this set of stocks.  Note that I purchased this set of stocks between late January and early February – review the MACD and price levels during those periods and compare to those that we are seeing today.

Strategy

My strategy for the week is as follows:
  1. I have alerts set on all stocks that I presently own that I would like to add to.  The alerts are real-time and trigger on present price as well as forecasted volume.
  2. I presume the up-trend will continue, until it doesn't.  I am in buying mode on alerted stocks, but I am sitting on the sidelines for stocks that do not meet price AND volume criteria.
  3. I am reviewing selling cash-secured puts on liquid contra ETFs for April expiration.  While volatility drops prices for options are dropping too, which improves metrics.
  4. I am reviewing selling cash secured puts on quality stocks that I wouldn't mind owning at a lower price.  Many stocks have moved higher in this market, and I missed some of the action.  Selling a CSP will allow me to collect a premium and if put to me, would allow me to purchase the stock at a lower price.
~~~~~~~~~~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "DROPBOX" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Tuesday, March 22, 2016

Intermediate Timer Confirms Move to Sidelines - as of 3-21 close


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Admin

I'll be giving a presentation at the following location this Saturday:

Great Falls Library,
9830 Georgetown Pike,
Great Falls, VA 22066
10:15a/ET - 1p/ET

The topic will focus on my new cheerleader role as the AAII Computerized Investing Special Interest Group wrangler as well as "Identifying Long-Term Income Opportunities: Using Trailing Performance to Weed Out Potential Underperformers"

I intend to stream the session via GoToMeeting for those of you who are too far away to travel.  Send me a note to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, and I'll send you the call-in invite.  The call-ins are limited to 25 people, so first come first served.

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I spent the weekend wrapping up my initial newsletter hence did not post here.  If you want a copy of my Actionable Ideas, the link is here.  https://goo.gl/gezuEM  Instructions on how to subscribe are contained near the end of the downloaded document.

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Observations

As noted in my newsletter, my intermediate-term timer transitioned to "Cash" as of Friday's close, and I observed that Monday's action with respect to the timer was going to be critical.  The intermediate-termed timer has now provided two consecutive days of "Cash" rating, so I am expecting that this leg up is going to fade.  Here is the timer table:



This is not an indication to do anything other than look carefully at your portfolio and if any positions are "weak", e.g., underwater, you may want to consider reducing the size of those positions.  I do not think that we're going to continue upwards as a group from this point, so unless you've picked a really remarkable set of stocks, any positions that are presently underwater will simply sink deeper.

My Long-Cash Ratio (LCR) table is also showing the first signs of weakness:

Click on the image to enlarge.

The right side of the table is most important right now.  This is a measure of acceleration, and simply put, Monday's action was slowing on an across-the-board perspective.  Continued red on the right side could either be an opportunity to buy, especially if the left side remains green, or if we see red on the left side too, then I would expect my timers to transition to "cash".

If you look closely at the far left you see that the Long-Cash Ratio is at 3.421, down -3% from the previous day.  If you also look you see that' Friday's jump was +22% from 2.902 to 3.527, which is a huge number of stocks that moved to the "long" side.

Moving "long" for a stock (within my system) requires BOTH price movement upward (e.g., demand is driving prices upward), and volume increases.  Friday was a big day.  Whether it was a climax top or not is to be seen -- a value over 3.xxx is an incredibly overbought value and we usually do not stay up that high very long.

To get a sense of this, I watch the following indicator very closely:


Click on the image to enlarge.

This graph plots my GGT index, which is comprised of about 3000 equal-weighted stocks, and the 8-day moving average slope of the LCR.  Over the years I've observed that the 8-day slope of the LCR is a great indicator of leading overall market behavior.

On the right I've circled where we are now.  The value is positive, so the slope is upward.  It keeps moving up and down aggressively, which is somewhat uncharacteristic but it is what it is.  I've also placed a bright red arrow at a point in recent history where the value was in the ballpark of being this high.  Of relevance to you is that the GGT price continued to meander sideways for weeks after we peaked, and then it dropped about 5% or so.  If you look closely at the LCR 8d slope MA, you see it leads the broader market peaks (in general).  It also leads the dips.

There's a pony in there somewhere.  As I said in my newsletter, I'm not a buyer of stocks right now, for increasingly obvious reasons.

Strategy

1) I am looking closely at stocks that I hold that are underwater.  If they do not move upward in the next few days I'll probably unload them, despite just having added a few new positions last week.  I'm specifically talking about my positions in ESS (down -0.51%), GBX (down -1.13%), PSXP (down -2.67%), LTXB (down -3.04%), and XIN (down -3.79%).  The remainder of my portfolio is doing well at the present time.

2) I'm not buying stocks.  

3) I did buy a covered call in VXX yesterday.  Here's the math:

BOT VXX @ 18.83 and STO VXX 160401C18.5 at 0.90 (credit)
This position has a breakeven of 18.83-0.90 = 17.93
The return on the option is 3.1%

We'll see.  I continue to look at VXX puts too; I don't think the VXX is going much lower from here even if we stay in this overbought zone.

