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.