Wednesday, June 30, 2010

Deciding to sit pat even though it appears we will close below 1040 on the SP500... I'm not excited about bid/ask on SDD, and think we need to see whether 1040 becomes resistance....
Anemic volume in the contras....

LCR Change Timer is Bearish, Elder is Bearish, All EMAs are Bearish

Let's start with our usual GGT Status ...

As most of you are aware, prices fell yesterday on the global sell off.  This is reflected in a -3.6% drop in GGT prices, finally ending us at $23.10.  This is a huge drop from our local high on 6/15 of $25.00, -7.6% to be exact.  As with all major drops in prices, the next day is often a "dead cat bounce", and if that is the case today (Wednesday), it could be time to add some Contra ETF positions.

Volume was up 12% over the 50d MA, indicating that the big boys were playing in the sell off.  I like to see their participation, but not on the downside.  Negative prices on higher volume is not a great situation for the bulls and is known as a "distribution day", which is as ominous as it sounds.

The Long-Cash Ratio (LCR) is back down at 0.282, indicating that 622 stocks have some form of long status and that 2209 stocks have some form of cash status.  Put another way, only 22% of the database is long right now -- a very bearish tone.  Guess I didn't kneed to tell you that though ....

The GGT Strength Index, which bounces between 0 and 1 like an oscillator, has dropped to 0.200, which is my less-than-scientific level for indicating oversold.  With an anticipated dead-cat bounce today, we'll see if it's the popular stocks that bounce, or the entire database.   I'm not bullish, so I expect this value to remain in this area +/- 0.05 with today's action.

LCR Change Timer

Of immediate importance is that the LCR Change Timer is sitting back at -1, which is CASH.  If you are aggressive you may want to consider contra ETFs.  My favorite with this timer are the standard index -2x contras:  TWM, SDD, QID, DXD, SDS, and MZZ.  YES, I should have held onto these positions rather than selling last Friday, but I was content to lock in my 4% gains over 3 days.  Of course, I would have been more content to lock in the gains from yesterday, but I had only a small position in TWM in play ....

So here's how I will probably play today.  With the LCR Change Time at -1, I'll most likely wait until after 3:30 or so before entering a position.  I want to ensure that the ADV/DEC line is bearish, e.g., more DEC than ADV.  I use to determine this (see my blog a few days ago).  If we are more DEC today than ADV, I will look at the TWM, SDD ... list from the previous paragraph and look for those that have a bid/ask spread of $0.01 and are trading on higher volume than normal.  If we are bearish, and if these ETFs are participating, I'll enter my normal positions.

Contrasting, if the ADV/DEC line is up, with more ADV than DEC, then the signal is in trouble.  With this situation, the LCR Change Timer will transition back to CASH-LONG (0), and if tomorrow is up, would signal a move LONG.  Hence, today's action across the board is really important.  Note my caution from yesterday -- jumping into a trade mid-signal is NOT recommended, but I've not quantified it as it's hard to backtest.

I simply like the zones when we move from long to cash and visa versa.  These are more likely to work because market sentiment is changing and it takes a few days for everybody to catch up.


Here's HGSI's view of Elder:

As with all my images, right-mouse click on it to open in another window.

Elder's 13d Force Index has moved back below 0, as indicated by the pink background in the ribbon bar.  IGNORE THE 2d FORCE INDEX BEING GREEN -- it is negated by the 13d FI being negative.

The slopes of the 13d and 34d EMAs on GGT price are now negative and are pointing downward:  "the car is going backwards and is accelerating backwards".  This is bearish.  Period.  End of Analysis.

"Danger Will Robinson"  (arms flailing, as spoken by Robot in Lost in Space)

For intermediate-term trades, when you look at the Contra ETF list above with the Elder screen above, you'll see that most of the Contra ETFs are positive in the 13d Force Index (bullish), but the 2d Force Index is positive (which is blocking entry).   Hence, we need the 2d FI to move negative so we can enter the trend at a more favorable position. 

Wait for it ... wait for it...

Here's what HGSI has to say for ETFs that have 50d MA Volume > 50K shares, are above $1, and have a 2d FI that is negative but a 13d FI that is positive:

DGL looks compelling, less on on SHM, and SHV is impossible to make any money over the Elder time frames....

Look at the list using Velocity and Acceleration, as you can see emerging ETFs that meet the 2d / 13d FI criteria.  I'll leave that as an exercise for the reader .... :o)

Not a recommendation, just an example of how to use HGSI to find stocks/ETFs meeting a certain criteria.


Trading Plan for Wednesday

As indicated above, I'll jump on a few contra ETFs tied to my short-term timer if the markets are tanking in the last 30 minutes of trading today.  I don't really care about the rest of the intra-day. 

DGL looks good for a longer-term holding, according to Elder's 13d FI/2d FI criteria.  It would have to rise above $44.37 to meet entry criteria.  Looking at the chart pattern, I'm not going to retire on it's performance alone...


Remember, you are responsible for your own trading decisions, not me.  Please do your own work.



Tuesday, June 29, 2010

Volume vaporizes, most indicators are red.

Here's the dashboard:

As with all my images, right-mouse click on them to open in another tab for easier viewing.

Monday's action saw GGT price fall -0.37% on volume that was -27% lower than the 50d MA of volume.  Yuck.  Unlike Friday, where we saw some big-boy participation, Monday's action was quite poor across the board.

The Long-Cash Ratio fell -7%, so as a whole, the database is sliding more bearish.  This is also evidenced by the Strength Index, which fell from 0.57 to 0.369, indicating fragile strength overall.

The LCR Change Timer remains at CASH-LONG (0), simply because it was in CASH on Thursday, saw an appreciation on Friday (moving it to CASH-LONG), and then a reversal downward on Monday (maintaining CASH-LONG). This is shown in yellow on the graph above.  If Tuesday is a down day ( use the ADV/DEC info at ), expect that this will revert back to CASH (-1).  I typically do NOT re-enter when this oscillates at 0 then moves one direction or another, as I've not tested how viable that strategy is, but if you are aggressive, there probably is an opportunity to make a few % gains by looking at Contra ETFs if we have a solid down day by 3:30-ish.