~~~~~~~~~~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to GreekGodTrading [ a t ] gmail {d o t] com, making the appropriate changes to the email address, with the word "DROPBOX" in the subject and I'll add your email.  I also ask that you subscribe to this list using the link to the left (if you are on the blog), as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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, March 13, 2016

16MAR11 Weekend Update

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Summary
The ECB's actions this past week placed a "Put" under the market.  This being said, we are overbought from a Leaders perspective, but still have some room to move with respect to other classes of stocks.

VLOG

I've prepared a video blog for those who want to view on their electronic media.  It's 54 minutes long, so grab your favorite beverage and relax.  The text that follows the video highlights some of the areas I touch in the video.

UPDATE:  YouTube downsamples the quality, so here is a link to the MP4 file on my Dropbox file system.  


  1. Click the link:  https://goo.gl/c1K7rR  
  2. In the upper RIGHT corner, click the "Download" then "Direct Download" option to bypass YouTube.




Market Leaders -- Short Term Resistance Apparent

I define market leaders as those that are growing REVs and EPS on a quarter-over-quarter (QoQ), trailing 12-month (TTM), and year-over-year (YoY) basis.  These stocks must also be trading in the upper 25% range of their yearly movement, and the 50d MA > 150d MA > 200d MA.  Volume must be at least 100K share average for the past 3 months.

When you apply that filter, you end up with the following basket:

Click on the image to enlarge

The list of Leader stocks is available in my Dropbox "stock" file, If you are not a subscriber to my Dropbox (free), then directions are below on how to become one.  The table can be found on the "Watchlist" tab.

These are all good stocks, and the have consistently been performing well within this market.

When I take that basket and create an index using HGSI, I get the following:

Click on the image to enlarge

I think that this is a really important graph.

The "Leaders" became leaders back in late January, when they broke out and started to pull their related moving averages upward.  At the same time the 13d and 34d moving average slopes crossed and turned positive, which is bullish.  Additionally, the MACD histogram also moved positive in this time, and has been positive since then, except for Friday, March 11.

There are a few take-aways that you need to study from this graph:
  1. the MACD histogram has turned negative.  Conclusion:  momentum of this basket of stocks is waning.
  2. the slope of the 13d MA (price) has now moved below the slope of the 34d MA (price), but both are still positive.  Conclusion:  on a shorter-term basis, capturing some gains may be prudent, as prices are under pressure.
  3. the highs of the index, starting back on 2/29 and continuing through 3/11, are hitting resistance.  Conclusion:  the leaders have most likely run as far as they can on this present leg.
Note:  this is a short-term observation.  If you are a long-term holder then all this means is that the paper gains in your portfolio could drop a bit.  I personally believe that we're good on a medium- and long-term basis.

In support of that last statement, I offer the following:

Greenfield Dividend Stocks -- Long Only

My stock classification system throws stocks into two major buckets:
  • Long:  these are stocks that are outperforming their historical averages and are doing so on increased volume and prices
  • Cash:  these are stocks that are underperforming their historical averages and are doing so on lower prices and perhaps lower volume
I think we would all agree that dividend-paying stocks are typically viewed as safer than non-dividend-paying stocks, largely because dividend paying stocks often are from companies who are larger, more well established, and are often considered medium-to-large caps with respect to overall market capitalization.

I further restrict my dividend-paying universe to stocks that are showing QoQ, TTM, and YoY improvements in REV and EPS.  Further, dividends must be constant to accelerating on a YoY basis, meaning, this year the stock must be paying at least the same dividends as they did last year, and preferably, a higher dividend this year than last.

Finally, I restrict by dividend stock list to those that are "Long", as defined above.

When I do this, and again, I load the list into HGSI and create an index, we get the following:

Click on the image to enlarge

While you may think this looks like the previously-shown Leader's graph I urge you to look closer.  Your take aways are these:
  1. The MACD Histogram is still quite positive.
  2. The slopes of the 13d MA (price) and 34d MA (price) are positive, with the 13d > 34d (bullish) -- overall price appreciation
  3. The index is trading well above it's 200d MA -- longer-term bullish
  4. The index is trading well above it's 13d MA -- short-term bullish.
  5. The index started it's breakout much later than the Leader's index, showing that longer-termed investors needed confirmation of this market cycle before they moved off the sidelines.
While the Leader's portfolio is to be considered a momentum portfolio, the dividend list that comprises this index can be considered a true grouping of solid dividend-paying stocks that is somewhat isolated from momentum concepts.  What this means is that most investors in dividend paying stocks are there for the longer-term, so the late movement into these stocks, realative to the Leaders list, and the continued upward performance of this list suggests more staying power for the markets, vis-a-vis the Leader's portfolio, which is showing weakness.

