Saturday, September 26, 2009

September 26th Weekend Update

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This past week was characterized by a peaking in GGT price on Tuesday at $19.20, the highest value we have seen since we started keeping track in August of last year. This was achieved on average volume, which I interpret to mean that the event is relatively unremarkable. This is a shame; I would have liked to see the pricing peak on higher volume, showing conviction in the market to drive us upward. The 8dEMA and 13dEMA are trending down, but the 21d and the 34d are still trending up, which is longer-term bullish. We've finished the week at $18.73 on below average volume (1.3M shares) so although we pause, I bet we start climbing again soon....



Of greater significance is that the GGT long-cash ratio fell continually throughout the week, peaking last Friday (9/18) at 3.695 (3928 stocks LONG, 1063 stocks CASH), despite a all-time peaking in GGT price on Tuesday. I take THIS as a very important event -- a clear divergence. Price moving higher, but more and more stocks slipping from a LONG status to a CASH status. I believe that this kept me from even thinking about moving long. The LCR is now at 1.584, indicating that 3057 stocks are LONG and 1930 are CASH. That's nearly double the CASH stocks from last week...



The GGT change timer transitioned to a LONG/CASH (0) value on Monday 9/21 close, signaling that we should protect our long-position profits. If you would have picked up the highest New Long Contra ETF, as indicated with the GGT ETF files posted the morning of 9/22 (there was only 1 NL), you would have established a position in SCO, somewhere around $16.56. It closed Friday 9/25 @ $19.09. or a gain of over 15%. Luck of the Irish? Who knows. Certainly the benefit of hindsight.




I did NOT pick up SCO on the 22nd; I typically wait until we get a confirmed CASH signal (-1) from this timer to move into contra positions, and this happened with the close on 9/22. On the morning of 9/23, after I posted the 9/22 ETF data, you would have seen that there were only two Contra ETFs listed in the LONG side: SCO and SMB. SMB has light volume, so I would have passed on it. SCO on the other hand is rather liquid, so using the 10:30 price of $16.94 (I actually got in a bit after 11:00 @ $17.73), you'd be doing pretty well as of Friday's close.

Hindsight? Perhaps. Nevertheless, this is how you can use the LCR change timer to your advantage. This is a quick signal so be prepared.

In looking ahead, it's too late to use the LCR change timer to cherry pick Contras; the next signal will be a CASH/LONG (0), which will tell us to get out of our Contra positions that we hold.



The GGT Bull-Strength indicator continues to be lock step with price, which is good and bad. Good in the sense of we have correlation, bad in the sense that without any deviations, we can't really use the indicator as an early warning system. The value for the strength indicator is now at 0.27, just 0.03 from Thursday, so it appears to be bottoming out and I wouldn't be surprised if we reversed from here.



The buy-strength continues to weaken, and is now at 0.45, practically in the middle of the range. Given this, we have as much upward range as downward, so this oscillator becomes totally useless at this point, except to show us that we are nearing bounce levels. Take a look at the figure above.

TMF, the Direxion 3x ETF that tracks the 30-year long bond, has signaled "New Long". GGT typically has called this one correctly. I'd set an exit at about 3% gain, but only use mental stop losses since it can swing a good amount in a day. Here's the chart:



Given that we are not on a timer transition, I do not see any other stocks or ETFs worthy of our monies at this time.

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I am seeing declining prices on average or below-average volume: bullish for the short-intermediate term. Lack of volume means that the institutional investors are not dumping their positions in any coordinated way.

The LCR continues to fall, and still has considerable room below the present level to keep going. Nevertheless, looking at the most recent history of reversals, we are approaching areas where a reversal to the upside could occur, WITH PRECEDENCE.

The LCR change timer is at least two days away from confirming a LONG call. It is presently in CASH, and if you aren't you probably have seen your profits erode by a few % points over the last few days. I would not sell the farm at this point if you have missed the downward movement; I think a reversal is only a day or two away.

GGT Bull Strength is nearing reversal levels. It could play here all next week, but that would not be normal. I'm looking for a reversal.

GGT Strength Index/Oscillator is nearing reversal levels, and has just broken the midway point. Like the Bull Strength, it could play here or lower all next week, but I don't think so since the trend is up.

GGT For Monday:

I am holding Contra ETFs. I plan to close them if the market is moving strongly to the upside by 10:30 or 11:00. I may put a 1% TSL in place or I may close them outright. We'll see if there is a rally.

TMF is in a solid up-trend, and we may have missed the entry (oh well). Resistance appears to be just over $46; if we open above Friday's close (look it up) then I think (because I'm aggressive) that I'll put a position on. If we break $46.10 or so then I'll put another position on, as long as the trend remains upward on Monday.