Elder's 13d Force Index continues to indicate Long/Green, which is bullish.  Powered in part by the huge volume increase upward on Friday, by itself you would think it's okay to look at long positions.  We're too early:

  1. The slope of the 13d FI is downward.  This is bearish.
  2. The slope of the 13d EMA on price is downward.  This is bearish.
  3. The slope of the 34d EMA on price is downward.  This is bearish.
  4. The 13d and 34d EMAs are weaving about each other in a horizontal pattern, which is dangerous.
Here's HGSI's view of Elder:

I simply can't advocate moving long with the slopes of the 13d / 34d EMAs being negative as well as virtually no winner in the Bull/Bear power graph.

Back to the GGT Status Graph:

The Pricing EMAs are all inverted, with the 8d < 13d < 21d < 34d.  This is upside-down for a bull leg and tells us that we'd be crazy to be in long positions right now.

The LCR EMAs are all inverted, nailing the coffin shut on longs.  The DATABASE EMAs are inverted, so we are clearly in a downtrend in the macro sense.  Perhaps not on a day-for-day evaluation (more horizontal than down), but over several days to weeks, gravity is working it's magic and is pulling everything down.


Trading Plan for Tuesday

I'm happy to sit pat today.  I'm holding a small position in TWM and everything else is in cash.  I'm waiting for some form of over-sold indicator and move higher on Elder's signals, which I doubt will occur today.

Futures are down as I write this, so I expect a less-than-stellar performance day.  Case-Shiller 20-city index comes out at 9 a.m., and it is expected that we'll have better numbers there (expected is 3.4%).  If we miss, fuel to the downward fire.  If we hit/beat, then we'll probably continue to churn.  Consumer Confidence comes out at 10 a.m., and expectations are for a slight drop from 63.3 to 62.  Again, if it's worse than 62, look for a downward move.


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



Sunday, June 27, 2010

June 25th Weekend Update

Let's start with our standard GGT Status Dashboard -- right-click on the image to open it in another tab.  We will be referring to it later:

The GGT Price index moved up on Friday, June 25th, +0.88%, ending at $24.06.  Last Friday's value was  $24.91, and the two-week-ago value was $24.35, so we're below both of these levels and the tone over the last week has been bearish.

Adding to our uncertainty, we are presently between two Fibonacci levels, so it is only a guess at where prices may go.  Here is a graph that shows you where we have been:

Of particular interest in the figure above is that the 38.2% retracement seems to be a good support for the GGT stocks (> $1, 50d MA Volume > 100K, traded on three primary exchanges).  We'll see if this holds going forward.

What the above graph does not give us is any indicator of market psychology -- the GGT pricing level has upside as well as downside room to move.

Note that GGT Volume jumped HUGELY on Friday, up +45% over the 50d MA.  This is quite bullish, if nothing else, simply because it shows broad participation by the active institutions.  This jump in volume is quite apparent on the next graphic:

You can also see the 38.2% Fib line acting as a support.  I find this interesting, as it does give us some form of idea about downside risk.

Of course, I must often remind myself that the market has no knowledge of GGT, the filters of GGT stocks, nor is the set of people watching GGT greater than about 300 of my closest friends and acquaintances.  This means that GGT fits to these indicators are SECONDARY indicators, unlike "penetration of the 50d MA of price" (just an example), which everybody watches.

Here's a view of Elder, which you may want to create using the %b Shift 5d filter in HGSI.  THIS IS A VERY POWERFUL GRAPH, and one that really shows an advantage to HGSI:

This is my own modification -- you will need to create this yourself.

  • I've put an Elder 13d FI Ribbon in the 2/13 day window, 
  • I've added an Elder 2d FI Ribbon that IS GREEN WHEN the 2d is NEGATIVE (this is reverse of how you normally look at it)
  • I've added slopes of the 13 and 34d EMAs, smoothed with 4d EMAs, and 
  • I've changed the 22d EMA and 50d MAs lines to my 13/34 EMAs.
Here's how I interpret the graphs:
  • The decrease in Bull Power over the past week but lack of matching increase in Bear Power should give you pause.  The markets are fighting a "balanced" battle.
  • The Elder 13d Force Index ribbon clearly shows that we are GREEN, which means that the FI(13) is positive.  This is a bullish indicator.  You can see from this graphic, as well as the my status graphic at the top of this blog that we have been "positive" for the last three days.
  • The Elder 2d Force Index is RED.  This means that it is POSITIVE, and is blocking us from entry.
  • Curbing our enthusiasm is that just below this window is a window containing the slopes of the 13d EMA and the 34d EMA, both smoothed with a 4d EMA.  The red line corresponds to the slope of the 13d EMA on price, and the yellow line corresponds to the slope of the 34d EMA on price.  What you should get from this is that

    1) the slopes are headed downward off a BIG positive value.  This is BEARISH.
    2) the slopes are both below 0.  This is BEARISH.
So, even if you were inclined to move into the market because of Elder's 13d signal being positive, there are many warning signs that should shut down that line of thought.


If you want to see what a good set of patterns looks like, in context of what I've presented above, here's the same view, but for the last several months:

I've placed the cursor at the crossing of the 13/34d EMA slopes.  YES, THIS IS EARLY (2/11/10).  Point here is that this crossing would have been an early indicator to wake up, that something positive was happening.

Note too on the graph above that there were several entries to the last bull leg that would have done you well.  So, even if you missed the first primary entry, there are numerous areas where the 2d Elder was negative but the 13d Elder and 13/34d slopes were positive, allowing you to enter on continued strength.

Patience.  Now is not the time to have a mass entry into long positions except for surgical strikes (e.g., according to the LCR Change Timer, which is a very short-term timer).


Refer back to the GGT Status Dashboard, which is the first image in this blog entry.

The LCR jumped Friday, moving from 0.434 to 0.533, and is indicating that 986 stocks have some form of GGT "Long" status and 1850 have some form of "Cash" status.  I also note that this caused the GGT LCR Change Timer to move from CASH (-1) to CASH-LONG (0), simply because of the significant advance in stocks on Friday.

