Wednesday, March 24, 2010

And the beat goes on ...

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I learned a long time ago not to fight the tape, which is why even though I'm waving yellow caution flags, I'm still moving into long positions, albeit timidly.

I entered KMB yesterday and am above water, but just barely.  A check of the charts this morning shows that it's a good, intermediate-term stock, provided it keeps the momentum.  I also entered AMGN on Monday and I think it will do fine over the next several weeks, a correction not withstanding.  As I indicated this past weekend at our meeting I am mostly in cash, as GGT confirmed a move to cash last week.  While some of you may be second guessing my decision, the important thing is to:
  1. believe your indicators
  2. believe your indicators
  3. believe your indicators
The GGT LCR Change Timer has never been wrong in 18 months of published signals, e.g., the market went up dramatically even though the timer indicated CASH.  It's certainly been early, which tests your meddle, but I'm in this for the long haul so I don't care if I'm early.  I think the risk is simply too high to be 100% committed at the present time.  Tip your toe in, certainly, but keep your bathing suit dry for now.

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The GGT Price index closed at an 18-month high of $25.09, up 0.885% from Monday's close of $24.87.  Volume was normal at 2.068M shares, with 50d MA volume at 2.053M shares.  Again, all within statistical averages, so up prices on steady volume is bullish.

GGT Bull Strength, which is the ratio of (New Longs + Affirmed Longs) / (New Cash + Affirmed Cash), jumped dramatically on Tuesday, showing that underlying changes in the database were strong.  We need BOTH volume AND price to get New Longs/Affirmed Longs to signal, and a major jump in this indicator shows that we experienced just that.  Continued Bull Strength is very bullish, so although we've watched this indicator drop several consecutive days, continued dancing up here at these levels is bullish.  Here's the chart (click on the image to see a larger view):



Note that I've circled when the Bull Strength indicator was very weak ... when it has been in the low areas this typically has signalled a significant and sustained moved to the upside.  We're at the opposite end right now, so I'm not sure where the fuel for a sustained run will come from without a reset.  Food for thought.

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The GGT Long-Cash Ratio moved UP on Tuesday, reversing a 3-day drop.  It is now at 2.777, and indicates that 73% of the database is LONG (2341 stocks), while 843 stocks are in CASH.  Of greater importance is that the 13d EMA of the LCR Rate of Change has reversed for two consecutive days, and although it is still negative, it is becoming less so each day.  This is bullish, especially if it crosses back into positive territory.  Here's the chart:



I was expecting a bigger "reset" with this indicator, so we'll have to watch it in the following days.

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The fast LCR Change Timer has moved from CASH (-1) to a CASH-LONG (0) status.  This is normal when the LCR reverses and is an early indicator of a bullish change.  The slow LCR Change Timer is indicating CASH (-1).  If we have another up day the fast LCR Change Timer will move to a LONG status.  We are at least 2 days away from confirming this change with the slow timer (Wed and Thurs action).    Watch the ADV/DEC line on stocks throughout the day ... if we have more ADV than DEC there is a good possibility of the fast LCR Change Timer moving to LONG status.

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The DJ30 strength indicator is at 0.96.  All the index strength indicators are above 0.65, and moved upward yesterday.  There is still room for these other indexes to move upward, e.g., this tired bull isn't done yet if it doesn't want to be....

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

Regards,

pgd