Sunday, October 25, 2009

Notables from Friday, October 23rd, 2009

It's been a busy weekend on the update front -- over 4000 stocks were updated concerning their EMAs.  I've been working on some improvements to the speed of the optimizing code and I think that this new version will help me get through 5000 stocks faster, perhaps in 2 weeks or so.  I really need you software people to step up here because I'm not writing code as fast as I used to ...

GGT price fell again on Friday to $19.19, down from $19.51 on Thursday, and on relatively normal volume of 1.43M shares.  The 5, 8, 13, 22d EMA lines are trending down, and if we continue to have a down day on Monday the 34 will be under immediate pressure and the 55 may go horizontal.  Here's the latest graph of GGT price (thin line) and the EMAs.  Click on the graph to enlarge.



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The chart below is Elder's GGT Force Index, plotted with the GGT Price.  I've only taken the data since July so that you can see the details.

We've said numerous times in the past that the GGT Force Index is a great indicator; take a look at this figure:



Some points to note with respect to the time frame shown:
  • Once the Force Index (FI) peaks, GGT price does not move appreciably higher:
    8/3 peak @ $17.83 on FI = 467K, subsequent peak @ $17.96;
    8/21 peak @ $18.09 on FI = 374K, subsequent peak @ $18.18;
    9/16 peak @ $19.17 on FI = 493K, subsequent peak @ $19.28;
    10/6 peak @ $18.99 on FI = 339K, subsequent peak @ $19.68 (perhaps an exception);
  • Generally, when the FI dips below ~-450K, we trigger upward, usually around +4-5%;
  • The present FI is at -276K; while it is possible to reverse higher and sustain it, the data on this chart suggests that we will continue to drop a bit more.  I'd really like to see a drop below the 400K-450K level to signal a new up leg.
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I've been discussing the GGT channel lately; here's the chart:

















As you can see we are still within the channel indicated, and are 4.7% below the upper trend line of $20.08 and are 1.6% above the lower trend line of $18.88.  Our present price of $19.19 is right at the support line formed by the tops generated around 9/16-9/21 ($19.17, $19.13, $19.20, and $19.12), so the next few days will be interesting.  I think we can fall a bit more (perhaps 1.6%?) if we penetrate this support; if we penetrate the lower channel line then the next support is around $18.50.  This chart suggests that if history is any indicator, we'll pull back a bit more then reverse.

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Below, I've plotted GGT Bull Strength on a log-y axis so that we can get a view of the bottoms and our present value of GGT bull strength  This is not a log-relationship -- I changed it purely for visualization purposes.  Although you can read anything you want into tea leaves, we get reversals and sustained up-trends when the GGT Bull Strength drops below 0.1  Our present value of 0.233 suggests that we could drop a bit more from here before reversing.


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The Long-Cash Ratio (LCR) has dropped below 1.0 to a new value of 0.912, indicating that there are 2414 stocks in the database with a long recommendation and 2648 with a cash recommendation.  When you view this next graph you'll see that we can have a tremendous amount of fun with it:



The first thing that your eye should see is that we are forming the 2nd dip of a "W" pattern.  If you doubt this, take a look at where I've drawn the vertical arrows at the middle of each "W", from the LCR value to the GGT Price value.  We are clearly on the 2nd portion of *some* down leg; the question is whether it will drop as low as the 1st half, or better yet, whether it will mimic the behavior of the first two "W"'s, with a lower 2nd dip on each of the previous two occurrences.

The second thing to realize here is that if the past is any indicator (and we know that it's not in general), the upside portion of the 2nd dip could be pretty substantial, and FAST:
  • The 5/22 to 6/4 run up in LCR saw the GGT price go from $15.30 to $16.58, a 8.3% change to the upside in 9 trading days;
  • The 7/10 to 7/27 run up in LCR saw the GGT price go from $15.42 to $17.28, a 12.1% change to the upside in 12 trading days;
  • The 9/3 to 9/18 run up in LCR saw the GGT price go from $17.70 to $19.20, a 8.4% change to the upside in 11 trading days.
Of course, my crystal ball is as good as yours, so none of this may materialize and we may simply plunge; that is always a possibility.  Seems though that the market is in need of going up, so I think we'll reverse here within 10 days or shorter.  All I'm stating is that we all need to be vigilant for such a change to a move to the upside.

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In terms of our GGT Change Timer, it's presently sitting at a value of 0, and whipsawed the last couple of days.  This is indicative of a horiztonal market, and up to Friday, the LCR was bouncing around 1.56 (Fri/Mon) and around 1.09 (Wed/Thr).  The bias is still downward, and this was confirmed on Friday, October 16th with the Cash (-1) call.  The move into Contra positions the following Monday (10/19) was justified from a timer point of view, but we have lost about -0.8% in our overall "ideal" equity curve.  Nothing to get worried about.


If you are sitting on Contras, given the LCR "W" position that I spoke of above, I would hang on to what you have and be vigilant to a significant move to the upside.

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GGT Strength is now at 0.427 and has not been this low since early October.  The LCR and the strength index are in synchronization, which means that they are supporting each other's moves and that this is a good thing.  Unless presented information to the contrary there is NOTHING suggesting that we are going to reverse here, so for now, weakening database stocks is the call on the table.

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The last section here concerns the strengths of the various indexes that I am watching.  The weakest index is INDIA, with a value of 0.014.  Next in line for the domestic indexes is the Russell 2000 -- it has a value of 0.2 on a scale of 0:1 and fell a dramatic 60% on Friday, from 0.511 to 0.201.  ALL of the indexes, with the exception of Russia (which has been contrarian and has been at solid strength) fell, reflecting nearly wide-spread participation.

Note, these are all VERY FAST timers, on the order of days.  Do NOT confuse these signals with longer-term EMA signals, such as the 5-13-22 or the 8-13-22 sequence.  They will NOT be the same, guaranteed.

DJ30: 0.341, down from 0.647
NDX100: 0.296, down from 0.570
Brazil: 0.461, down from 0.582
Russia: 0.667, unchanged (!!!!)
India: 0.014, down from 0.088.  Be careful ....
China: 0.469, down from 0.604
S&P500: 0.290, down from 0.672
S&P400: 0.313, down from 0.615
S&P600: 0.256, down from 0.559
Russel 2K: 0.200, down from 0.511

First of all, take a look at India ETFs: FNI, EPI, PIN, INR, INP, and ICN.  PIN and INP are "New Cash" recommendations, and individually, they appear to be the boat anchor's in the lot.  The other ETFs, specifically FNI and INR, are showing good strength (columns AB and AC from the ETF worksheets that I post daily), but are terrible volume.  As far as I'm concerned, until we see some up tick here, the low values in India are going to stick.

Take a look at the Indian stocks that we track, visible from the GGT stock Dashboard file I posted over the weekend.  PTI looks strong, and is at a 52-week high .  This one has had quite a run up, and it appears to be clearing resistance.  Keep an eye on it for continuing to move upward. Any of the other Indian stocks (check the GGT Dashboard file) that are showing a Long or Aff. Long status could be a good basket to trade in the short term -- any time we are at this low of lows we should be trying to identify long stocks that will participate if the market moves higher.

As far as the other indicators, I'd wait until we have a better idea if they are going to continue lower.  I like to see values < 0.2 for a couple of days before calling for a hedge position ...

Remember, you're responsible for your own trades ...

Regards,

pgd