While not a perfect proxy, you can easily see what is going on intra-day  (if so inclined) by using a free service called FinViz, which you can view at  Once there, the upper right corner of the home page will tell you a great deal in a very short period of time.  Note that I have the paid subscription, hence the "Elite" showing up in the title:

What I find important about this is that:

  1. Intra-day relative volume is shown in blue.  We can see that for the DOW, volume in those stocks was up nearly 1.5x
  2. With respect to ADV/DEC and predicting what the GGT LCR Change Timer will do, we can watch the 4523 Advancing/1696 Declining bar to see what is going on at any point in the day.  I find this bar indicator very important between 3 pm and 4 pm, as it helps me to decide final trades or to get the jump on the LCR Change Timer.
  3. IMPORTANT ===>  Note that we had 144 New Highs on Friday, but 154 New Lows.  So while we  had far more advancing issues than declining, we had more stocks hitting bottom that closing at new highs.  If this isn't a warning shot ...
I use FinViz as an intra-day view and am experimenting with their stock screener.


My Decision to Liquidate My Contra Shares Early

I liquidated my Contra ETFs mid-day on Friday to lock in their gains, especially going into an uncertain weekend.  For those of you who asked why I did this, in absence of a timer signal, take a look at the following chart:

You may want to print this and put it by your PC.  Alternatively, you can send me a note via the Yahoo! GGT web site and I'll post the Excel datasheet in the file section for you to download.

This chart shows the annualized gain of a position, given the number of days you've held the position as well as the actual gain within the position.  As an example on how to read this chart, if you hold an investment 10 trading days (go down to 10 in the left column), and the gain is 1% at the end of the 10 days (go over to where 1% is indicated then drop down to where it meets the 10 in the left column), you'll see that on an annualized basis, your annualized gain is 44%.  

Does this mean you pocket 44%?  Of course not -- you pocket 1%. What it means is that for trades that are held on short time frames, and done consistently, you can see how your gains rack up.  This is the premise behind the GGT LCR Change Timer when coupled with Money Management 101.


Monday's Trading Plan

I'm holding a small position in TWM, a portion that did not execute due to my limit order.  If the markets look strong in pre-market trading I will most likely sell this in the pre-market, as it has fallen to a profit of only +0.60%.  Conversely, if markets look week in pre-market, I will most likely hold.

I intend to sit pat until later in the day.  If I see strength in the markets in the last 15-30 minutes of trading, according to the FinViz site I wrote about above, we can expect the LCR Change Timer to transition to a LONG (+1) call.  I would want to see the ADV > DEC on this site.  According to our rules for the LCR Change Timer, positions would be opened on UWM, SAA, QLD, DDM, SSO, and MVV, but only if they were above the previous day's high by at least a few pennies.


Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.



Friday, June 25, 2010

Protecting Contra Profits NOW

Given that
  1. it is Friday,
  2. the G8/G20 folks are meeting
  3. the FinReg folks are causing all sorts of discontent
  4. the major indexes have started lower the last few days, bottomed, then moved upward
  5. my 2-4% gains are eroding
I have placed limit orders to close my contras and secure the gains.  1-3% over 3 days is a very nice return, especially on an annualized basis.


I'm not responsible for your decision to trade.  Do your own work please.



The Bears are in Control in the Short Term

Here's the GGT dashboard through Thursday night's close:

Thursday was a solid down day, as we all most likely know, with the GGT price index falling -1.65%.  Remember, these are liquid stocks with 50d MA over 90K shares, so this was a broad selloff.  Volume was up from previous days but still -15% below the 50d MA; in William O'Neill parlance this was a "distribution day".

The Long-Cash Ratio continues to fall, now sitting at 0.434, a level it hasn't seen since 6/15/10.  GGT strength continues to weaken to 0.254, and at this level, would not surprise me if it reversed, as this is indicating oversold.  This being said, with futures down at 7:31 a.m., I'm not holding my breath for an upward reversal.

Our LCR Change Timer continues to be on the cash (or Contra, if you are aggressive) side of the market, and  my contra positions are now collectively up between 2.9% and 4.3% since purchase on 6/22.  It is most likely too late to jump on these if you did not follow me.

Most surprising to me is that Elder is continuing to attempt to lure me into the long side of the market, with the Elder 13d Force Index above 0 and the 2d FI below 0.  I note with confidence that the 13d and 34d EMAs are both heading downward, and that the 13d < 34d, indicating that we should wait.

The LCR EMAs are now fully inverted, e.g., the 8d < 13d < 21d < 34d < 55d.  This is completely upside down for any type of sustained bull, and until this starts to reverse, we should avoid long positions.


Trading Plan for Friday

Hold onto your hat ... it's going to get more rocky as the end-of-quarter window dressing occurs.

While it is possible that the contra gains may erode some, I intend to sit pat.  Aside from a very low GGT strength number, there is nothing that is compelling me to sell the contras prematurely and sit in cash.  We'd need the Dow30 to rally 1.45% today to wipe out my DXD gains, and I just don't think today will be the day.  Nevertheless, if the ADV/DEC ratios favor the longs by the end of the day, protecting contra profits TODAY would be prudent, as the LCR Change Timer will transition to a cautionary CASH-LONG (0) position.


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



Thursday, June 24, 2010

Elder 13d Force Index Whipsaws Positive, but ...

Here's the update dashboard through Wednesday's close:

As with all my images, right-mouse click on the picture to open in another tab.

GGT price fell another -0.2% on Wednesday, ending the day at $24.25, down significantly from the peak of 6/15 when it closed at $25.00.  Volume continues to be on the light side, down -21% from the 50d MA of volume.  We're in the summer doldrums in terms of large transactions, although with the end of the quarter around the corner, I did expect volume to increase as the fund managers get positioned.

GGT strength fell again on Wednesday, and is now sitting at 0.326.  We're getting closer to reversal territory, so I would not be surprised of a rebound in the next few days.  Futures are down this morning, but as we've seen numerous times, this could certainly reverse on us.

The GGT LCR Change Timer remains in CASH (or contra ETF for the more aggressive of you).  My contra ETF positions that are tied to this timer are up just under 1%, having given up a good portion of their gains with the action on Wednesday.  It does appear that we're in for increased gains at the open -- we'll have to see what the day holds.

Elder's 13d Force Index has moved back to the Long side because the 13d FI is greater than 0.  We're obviously on the threshold, having experienced a whipsaw, so caution is advised.  Although the 2d FI is negative, signaling a good entry into stocks if they individually show strength above Wednesday's high, I do think we need to be very careful here because the slopes of the 13d and 34d are heading down, not upward.  Entry into the long side at this point is risky by all of Elder's measures, and for the more conservative of you, I would seriously consider sitting pat.

