Wednesday, February 24, 2010

Potential timer signal change ...

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GGT has developed a timer that is based on the change of the Long-Cash Ratio (LCR).  The LCR is exactly what it sounds like -- the ratio of the number of stocks in the database with a LONG recommendation, relative to the number of stocks in the database with a CASH recommendation.  The current signal going into Tuesday, February 23rd was long, and Tuesday was the start of the 9th consecutive trading day with a LONG status.

With the close on Tuesday, February 23rd, the signal has transitioned to a Long-Cash (0) value.  If today (2/24) is a down day as far as the database is concerned, then I expect it will further transition to a CASH (-1) level, which would be bearish for long positions in equities.

Pay particular attention to the ADV/DEC in the major exchanges today.  One way to do this is to watch the data on the home page at http://www.finviz.com/, and you'll see an aggregate of all action for the day.  Individual index action is largely irrelevant, although the S&P500 index does contain the most stocks hence will be closer in representation to the ADV/DEC performance.

For the record, the LCR closed below 1.0 on Tuesday after hitting a high of 1.099 on Monday.  1568 stocks are indicated LONG going into Wednesday, and 1586 stocks are indicated CASH.  While the 13d/22d/34d EMAs of the LCR are all positive in direction (bullish), the day-over-day change is decelerating (bearish), and we need to watch this for a change in market sentiment.  Furthermore, the 55d and 65d EMAs of the LCR are trending DOWN, which is intermediate-term bearish.  We need these all to line up, either all pointing upward, or all pointing downward, to call a definative market trend.  Right now we are in transition, so I intend to protect profits.

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Remember, you are responsible for your own trading decisions, not me.  Do your homework.

Regards,

pgd