Tuesday, July 20, 2010

LCR Signals MOVE TO CASH

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Despite the markets being up yesterday, the underlying momentum of the database was down, as evidenced by the LCR moving down.  Given the length of this bull leg, and this type of divergence, I will close my positions in UWM and QLD using a 1% Trailing Stop Loss, placed before the open of normal trading.

Here's the tea leaves:


GGT Price moved up +0.45%, in tandem with the markets, on volume that was +6% above the 50d MA of volume.  This is normal price/volume action and is unremarkable.

Contrasting, as evidenced by the 4th and 5th columns, the GGT Long-Cash Ratio (LCR) fell -12% to 0.536, which is a divergence from the price action of the day.  It takes more to cause the LCR to move up or down than simple price action, and a falling LCR tells me that for the underlying stocks, price, VOLUME, and RATE OF CHANGE are all collapsing.  This isn't to say that we can't see a reversal, but right now the foundation of price action is falling, which is worrisome.

Confirming this move downward is that the entire strength of the database, as indicated by the GGT Strength Index (6th column), also fell.  I know it says 0.366, the same as the previous day, but I grabbed the screen shot before this field updated -- THE ACTUAL STRENGTH IS 0.318, which is below yesterday's value.  Correspondingly, I think that the falling LCR and falling strength are in sync, and it is thus prudent to close my long ETF positions (UWM, QLD).

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GGT Short Term LCR Change Timer

The short term Change Timer has signaled a move to CASH.  I am chosing NOT to ignore it.  If the markets are up today we will not get a signal to move long until the close on Thursday.  If the markets are down then we will be confirming the signal.

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Elder Intermediate Timer

Elder continues to indicate LONG on the intermediate-term timer, and with the 2d Force Index below 0, continues to indicate that there are good entry positions within the present market.

Yesterday, I provided a HGSI list of stocks that met the Elder Criteria.  I watched these throughout the day -- not one cleared the previous day high (Friday).  Correspondingly, I DID NOT ENTER ANY INTERMEDIATE LONG POSITIONS.

I'll watch again today, using the same filter and selection criteria.

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Trading Plan for Tuesday

I will close my short-term positions in UWM and QLD using a 1% TSL.  I will open positions, on strength only (volume and price), in QID, DXD, TWM, etc.

I will open intermediate-positions, as determined by my HGSI filter I presented yesterday, if they show strength (volume and price).

For review, my volume criteria is:

12% 10d Avg Vol by 10:00
25% by 10:30
33% by 11:15
50% by 12:15
60% by 1:15
70% by 2:15
90% by 3:15

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

Regards,

pgd