The slopes of the pricing EMAs are all pointing downward, which is bearish.


Trading Plan for Thursday

No changes.  I will continue to hold my contra ETFs, which are just floating around their 20d EMA.  I'm a bit concerned that the 20d EMAs of the individual contra ETFs are all starting to trend downward, so this bear is weakening.


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



Wednesday, June 23, 2010

A Sea of Red; LCR Change Timer is CASH, Elder is CASH

Google is having significant problems, so I'm attempting to upload this via email.  We'll see if it works. 

Here's the daily status dashboard: 

GGT Price fell -1.90% on Tuesday on below-average volume, the latter being the case since 6/9.  Of greater importantance is the marked reversal of the Long-Cash Ratio (LCR) -- it has fallen 26% to 0.665, well below the 0.932 peak of last Friday.  GGT strength has also dropped significantly to 0.349, and values below 0.2-ish would be considered oversold and a reason for looking at longs, provided that Elder returns to a bullish stance.

Note:  The LCR Change Timer has moved to CASH, as we expected with a down day (see yesterday's blog at once Google gets their act together).

Note:  ELDER FORCE INDEX has moved to CASH.  This is a reversal to the cash side which is fairly uncommon, and it shows that there is a lack of strength on either side (bulls or bears).  Specifically, the 13d MA of the Force Index is now negative, giving us the red "Cash" indicator.  The slope of the 13d FI is also pointing downward, which is bearish.  In this particular case we don't care what the 2d FI is doing -- it is trumped by the 13d FI; same with the remaining slopes and other indicators.  All week I've been saying that without the 13d MA > 34d MA that this rally was at risk, and here we are.  I hope you were listening.

The 13d MA on price ($24.37) has now exceeded the 8d EMA on price ($24.36), which is bearish.  This is going the wrong way for a bull.

The slopes of the pricing EMAs (8, 13, 21, 34, 55) have all turned down.  This is bearish.
Not shown:  Price has fallen below the value of two weeks ago, which is bearish.


Trading plan for Wednesday

I placed 1% Trailing Stop Losses on all my long ETFs that are tied to the LCR Change Timer, and I expect that they will trigger today.

I placed orders which filled in the last 15 minutes of yesterday's trading on TWM, QID, DXD, SDS, and MZZ.  If we have a strong day today I may add another 25% position to these, to lower my basis.


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



Tuesday, June 22, 2010

LCR Change Timer Signals a Caution Flag

Let's get right into this, because I want to get this posted in order to be timely this morning:

GGT price has now fallen two consecutive days on continued lower-than-average volume, with yesterday's volume being incredibly poor.  Downward drifting prices on lower volume is not a cause for concern to the primary trend -- the big boys are not playing when this occurs.

Of interest is that the Long-Cash Ratio (LCR) fell for the first time since 6/9, and is now sitting at 0.894.  If you have been reading the past entries you will understand this to mean that prices, volume, and LCR should be in sync to the upside, and prices/LCR should be in sync to the downside.  We are now achieving that, so the world is whole.  Seriously, the LCR only dipped -3% on Monday, but it was enough to cause a few indicators to flash a caution sign.

GGT strength continues to weaken, and is now at 0.557.  This is no-man's land -- the database has considerable room to move up (0.443 to be exact) as well as considerable room to fall.  At this level the indicator is relatively useless.

Of importance is that the LCR Change Timer (fast) has moved to 0 from +1, which is now a LONG-CASH position.  IF TODAY IS A DOWN DAY AS FAR AS THE ADV/DEC line is concerned (watch, upper left-hand corner on the home page), then this timer will transition to CASH with today's action.  THIS WOULD BE THE TIME TO CLOSE LONG POSITIONS that are tied to this timer.

Elder is still indicating long, and if the particular stocks you are interested in are clearing previous highs, this could be a good entry.  Note that the 13d is < 34d EMA, which means the confirmation for Elder Force Index has NOT triggered.


Trading plan for today:

1) if the market is down near 4 pm I intend to close my long ETFs, mostly for a gain of a few percentage points.
2) if the following contra ETFs are above yesterday's highs I may purchase small positions of each:  TWM/SDD/QID/DXD/SDS/MZZ


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



Monday, June 21, 2010

Divergence between LCR and Price Continues, Bulls are in Control

Good morning everybody.  I hope that you had a nice Father's Day weekend.  Mine was quite enjoyable with my two boys.

Here's the daily status chart:

We are still experiencing a divergence within the market.  GGT price fell another -0.08% on Friday, on continued below-average volume.(note that we've had 7 days of below-average volume).  The move down is not significant, so light drifts downward on mediocre volume are not causes for major alarm, but on the other hand, are not ringing the "Bull" bell loudly either.

Of interest is the divergence in price and the Long-Cash Ratio (LCR).  The LCR continues to climb, indicating that within the database of 2900+ stocks, a significant number are moving above historical thresholds on both price AND volume action.  This is an internal rotation within the market and we've seen it several times over the last 18 months.

The LCR is very close to unity in the database -- it is sitting at 0.923, indicating that 1373 are "LONG" and 1487 are "CASH".  We've had 7 consecutive days of increasing LCR, which certainly is bullish.  We have a considerable amount of up room too, which is also bullish.

GGT strength continues to float around the high 0.6 and 0.7 level.  We played in this range during March/April, without a major reset downward, so it is possible to keep this momentum, especially with database rotation.  Although we certainly could reset and drop in the markets from here, I think that there is too much momentum to pull is downward for any sustained period of time.

Our LCR Change Timer continues to indicate a solid LONG call, and has been here since the close on Friday, 6/11.  Since that time we're only up in the broad market about 2.3%, so this hasn't been a raging bull. Nevertheless, it's a long call, and right now, if you are not participating, you've missed a good up call.

The Elder timer, which is a bit longer, signaled entry with Thursday's close (2d Force Index dropping below 0 while 13d above 0), and Friday's action saw more of the same.  If today (Monday) is an up day there is a great chance that the 2d FI will move positive, resulting in a new up leg call.  I am looking to add to long positions at the open Monday morning.  I do note with some pause that the conservative side of the Elder signal is still bearish, e.g., the 13d < 34d.

