Thursday, July 1, 2010

A Sea of Red, Sitting Pat, Happy to Wait and See ...

As always, let's start with our normal view of the GGT dashboard (right-click on any image to load in a separate window):

We lost -0.87% on price yesterday, ending at $22.90.  As a reference, our recent low was $22.83 on 6/7, so unlike the SP500, we're not yet closing in new-low territory (yet).  Volume was down -10% from the 50d MA, but this is the "new normal" and is within the expected deviations, so nothing remarkable here. 

The LCR continues to fall as the database of stocks consolidates, ending at 0.222.  This means that 510 stocks have some form of long status and 2321 stocks have some form of cash status. 

The LCR Change Timer is still indicating CASH (-1), and has now been in this state for the last 7 trading days.  If you are conservative but like to move in-and-out rapidly, you've been in cash and have been protected.  If you are aggressive and like to move in-and-out rapidly, you've been rewarded handsomely, as the GGT Price has fallen almost 6% in 7 days (you could play this with Contra ETFs).  My lone-surviving contra position, TWM, is up +11.75% in the past 7 days, as a reference point.  Yes, I wish I had not sold all my contras last Friday, but my crystal ball is as good as yours and I didn't want to hold across the weekend.

Elder continues to warn us away on intermediate-term long positions, as the 13d Force Index is negative.  Despite this, I asked for input for stocks bucking the trend, and Hank answered the call with 4 countertrend entries, NRGY, SBS, IDT, and ATHN.  Let's take a quick look at them, but note, THESE ARE NOT RECOMMENDATIONS -- do your own homework:

NRGY is clearly making money the last few days -- volume is increasing on increasing prices.  The Elder 13d FI is clearly green, yet the Elder 2d FI is RED, indicating that the 2d FI is POSITIVE.  This blocks me from entry.  I like that the slopes of the 13d and 34d are above 0 (the car is driving forward) and that the 13d is gaining faster than the 34d (the car is accelerating).  I intend to wait for a pullback before considering this further.

The graph above is of SBS.  Again, this looks very strong, with price action clearly above the 13d MA and both the 13d and 34d slope lines above 0 (car is moving forward).  We see a bit of peaking in the slopes, with them presently downtrending (car is slowing a bit), so we may be presented a good entry opportunity.

Note that the Elder 13d FI is green, meaning that it is positive, and that the 2d FI is green, meaning that it is negative.  This establishes the conditions for entry, so we would want to see price action clear $42.40 before committing our hard-earned dollars.

The graph above is of IDT.  This is a very hot equity, as evidenced by last three days.  A couple of good points, and a couple of cautionary points:
  1. The Elder 13d FI is positive.  This is good
  2. The Elder 2d FI is positive.  We need to wait for a pullback to enter
  3. Both the slopes on the 13d and the 34d EMA of price are positive (the car is moving foward), and they are pointed upward (the car is accelerating).  These are both bullish indicators
  4. The industry group is shown in the gray dotted line.  Historically, until recently, IDT has been underperforming, and appears now to be in catch-up mode.  We need to poke around a bit more to explain why lagging.

The final graph above is of ATHN.  This is a new emergent, as is evidenced by the recent 13d Force Index moving positive.  Note that the 2d FI is RED, indicating that it too is positive, blocking entry.

The slopes of the 13d and 34d are both just moving into positive territory.  The car has just recently started moving forward.  Both are pointing upward, so the car is accelerating.  These are bullish indicators.

Note that the 13d EMA is below the 34d EMA on the pricing graph.  We may be a bit too early on this one, especially if you are conservative.

Note too that the industry group has been outperforming this stock for some time (dotted grey line on the pricing graph).  We need to understand why this is so.


Trading Plan for Thursday

Boring.  I intend to sit on my pile of cash and wait.  I'm waiting for the 1040 level of the SP500 to show us that it is either resistance or yesterday was a fluke.  I'm waiting for a sustained bounce and the LCR Change Timer to move LONG (we are at least two trading days away from that signal, if it happens).  As indicated in the previous few days blogs, I do not typically enter a signal mid-stream, so I'll let my TWM position continue and will let my core AAPL position wither away, possibly adding some more AAPL as it gets cheaper AND as it shows some indications of strength.

Patience is the name of MY game.


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