Friday, April 16, 2010

All-time LCR Peak on 4/15, All-time Long Peak on 4/15, Volume Peaking

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GGT classifies stocks into 6 categories:

New Long
Affirmed Long
Long
Cash
Affirmed Cash
New Cash

You can only achieve a "New Long" status if you were in one of the three cash status, and conversely, you can only achieve a "New Cash" status if you were in one of the long status.

Affirmed "X" means that the criteria is the same for the respective side of the table -- if you have an Affirmed Long, this is the same criteria for a "New Long", but since you were already long, this simply reaffirms the status.  The converse is true too.

As stocks weaken, they move from New Long/Aff. Long to Long, and as they strengthen, they move from New Cash/Aff. Cash to Cash.

As of 4/15, we have hit an all-time peak with the greatest number of "Long" rated stocks since we started tracking in September of 2008.  Historically, we've seen sideways movement or a decline from this point in the past, so we need to watch.

As of 4/15, we have hit an all-time peak in the Long-Cash Ratio (LCR), which is the ratio of (New Long + Aff. Long + Long) / (Cash + Aff. Cash + New Cash).  This ratio is now 4.219:1, meaning that 2413 stocks have some form of long recommendation, and 572 have some form of cash recommendation.  As new territory, we can't infer past behavior, but suffice to say, we've ALWAYS corrected when these levels have been this lofty.

Finally, we have experienced 2 consecutive days of volume of 36% and 35% above average levels.  GGT Price has moved up only $0.02 with the action on Thursday, so this is a prime example of churning.  Churning is associated with topping formations, or pauses before another move upward.  Given the low number of available cash-recommended stocks, I don't see how we can move upward in a big way, but who knows?

Caution is advised.

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Remember, you are responsible for your own trading decisions.  Please do your diligence.

Regards,

pgd