All other major indicators of the GGT system are relatively unchanged.  I will be posting a video of the various graphs later today.


Today's action plan:  add to my long ETF positions at the open


Remember, you are responsible for your own investment decisions, not me.  Please do your homework.



Friday, June 18, 2010

Elder 2d Force Index is Negative, LCR/Price/Strength Divergence

A neutral day for prices, but not for the underlying database.  Here's the status chart:

As with all my charts, right-click on the image to open in a new tab or window.

GGT price was unchanged for Thursday, literally finishing at 0%.  Volume continues to be in the toilet, down -23% from the 50d MA.   The Long-Cash Ratio (LCR) continues to move upward, which is a divergence from price, increasing 9% to 0.717.  This tells me that although the database, as a whole, is not appreciating, there are stocks that are gaining strength on appreciable volume, which is significant.  This cannot be sustained -- either the database price action must continue upward or the LCR must begin to stabilize and align with price action.

Further worrisome is that the database strength - an aggregate rollup of the individual strength of 2800 stocks,  continues to fall, having done so for the past two days and is now resting at 0.683.  Again, increasing LCR, unchanging price action, and falling strength do not point to a robust bull leg.  It can go either way though, so don't turn too pessimistic at the present time.

The LCR Change Timer (fast) continues to indicate LONG, and this continues to work nicely.  UWM is up 8.51% in the past 5 days, SAA is up 7.66%, QLD is up 8.96%, DDM is up 5.31%, SSO is up 5.42%, and MVV is up 6.68%.  My actual gains are a bit less because I did not enter until Monday morning of this week. Nevertheless, it pays to watch this timer -- as $1 on 12/31/08 has evolved to $2.48, although this is down from the 6/2/10 peak of $2.60 (we did hit a low of $2.42 on 6/10/10).  I intend to do nothing today with my positions.

Elder's 13d Force Index is positive, which is bullish.  The slope is heading down though, over the past two days, so caution is advised.  The good news is that Elder is signaling a possible entry into LONGs via a newly-negative 2d Force Index, if your selected stocks move upward today, clearing their previous day's high.  The 13 and 34d EMAs continue to point upward, which too is bullish, but note that the 13d < 34d, which is very cautionary.  This is a longer-term timer system and entry is always a bit unnerving -- something like jumping into a known cold lake.

The Pricing EMAs are continuing to sort themselves out, with the 13d > 21d as of Thursday's close.  This is bullish.  Note that the 34 and 55 are still inverted under these, so we're not in a full up leg at this time.


My trading strategy today is to sit pat on my LCR Change Timer ETFs, and although the 2d Force Index is signaling a possible entry into longs, I'm going to hold off entry today until I can spend some time this weekend looking at the BRICs, PIIGS, commodities, and other highly-rated HSGI stocks.


Remember, you are responsible for your own trading decisions, not me.  Please do your own work.



Thursday, June 17, 2010

Pt 1: Establishing an "Edge" using HGSI and the GGT System

When I take the 2800+ stocks that comprise the GGT universe, and when I separate them into their overall recommendations (New Longs, Affirmed Longs, Longs, Cash, Affirmed Cash, New Cash), and then I import these into HGSI, we can do some interesting things.  Let's start on that path:

[Sidebar: note that this stock information is available in the weekend posting of the GGT universe at the Yahoo! GGT web site, generally in the format GGT_stks_ByRecommendation_YYMMMDD.html]

This view is of the Ranking Window; within the GGT-10JUN16 folder I have 6 sub folders containing all of the stocks that comprise their specific recommendation.  Here, we see the recommendations of each group, based upon the index performance.

When you sort this list Relative Strength descending to the most current date, you see that the Affirmed Long group has the highest RS with respect to a lookback in time.  This is to be expected, because Affirmed Longs are those stocks that have both price and volume appreciation on the day of the recommendation.  Affirmed Longs were already ranked long (New Long, Affirmed Long, or Long), hence they are simply reaffirming that they are moving up.  As a group this is the strongest group, and has been for a good period in the past.

The next group is the Long Index group, and these are stocks that have been ranked some form of Long for some period in the past.  These stocks, while above their historic optimized price, volume, and ROC EMA values, are not rockets.  They may be plodding up, or they may be trending sideways.  We simply don't know from this view, but as you can see, with an aggregate RS of 85, they are still good candidates.

The next group is the "New Long" Index group, and this group has previously been in some form of "Cash" recommendation prior to today (New Cash, Affirmed Cash, Cash), and the action (in this case) on June 16th pushed it above the historic optimized price, volume, and ROC EMA values.  This is why this group has a RS of 71 -- these are new, emergent stocks, and they are ones we should be keying into.  Furthermore, take a look at the historical RS of this group 71 --> 57 --> 57 --> 29 ... etc.  As a group, these stocks were having the heck beat out of them in prior weeks, so it makes sense that stocks with this recommendation would have an improvement in RS as we move through time.

The 4th line down in the image is simply the entire GGT stock universe, and this represents the median of the database.  Use it as a point of reference.

The 5th line down in the image represents those stocks that have a "Cash" recommendation.  A stock has a "Cash" recommendation when it has appreciated in price but fails the volume test (e.g., moves from "New Cash" or "Aff Cash" to Cash).  This category is the "feed" category for New Longs, meaning that it generally is the primary source of New Longs, when they occur.  As a group there are numerous candidates worthy of our consideration, as many of Jeffrey's pull-back candidates reside here.

The 6th line down in the image represents stocks that have an "Affirmed Cash" recommendation.  These stocks are dangerous -- they are losing price appreciation, and generally, they are doing it on higher volume.   I rarely consider any stock with an "Aff. Cash" recommendation.

The 7th and final line down in the image represents stocks that were previously in some form of "Long" status (New Long, Affirmed Long, Long) and due to price, volume, or ROC values falling below historical optimized EMA levels, these stocks have dropped to their knees with a "New Cash" recommendation.  These are the stocks that tend to get hit the hardest in a given day, because they could have been peaking for some time, then the selling begins.  ANY stock with a "New Cash" recommendation should be considered for selling to lock in prices.  Note that often, by the time a stock gets this recommendation, it has given up a significant amount of gains.  There are other methods to look at whether we should sell the stock that are faster than this recommendation.


