Wednesday, October 7, 2009

GGT Notables from 10/6

GGT price increased from $18.70 to $18.99, a gain of 1.55%, on average volume of 1.47M shares. Although I'm surprised, I would consider this bullish --> rising prices on solid volume is a good sign that we have broad participation.

GGT price EMAs are intact once we get above the 13d; all have resumed an upward trend. This is bullish, although as I always say, it's like driving with only the rear-view mirror to guide you....

The Long-Cash Ratio (LCR) moved from 0.768 on Monday to 0.975 on Tuesday, reflecting the recent bullishness that we've been experiencing. OF PARTICULAR INTEREST is that the LCR EMAs (8,13, 22, 34, 55) are all in a downtrend ... which I would consider intermediate-term bearish. Interpretation: while the daily LCR is moving up, the amount it is moving up is not enough to overcome the historical momentum that was created starting 9/24 and moving forward. To me, I think this is a crack in the ice.

TIMER CHANGE: Because the LCR Change timer has experienced two-days of back-to-back gains, it has flipped from CASH/LONG to LONG with Tuesday's action. This timer is telling us that IF today is upward by 10-10:30, that we can put some money down on long positions.

GGT Strength, across the entire database of stocks, has jumped from 0.3321 to 0.7171 in two days. This is a huge delta -- meaning we are seeing broad, fast participation in terms of price and volume action of LONG-rated positions -- which I see as a bullish sign. This being stated, once we cross the 0.7 line, history has shown that we tend to reverse a bit, and we're there.

Last weekend I introduced a new concept in tracking the strength of various groups. While it is far to early to tell, the DJ30 was bottoming with a strength of 0.04, and I recommended purchasing either the ETFs following the Dow or the DJ30 stocks themselves. I paper traded the DDM, the 2x leveraged of the DJ30, and luck of the Irish would have rewarded us. If you bought at the 10:30 price of $36.35, as of last night's close at $38.01 you'd have an unrealized gain of 4.5% in two days.

The DJ30 strength is 0.711
NDX100: 0.714
Brazil: 0.95 (recommend closing any Brazillian ETFs or stocks)
Russia: 0.64
India: 0.79
China: 0.78

While we may see another day upward, I think we need to be careful here. Certainly, I am not going to enter in any new positions in any of these areas, no matter how small.

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Summary: I'm continuing to keep my powder dry. Yes, I've missed the run up the last two days, and yes, it does appear that with yesterday's action that this cycle may have some legs. I'm not going to chase it.

Regards,

pgd