Thursday, October 8, 2009

GGT Notables from Wednesday, October 7th

Volume was incredibly low on Wednesday, the 7th, -21% below average, which is the second day this week of significantly lower values but higher prices. Here's the series:

Monday: $18.70 (up from Friday's value of $18.39), Volume -15% below average
Tuesday: $18.99, Volume -3% below average
Wednesday: $19.03, Volume -21% below average

I know those of you in the market are making money, but I can't justify the risk right now. Higher prices on lower volume (to me) is a "sucker's rally" because it shows that the institutionals are NOT participating. I need to see a big price day with a big volume day for me to believe in this rally. Until then, I'll miss out on the gains -- it's that simple.

Nevertheless, on pricing EMAs alone, we have a full "throttle up" situation, so if you're holding onto long positions, you're probably in good shape.

The LCR moved from 0.975 to 1.024, indicating that 2518 stocks have a long recommendation and 2459 stocks have a cash recommendation. DIVERGING from this gain in the LCR is the bull-strength, which actually fell from 1.53 to 0.73. Any time we see the bull-strength diverge from the LCR it means that while MORE stocks are moving to a longer-position, when we look at the number of stocks moving long relative to those falling to cash, the CASH stocks are winning. Think of bull-strength as GGT's "New Highs/New Lows" ratio. Prices --> upward, LCR --> upward, bull-strength --> downward = DIVERGENCE. In raw numbers, there are more stocks falling out of a long status compared to those moving from cash, even though the ones rated long are appreciating in price faster.

Just so everybody is aware, the intermediate-term EMA on the LCR peaked on 9/25 and has been falling ever since. The correlation of this daily value to GGT pricing value is 0.8813, which is very, very good. We may go upward in price (much to my chagrin), but I can't justify jumping in with both feet (disclaimer: I do hold a few longer-term core position ETFs).

Our GGT change timer is now into day 3 of the LONG recommendation. Since the recommendation went long, we have dropped about -1.8% in overall value. No timer is perfect -- remember that.

GGT strength of the entire database has fallen from 0.7171 to 0.6584, and we're now in no-man's land. Anything can happen below about 0.7 and above 0.3 or so. Your guess is as good as mine.

Here are the strength's of the various indexes and lists I am watching:

DJ30: 0.535, falling
NDX100: 0.590, falling
Brazil: 0.780, falling
Russia: 0.529, falling
India: 0.514, falling
China: 0.823, rising
SP500: 0.807, falling
SP400: 0.656, falling
SP600: 0.776, falling
Russell 2000: 0.735, falling


Summary: we have rising prices on really low volume --> DANGER WILL ROBINSON! We have rising prices but a divergent GGT bull-strength --> indicative of topping. The GGT change timer, while long, has lost nearly 2% since going long, which is uncharacteristic, since it is up 51.4% in about a year.

Be careful out there. We need higher prices on higher volume. Ideally, we need two days of this to really show a powerful up leg. Until then, I plan to keep my powder dry.