Sunday, June 27, 2010

June 25th Weekend Update

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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.

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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).

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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 http://www.finviz.com.  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.

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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.

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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.

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

Regards,

pgd