This being said, there are a couple of highs over the past two weeks which appear as the same type of resistance that we saw with the Leaders index.  Friday was a breakout day, so it is possible we will continue higher with dividend paying stocks.

A full list of the dividend paying stocks is too big to post here.  A shortcut to the file is here.

Timer Table

Supporting the statement that a broader move upward may be underway is that my timer system has just confirmed that I should seriously consider being 100% long in the present market, on a short-term, intermediate-term, and long-term basis:



While I like to see this, we are at extremely overbought conditions:

Click on the image to enlarge

The Percent Longs chart tells me how many stocks in the database, on a percentage basis, are rated "Long".  We've moved from single-digit values in January to over 72.7% in March -- a large change for a short period.  I would not be surprised to see some weakness in the next week or two, and I will use that weakness to add to as well as establish new positions.

Ideally, I'd like to see the Percent Long chart drop back into the green zone, but that may be too much to ask for the strength in this market.  At a minimum I will wait until the Percent Long value drops below the solid red line, which is one standard deviation above all the major turning points (the solid red line is currently at 63.3%; the bottom of the pink zone is at 54.9%, which is the average of all the turning points).

Strategy

I'm waiting for "red" to appear on the right side of my Long-Cash Ratio (LCR) table:


Click on the image to enlarge

I talk about this table in the VLOG so watch it for more details.

The right side shows the slope-of-the-slopes, or acceleration, of the number of stocks transitioning from Cash to Long (movements in the LCR indicator).  You see some red on the right side, and the corresponding rows on the left side of the table are still green.  This is good -- we have a slight pullback but not enough to lose the momentum in the markets.  Friday was a strong day, it basically reset us to move upward, so we're not set up for entry on Monday.

I added to only a few positions this past week and while the incremental portions are up, I think I got lucky.  I seriously think we are quite overbought here and I'm intending to wait until we drop below 63.3% longs before I aggressively add to positions.

I need to see "new" red on the right side of that table before I will get my buy list together.

I buy strength, not weakness.  Period.  There are no exceptions to this rule.

I do not buy with a limit order.  I buy with a BUY-STOP order.  This means that the stock must move past a higher level than the previous day before I purchase.  If the order never fills and it is the end of the day, and I'm still interested in the stock, then I lower the BUY STOP to a new level.

I never buy at the open.  I always wait for the book to clear, so I never place orders that activate before 9:45 a.m. ET.  There are no exceptions to this rule.  Same goes for selling.

I only buy GGT Long-Rated stocks.  Period.  I can't think of any exception to this rule.  You can get access to about 3000 stocks and 500 ETFs by subscribing to my Dropbox folder.  Instructions are below.

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I am launching a newsletter that will be updated on the weekends and will focus on longer-termed portfolio holdings.  If you are interested in this let me know and I'll put you on the early list for comments.  I'm still working on the Paypal setup and website security configurations and don't have everything completed yet.  Send me a note to the address below in the next section with "NEWSLETTER" in the subject field and I'll add you to the trials.  Note, this will not last forever -- it will convert to a pay status.

Note, if you are a subscriber to my Collective 2 portfolios then you'll automatically get the newsletter -- I've already added your name to the list.  

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Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
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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

Wednesday, March 9, 2016

Calling the short-term top, close of March 8th

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If you are on the blog page in a browser, please subscribe to this using the "Follow by Email" link to the left.  Having your email helps me see the number of folks reading this.

Summary
With the close of markets on Tuesday, March 8th, I'm calling a local top.  We've been rising in terms of the number of stocks getting a "new long" recommendation for a number of weeks, but the day-over-day amounts are decelerating.  The actionable thing here is to look carefully at your portfolio and if you bought stocks when I did, around the 12th of February, if any of those stocks are underwater, there should be some serious research on whether you are a long-term holder or attempting to ride short-term waves.

My call is that most stocks that are underwater at this point will go deeper underwater as markets digest recent gains.

Do your homework folks.

Justification
The following chart is the slope of the 8-day moving average on the long-cash ratio metric that I've developed.  The sensitivity of the 8-day is good for short-term evaluation -- it means nothing if you are a long-term investor.

Click on the chart to enlarge.

The key takeaway is that we are at the highest levels in 2 years and we've started to drop -- and drop fast.  Looking back in time, sure, we could bounce around here with up and down days, but I think that we're going to see weakness in the coming days/weeks.

