Wednesday, November 25, 2009

Notables from Tuesday, November 24th

The LCR timer has moved to a LONG status (+1), indicating that we should be appropriately biased in our selections on a short-term basis.  The LCR value only changed by +3% from 0.775 to 0.796, which is not a large, decisive change.  With 2167 stocks LONG and 2722 stocks recommended in CASH, and volume in the toilet, I approach the signal with a combination of skepticism yet willingness to participate.

The GGT price index moved from $19.45 to $19.46, barely a change at all.  It did this on 1.14M shares of volume, which is -21% below the normal average volume of 1.44M shares.   Note that this is across 4900 stocks.

GGT strength fell from 0.613 to 0.568.  This is a notable change -- and the divergence with LCR moving upward gives us a reason to pause.

Here are the individual strengths of the various indexes I follow:

DJ30:  Dropped from 0.811 to 7.111
NDX100:  Dropped from 0.475 to 0.368
Brazil: Dropped from 0.534 to 0.529
Russia: Dropped from 0.722 to 0.389
India:  Dropped from 0.641 to 0.506
China: Dropped from 0.650 to 0.387
S&P500:  Dropped from 0.541 to 0.534
S&P400:  Dropped from 0.441 to 0.411
S&P600:  Dropped from 0.709 to 0.576
R2K:   Dropped from 0.666 to 0.564

Conclusions:  since GGT price is relatively unchanged, the LCR edging upward slightly causing the LCR Change Timer moving to the long side, yet with the underlying database strength decreasing, I think that we need to be careful and prudent about our alignment.  Note that the individual indexes above moved DOWN in strength, although the collective LCR moved upward only slightly.  We CANNOT sustain this divergence -- either strengths will reverse to support the increasing LCR, OR, LCR will reverse to support the falling strengths.  Falling strengths have more momentum, hence I think it smart to put a contra hedge on with a tight stop on the longs.

I will enter a hedge on my long positions that will be triggered by any weakness.  For example, for my UWM position, I will enter TWM (green body yesterday) if it moves above $28.50 (close + $0.05).  If it had a red body I would purchase if it moves $0.01 above the high for the day.   I have placed a sell stop at 98% of UWM's low yesterday ($24.94 * 0.98 = $24.44).

As always, leave a comment below if so desired.