Previously shown was the Relative Strength View, here is the Velocity View, which compares the change in RS:

"Ian Slow RS" is shown as the method of calculating Velocity -- I tend to prefer "Ian Fast RS" for both Velocity as well as Acceleration views.

The analysis here is the same as previous; we see that looking back over time, Affirmed Longs have the greatest change in RS using the shown method (they are the same results for "Ian Fast RS"), hence we know that if we pick from the Affirmed Long recommendation list, that these stocks are already moving upward quite nicely.

Longs perform well too -- in this case outperforming 85% of the database.  Both of these areas should be good pools for us to pick sustained winners.

New Longs are weaker in Velocity, as you might surmise.  These have been in some form of Cash, hence their RS has been relatively low.  As new emergents, they have not demonstrated "staying power" relative to Longs and Affirmed Longs.  You might also surmise that they would have the highest Acceleration values, so let's see:


I like acceleration -- this is the change in velocity.  Stocks that are moving up with higher acceleration tend to be in 1) reversal mode off a bottom, or 2) move in the indicated direction until profit taking sets in.  Here's the view, using "Ian Fast RS":

Here, New Longs outperformed 99% of the database in change in Velocity, which we know from above is Change in RS.  Hence, Acceleration is the Change of Change in Relative Strength.  This makes sense -- New Longs had some form of Cash recommendation prior to today, so they have exploded in both price and volume, giving them this classification.   This is why Acceleration rankings are very good ranking indicators for newly emerging groups.


This is just the first part of how to use HGSI and GGT; I'll dive into using the Ranking tools as well as the Warehouse and Filters to start zeroing in on what I think are interesting candidates, all with the intent of establishing an edge in our trading.


Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.



Bulls are in Control, Houston, We Have a Divergence...

The daily snapshot of GGT status:

As with all my images, right-click on it to open in another tab and see the details.

Price fell -0.3% on Wednesday, locking in the gains of the previous few days.  Volume still is in the toilet, recording another -17%-below-average day.  We have a divergence:  the Long-Cash Ratio (LCR) moved upward from 0.553 to 0.659, indicating that 19% of the stocks in the database moved into Long status.

[ Sidenote: For the new readers, there is only one door into a long status, and that is through the "New Long" assignment.  To unlock this door, the stock has to have BOTH volume and price appreciation for the given day -- price appreciation is not enough.  The falling GGT prices of the database (-0.3% on Wed) were offset by a large number of stocks that surged on volume AND price, causing the LCR to move upward 19%.]

The bulls are in control.

Continuing the divergence observation, GGT strength fell (6th column) from 0.86 to 0.77, which is squarely in overbought territory.  These values suggest that there is a higher probability of a drop, but as we saw in the March/April 2010 run-up, we can play above 0.7 for weeks at a time if the bulls really want to dance around.

[Sidenote:  GGT Strength is derived from numerous conditions:  the present price relative to the past, the present volume relative to the past, and the rates of changes of both price and volume, relative to the past.  The greater the differentials of today compared to the past, the higher the strength.  A falling strength simply means that price OR volume OR rates of change are ebbing to the other direction, and reversals off a peak usually portends a short-term reversal in prices.]

The GGT LCR Change Timer (fast) is solidly indicating LONG, and my index ETFs that I trade in conjunction with this side are cooperating nicely.  On the long side I normally trade UWM, SAA, QLD, DDM, SSO, and MVV with this timer, and all are up nicely since the morning of 6/14 (I did not purchase the evening of 6/11, which would have been a better entry).

A private question came to me in email (please use the comments field on the blog or the Yahoo! group to ask  questions) about whether "... it is too late to jump on this [LCR Change Timer] signal?"  My advise, and note that you are responsible for your own decisions, not me, is that you should simply wait for the next state change.  We are in overbought territory -- the time to have purchased would have been when the timer transitioned from CASH to LONG AND the strengths of the ETFs were much lower than they are today.  If nothing else, wait for a pullback in the markets to enter this signal, but be advised, this is very risky.  If you see the timer status indicator moving to "0" with a YELLOW background you have a place to enter, but only do so if you understand that it will most likely fail.

Elder's 13d Force Index is positive, which is bullish overall.  The 2d Force Index is positive, which means there is too much risk to enter the broad market at the present time.  A better entry is when the 13d is positive and the 2d is negative.  Both the 13d and 34d MAs are trending upwards, which is bullish.  Note that the 13d MA < 34d MA, which means entry into this market is at much higher risk.  I intend to wait until the 2d pulls back to enter long positions.

This next chart is interesting to me:

Note that I've removed dates 3-16-10 to 5-16-10 to collapse this into one view.

Look back at period 2/12/10-2/16/10, specifically at how the patterns then are being replicated with the most current data.  Of particular interest is how the different LCR EMA slopes are starting to come in line (bullish) with every day-over-day advance of the market.  This is significant, and while the past is not a predictor of the future, patterns do repeat, and if this one continues on the path it is on, we will see the development of a new bull.


My trading plan for today is to sit pat, happy to hold onto my long index ETFs.  End-of-day actions are not required, simply because the LCR Change Timer is a solid long (+1).  Elder is too overbought, so I'm not entering any long positions.


Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.



Wednesday, June 16, 2010

S&P500 Closes above 1107; Now What?

Let's start with the basics -- here is the GGT status dashboard for Tuesday, June 15th:

Obviously, a bonus day for the GGT database, with a 2.4% increase in average price.  Volume continues to lag, with the daily volume -17% under the 50d MA average level.  Again, this is problematic for a sustained bull -- we are not seeing large participation by institutions, which I consider worrisome.

This being said, the Long-Cash Ratio (LCR) jumped with a 64% change, which is very bullish.  This means that a large number of stocks (296) jumped into a "New Long" status whereas only a few (2) moved into a "New Cash" status, so the bulls were clearly in control.

The short-term LCR Change Timer is still on the long side, as to be expected.  Even if Wednesday is down this timer will not cause us to move our monies, so I intend to sit pat on my long index ETFs at least through Wednesday's action.

There has been no change to the Elder timer system -- the 2d Force Index is still positive, barring me from entry into new longs.  I am waiting for the 13d FI to remain positive but the 2d FI to pull back to a negative value, giving me a greater chance of success.  Note that the 13d EMA is still below the 34d EMA, so even though they are in an uptrend, they are inverted, which means we are NOT confirming the Elder signal.