Note that the VALUE is positive -- it is still moving upward. Note that the day-over-day change is less than the previous day -- it is decelerating.  You can see this more clear in the next table:


Click on the chart to enlarge.

This is my Long-Cash Ratio table, and it shows all the slopes of the moving averages on the left, and the slopes-of-the-slopes (acceleration) on the right.

On the left we see a sea of green across multiple time frames.  The moving averages all are positive in slope and are moving upward on a day-over-day change.  Overall this is bullish.

On the right we see the start of red appearing -- the day-over-day changes are negative with respect to the previous day, again for the various moving averages.  This means that although we are moving upward, we are doing so with less strength.  The analogy is a ball that you throw in the air -- it still is moving upward, but it is slowing every second.  Eventually, it reaches the apex, and starts to move downward.

The cumulative tick chart also is starting to show one day of weakness:


Click on the chart to enlarge.

First of all, let me say that this is a really strong chart, except for yesterday.  The top shows many more stocks hitting new 52-week new highs than are hitting 52-week new lows -- a buying environment.  The middle plot, with the exception of yesterday, is showing strong algorithmic buying on the NYSE, especially into the end of the day.  The bottom shows the real-time cumulative tick (white), with moving averages, and simply put, we're seeing horizontal buying/selling over the last three trading days but the trends are still positive and pointing upward.

The cautionary signals from above occurred on Tuesday, especially the algorithmic chart in the middle.  It shows that there was strong, net selling into the close, and it started around 2 pm ET.  This is significant, and shows that there were profit takers to the long rise.  In fact, the relatively - flat white CT line over the past three days shows that the bull/bear war is more/less balanced, so there are net buyers AND sellers here.   Finally, the convergence of the moving averages with the slower, solid red line shows the slowing that I've been discussing, so again, caution is advised.


Click on the chart to enlarge.

We've come a long distance in a short period of time.  The chart above plots the percentage of stocks that are "long" rated -- historically outperforming their optimized price and volume levels (e.g. are in demand) -- and you can see we're in the 70% range.  Go back a few blogs and you'll be reading where we were in the single-digit range (it wasn't that long ago).

While we certainly can play up here -- simply look back at history -- over the long-haul buying stocks when we are in the pink zone has not always been a great choice.

On the other hand, buying stocks when we're below the bright green line has always been a great buying spot, and most of my holdings have solid gains right now.

It's far better to buy when we are in the green zone, and almost a sure bet to buy quality when we're below the solid green line -- and we're a great distance from that place right now.

Perhaps this time is different -- perhaps it is not.  I don't know -- your crystal ball is as good as mine.  What I do know is that *I* am not buying stocks right here, but I keep my shopping lists up-to-date.  Money management here is crucial.



This timer table still shows that we're targeting 67% investment and 33% cash.  I'm actually well above the 33% cash level right now -- we changed states into the new target around the 25th and 26th of Feb and we were already outside of the "green" zone in the Percent Long chart that I showed above.  I've been slow to get more invested here, but after getting nailed in Nov/Dec/Jan, I want to edge back into the markets with longer-termed holdings.

Strategy
For those of you who are new to this blog, I'm not a short-term guy, and I'm transitioning to holding stocks over a much longer period.  I do not invest according to the Cash/Long signals of my timers -- I use the timer states to indicate when I should be entering the market.  Exiting the market is done on an individual stock basis, and I also look at the money management levels of the timers to determine equity/cash targets.

There are a number of stocks that I'm watching, and those lists are in my shared Dropbox folder.  Instructions on how to join are below.  Newly developed leaders that are worthy of further research are these:

CMN
HPY
JBSS
VLRS
IESC
LMAT
XRS
AVNU
BAK
DRD
HTHT
VCRA
ZAGG
HOFT

Note that CMN reports earnings tomorrow, before the open.  Also note that HOFT has lower volume than I like, but the underlying performance of these stocks in this recent market cannot be debated.

Do your own diligence.

My personal holdings are doing well overall:


The stock file in the Dropbox has comments/notes on each of these, and you'll be able to see what I'm thinking in terms of longer-term prospects.

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I am launching a newsletter that will be updated on the weekends and will focus on longer-termed portfolio holdings.  If you are interested in this let me know and I'll put you on the early list for comments.  I'm still working on the Paypal setup and website security configurations and don't have everything completed yet.  Send me a note to the address below in the next section with "NEWSLETTER" in the subject field and I'll add you to the trials.  Note, this will not last forever -- it will convert to a pay status.

Note, if you are a subscriber to my Collective 2 portfolios then you'll automatically get the newsletter -- I've already added your name to the list.  

~~~~~~~~~~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Here's how to find me:

InvestFeed/Twitter:  grems8544
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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