Friday, June 25, 2010

The Bears are in Control in the Short Term

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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.

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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.

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

Regards,

pgd