The pricing EMAs, with the exception of the 8d/13d pair, are all inverted.  This is bearish.  I will not be committing a full set of longs until these are properly aligned (8d > 13d > 21d > 34d

The LCR EMAs are strangely configured.  The 8d/13d pair are properly positioned for a bull, and with Tuesday's action, the 34/55d pair are now properly positioned.  This latter pair has occurred because the depth of the pullback was not enough to cause these two to dive deeply.  Hence we now have a situation where we are simply waiting for the 13/21d and the 21d/34d pairs to get in the proper position and point their way up.  We'll see.  


This is my modified Jeffrey's 2ac panel where I also plot the slope EMAs on the 65d EMA of price.  Note that
  1. all the slope EMAs, with the exception of the 2d (RED), are below 0.  This means that they are losing ground in terms of price.
  2. all of the slope EMAs are pointing upward, with the exception of the 34d slope EMA.  Note that the 21d slope EMA *just* moved upward, hence this is bullish for the database, but the 34d causes me to pause and be cautionary.
  3. As described above, the Elder 13d FI is positive (green) and the Elder 2d FI is positive (red).  This is NOT the time to enter positions -- wait for the 2d FI to move negative but with the 13d FI remaining positive.
  4. I like that the 200d MA of the database is moving upward, but this is tempered by the 50d MA is trending down.  I'd like to see both of these pointing upward for confidence in the emergence of this new bull.

NFLX has signaled a possible entry for today if it clears yesterday's high of $129.19.  Here's the chart:

I like NFLX for several reasons:
  1. All the slope EMAs are positive and 
  2. All the slope EMAs are pointing upward
  3. Elder 13d FI is positive (green)
  4. Elder 2d FI is negative (green), indicating a possible entry signal
  5. The 50d is above the 200d
  6. The 50d has a positive slope
  7. The 50d is incredibly linear
  8. The 200d has a positive slope

Remember, you are responsible for your trading decisions, not me.  Please do your own diligence.



Tuesday, June 15, 2010

HGSI BRIC Analysis ...

Brazil-Russia-India-China (BRIC) stocks are interesting to me because they represent an off-shore opportunity that is loosely coupled with our domestic performance.  HGSI can provide considerable insight to this strategy, if you take the time to set up the screens and observe past behavior.

Rather than spend time walking you through the setups, let me first dive in head first and if you like what you see, you can leave a comment below that you'd like to set up the details and play with the system yourself.

As with all my charts, right-mouse click on the image to open in a separate window or tab.

This is a variant of Jeffrey's 2ac Price & Volume chart.  The modification stems from the addition of the pane above the pricing/MA series -- I have added specific indicators based upon the 65d EMA of the price.

Specifically shown in that 65d EMA slope pane are a
  1. 2d EMA on the slope of the 65d EMA of price (RED),
  2. 8d EMA on the slope of the 65d EMA of price (BLUE),
  3. 13d EMA on the slope of the 65d EMA of price (GREEN)
  4. 21d EMA on the slope of the 65d EMA of price (BLK), and
  5. 34d EMA on the slope of the 65d EMA of price (PURPLE)
The first thing you should note is that:
  1. All of these values are below 0.0 (negative).  This means that the slope of 65d EMA of the stocks (or ETFs) represented in the pricing series index have been falling.  Falling slopes = lower prices.  In general, negative slopes are bearish, and the deeper they are below 0, the more the price series has been in trouble (just take a look at BP).
  2. Look at "the slope of the slope".  In this particular case we have:

    a) the 2d EMA of the slope of the 65d EMA of price (RED) is well above all the other EMAs, and it is moving upward.  Think of this as "pulling" the rest of the slopes up.  This is very-short-term bullish.

    b) the 8d EMA of the slope of the 65d EMA of price (BLUE) is pointing upward.  If we think of this as a car driving forward or backward (with a value of 0 meaning the car is stopped), if the indicator is negative, the car is going backwards, but if THAT slope is pointing upwards, the car is going backwards less fast.  This is short-term bullish, e.g., EMA prices are not losing ground as fast.

    c) the 13d EMA of the slope of the 65d EMA of price (GREEN) is also pointing upward.  Although negative in value (the car is driving backwards), it too has reversed and is pointing upward which is more bullish (the car is driving backwards less fast).

    d) the 21d EMA of the slope of the 65d EMA of price (BLACK) has just turned up within the last few days.  Same commentary as (c) above.

    e) the 34d EMA of the slope of the 65d EMA of price (PURPLE) is still pointing downward.  In our analogy, "the car is driving backwards and going faster in reverse".  This is bearish, and is a warning sign.

    The interpretation of this BRIC index is that in general, BRIC stocks (which comprise the index) are losing ground less fast but because all their EMAs of the slopes are negative, are still losing ground.  Another way to think of this is that *some of the constituent stocks comprising this index are looking good, while others are still looking bad.*  Let's see if we can determine which is which.


One of the powerful aspects of HGSI is the quick ability to generate indices based upon whatever you feel is important.  As you make lists of lists, these indices get "rolled up", giving you a macro picture.  This, in fact, is what you are looking at above -- the BRIC index is actually comprised of the separate Brazil, Russia, India, and China indices.  Let's look at each country by itself.  First, Brazil stocks:

Brazil is almost a mirror image of the entire BRIC picture -- certainly the 65d EMA slope pane discussed above has the same conditions as the entire BRIC picture.  Let's dive into the stocks that I have in the Brazil index and see if there are any leaders.

One way that I do this is to use the Ranking tool within HGSI.  Here's the image, with the Brazil Index highlighted:

As you can see, there are 15 stocks that are out-performing the Brazil index in terms of Relative Strength.  These are further candidates for your consideration.  If we choose the top one (ABV class C), we get a very interesting view when we apply my modifed Jeffrey's 2ac chart:

Here, we have ALL the slope EMAs positive and trending upwards.  This is a very interesting equity -- perhaps a bit over-extended (e.g. wait for an Elder 2d Force Index transition to negative before entering), but still very interesting.


You can do this analysis with each of the BRIC countries, or any list that you create for that matter.  Here are the charts for the Russia, India, and China indices:



India Index:


China Index:


Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.



...and We Keep Marching to the Long Side ...

