As always, let's start with the facts ...
GGT price fell from Wednesday's value of $19.38 to $19.21, a drop of nearly 0.9%, on extremely light volume of 692K shares. Most of the trading floor/buyers/sellers were obviously with their families. Friday-over-Friday the price of the GGT actually INCREASED $0.05, and because last Friday's reading was the same as the previous Friday's (11/13), we have a situation where we are actually horizontally trending...
If it weren't for the continually falling volume I would be very bullish here; two weeks in the same area on low volume points to a fairly stable environment from which to build. Since we're not seeing high volume with falling prices we're not seeing dumping of equities -- just the opposite -- everybody is "sitting pat". Here's the most recent GGT price and volume graph; click on the image for a larger view:
Thursday's events relating to Dubai rippled through the financial GGT database on Friday, causing the long-cash ratio (LCR), to drop from Wednesday's value of 0.832 to 0.626, indicating that 1822 stocks are on the long side of the recommendation list and 2912 stocks are on the cash side. 2193 stocks were long on Wednesday, and 2000 were long last Friday, so just like we're seeing price meander, we're seeing the database drift more-or-less horizontally. The high over the last 5 days is the 2190 achieved Wednesday, and the 1822 achieved with Friday's close represents our low point. Here's the chart regarding GGT Price and GGT LCR ... click on it for a bigger view:
In order to move the LCR upward, we need increasing prices AND increasing volume across the database -- remember that the movement from CASH to LONG status requires higher prices on rising volume. The decrease in volume over the last few weeks has not helped this situation, and correspondingly, the LCR has dropped because as prices drop, they slip down the one-way door into CASH status, only to fail to rise back into LONG status when there is no volume accompanying the appreciation in price. Furthermore we're seeing lack of participation of the small-caps in any rally, and this is keeping many / most of the indicators on the bearish side of their values. Hence, to really push the LCR upward, we need indicators like the R2K, the S&P400, and the S&P600 regain their leadership positions relative to the S&P100, DJ30, or NASDAQ100.
If you take your favorite software program, and plot the performance of both the IWC, which is an ETF that tracks microcap stocks, alongside IWB, which tracks largecap stocks, you'll see the following (click on the image for a larger view):
Shown above is IWC (blue) and IWB (black) for a 3-month look-back; the same situation exists on a 1-month as well as the 6-month lookback periods. The 1-week lookback is bad for both, with the microcap IWC getting hammered relative to the IWB with Friday's action.
My point to the above chart is that until we see leadership in the micro- and small-caps, we are not going to see huge runs to the long side with the LCR, because the large-caps are dominating, and in the equal-weighting of LCR calculations, there are fewer large caps than there are small and microcaps. The bias is pretty clear.
We have an indicator which is pointing us higher from a short-term perspective. It's called the GGT Bull-Strength indicator, and it is the ratio of (New Longs + Affirmed Longs) / (New Cash + Affirmed Cash). The intent of this indicator is to see how many stocks meet the criteria for changing states, either from Cash to Long or Long to Cash. When the number is large, we have an overbought condition, and when the number is small, we have an oversold condition. Click on the image for a larger view:
Right now, according the GGT Bull-Strength indicator, we have an oversold condition: the present value of the GGT Bull-Strength indicator is 0.0371.... To put this in perspective, we were at 0.039 on 10/28 with a GGT Price of $18.22, and the markets then moved up to $19.64 by 11/17, a total of 15 trading days later. Folks, this was an appreciation of 7.7% in 3 weeks. I'm not saying that this will happen again, but we need to be prepared for another move to the upside.
Our GGT LCR Change Timer is having a hard time with life. It moved from Long (+1) to a Long-Cash (0) state with Friday's action, and is signaling for us to get our CONTRA shopping lists ready. It has been flipping back and forth since 11/19, simply because the markets have been going sideways. Here's what the setup for Monday is:
- IF the ADV/DEC lines on the major exchanges are up by 10:00 - 10:30, then there is a high likelihood that the day will be up as far as GGT is concerned. This will cause the LCR Change Timer to stay at Long-Cash (0), effectively cocking the gun for Tuesday. I am presently LONG, hence I will do nothing if this is the case on Monday.
- Alternatively, if the ADV/DEC lines on the major exchanges are down by 10:00 - 10:30, then there is high likelihood that the day will be down. This will signal us to move to cash or contras, and I will do so on MONDAY around this time frame.
In my best Robot voice from "Lost in Space", all I can say is "Warning Will Robinson! Warning!" with my arms flailing. Volume has been suspect, so if we have an up day, we need to see some serious movement in price AND volume, across multiple days, to signal a bull rally. Average/stddev GGT volume is 1.39M +/- 235K shares, so let's see that or better on consecutive days to have some confidence of things moving higher.
Click on the image for a larger view; here is the GGT LCR Timer superimposed with the GGT Price. The timer is right more than it is wrong, and is up 82% since inception in September 2008.
The database strengths are entering over-sold territory on a global basis, and on an individual basis, it's pretty clear that we need to enter long positions. Here's the support for this statement.
I'll not cover the BRICs this weekend; if you're interested, I'll include it in Monday's writeup -- simply leave me a note below.