Despite the pullback in the major indices yesterday, as a whole, we advanced.  According to FinViz:

  • 3679 Advancing (55.1%), 2509 Declining (37.6%)
  • 168 New Highs (81.2%), 39 New Lows (18.8%)
  • 1747 Above 50 SMA (26.3%), 4884 Below 50 SMA (73.7%)
  • 3485 Above 200 SMA (52.5%), 3153 Below 200 SMA (47.5%)
My GGT Summary dashboard indicates the following:

As with all my charts, right-click on it to view in another tab or save to disk.

A few observations:
  • Volume (3rd column) is very low -- we've had four consecutive days of 0 change off the 50d MA Volume or below.  This is clearly a period of consolidation and the big boys are not playing.  Caution is advised.
  • The Long-Cash Ratio (LCR, 4th column) is advancing, and is now at 0.336.  Compared to the 6/8 low of 0.136 this is a significant advance and is bullish in the short term.
  • The LCR is still well below 1.0.  While 1.0 isn't magical, it does represent the point where more stocks are "LONG" compared to those with a "CASH" ranking.  We have far more stocks with a CASH ranking, and this is longer-term bearish.
  • The database "GGT Strength Index" (6th column) is now at 0.690, which is short-term bullish.  Once we cross the less-than-scientific value of about 0.7 we've noted in the past that the chance of a short-term pullback increases dramatically.
  • The GGT LCR Change Timer (fast, columns 7 and 8), is clearly pointing to the long side.
  • Elder's Force Index on the GGT database is
    1) LONG on 13d Force Index (column 7) -- get your LONG stock lists ready
    2) LONG on 13d Force Index Slope (column 8) -- bullish
    3) CAUTIONARY on 2d Force Index, because it is too positive.  Suggests that you wait for a pullback before entering stocks
    4) LONG on 13d EMA pricing slope
    5) LONG on 34d EMA pricing slope; together with 13d, these two are "go for throttle-up" on the long side, as indicated in column 15 "Aggressive Elder Signal"
    6) CAUTIONARY on the "Conservative Elder Signal", because the 13d EMA is NOT above the 34d EMA.  We are very, very early in this new bull, if it materializes.
  • Only the 8d Pricing EMA is above the 13d Pricing EMA -- all the others are inverted.  Again, we are very, very early in this new bull, and my suggestion is NOT to commit a great number of long positions at this time.
  • Only the 8d LCR EMA is above the 13d LCR EMA -- all the others are inverted.  Same comment as above.
  • The slopes of the pricing EMAs are all pointing upward, which is necessary (but not sufficient) for a sustained bull.  
Summary:  Caution is advised, as we are clearly in tide-changing waters.  We have some bullish indicators, but we also have remnants of the bears that are still hanging on.  I intend to wait and see today, with no major transactions planned.


Remember, you are responsible for your own investment decisions, not me.  Please do your own homework.



Monday, June 14, 2010

GGT LCR Change Timer (fast) Signals; Elder also Signals

I'm sorry for the delay in posting.  With travel back from Denver on Friday, combined with having my butt kicked in a half-Ironman triathlon this past weekend, time has been short.  I got home late last night (Sunday) and had no energy to review this content.

To start, here's the updated dashboard; as with all my charts, right-mouse click to view in another tab or to save to disk:

If you really take a close look at this chart you'll see that Wednesday's volume was 0% changed over the 50d MA of volume, Thursday's was -15% below the 50d, and Friday's was -25% below the 50d MA.  Rising prices on lower volume is not a good sign for a sustained bull.  When I look back in the history of GGT, new bull legs have never been characterized by falling volume -- so I think we need to be cautious.  If any of you are interested in the chart above back to the beginning of GGT time let me know and I'll send it to you.

The 4th column from the left is the Long-Cash Ratio (LCR), and you can see that it is still "red".  The color is artificial, in that it is red if it is below 1.0 and green if it is above.  It is important to note that we have had two consecutive days of increasing numbers of "LONG" rated stocks in the database, hence the LCR is climbing.  This is necessary for a bull to start so this could be considered bullish.

The 6th column from the left is the GGT Database Strength.  We've see it jump from 0.168 on Wednesday to 0.621 on Friday, and it indicates that we're starting to move into bullish territory.  Again, values above a less-than-scientific value of 0.7 are considered bullish.

As indicated by the heading of this entry, the LCR Change Timer (fast) has signaled a move to LONG, which is shown in columns 7 and 8.  I will close my contra positions that are based on this timer with a 1% Trailing Stop Loss (TSL), all of them for a loss.

Elder's 13d MA Force Index on the GGT price/volume series is clearly positive.  THE SLOPES OF THE 13d MA and 34d MA ARE UPWARD, which is bullish.  For the more aggressive, conclude here that Elder has signaled re-entry into long positions at this time.  I will close my contra positions that are based on this timer with a 1% TSL, all for a nice, healthy profit.  I will also purchase 2x leveraged ETFs today across the major indices if they continue to show strength (e.g., clear Friday's highs).  If you are more conservative, note that the 13d MA is < 34d MA (but both are in an uptrend).  This is a confirmation signal, and right now it is still bearish.

The last time the Pricing EMAs were inverted (55d > 34d > 21d > 13d) and this pattern reversed was the bull that started in March 2009.  Look at the chart above, specifically the group "Pricing EMAs" and the column labeled "34d > 55d Pricing EMA".  As you can see we are presently bearish in the 13/21, 21/34, and 34/55 EMAs, with ONLY the 8d>13d.  We are early, very early here folks, and risk is very high.  Here is a snapshot of the March 2009 period, as a reference:

As another point of reference, also note for March 2009 Bull:

  1. LCR did not move above 1.0 until 3/19/09
  2. Elder FI signaled "Bull" on 3/17/09, whipsawed, then re-signaled on 3/23/09.  We received confirmation of the bull on 3/26/09.
  3. Pricing EMAs did not start their proper bull alignment (8d>13d>21d>34d>55d) until 3/12/09.  The 13/21 pair aligned on 3/23.  The 21/34 pair aligned on 4/2.  It took until 4/27/09 before the 34/55 pair aligned.

Watch for a close of 1107 on the S&P500 -- this is the 200d MA, and we've tested and failed several times in the last couple of weeks.


Remember, you are responsible for your own investment decisions.