Wednesday, August 4, 2010

Short Term Timer could Flip, Elder Strong on Intermediate-Term

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The price index fell on Tuesday by -0.69%, ending the day at $25.74.  Volume was -12% lower than the 50d MA, with 2.2M shares trading.  Down prices on lower volume, as long as it does not occur for long periods, does not worry me.

The LCR dropped -5% to 1.701.  Database strength dropped too, so along with price, we're all in alignment.  It's hard to make money in this type of market.  As indicated on Monday, we're in this range and I thought that this week would be tough, hence here we are.  The LCR is oscillating back and forth every couple of days.

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Short-Term LCR Change Timer

If today (Wednesday) is down, then this timer will revert back to CASH (-1).  The time constant on this timer is very short ... less than 1 day ... so daily changes in the LCR in a trendless market will cause it to move back and forth. This will require that I close my positions in DDM (presently down -0.89%), QLD (-0.91%), and UWM (-1.94%).  Sometimes we win, sometimes we lose.  Choppy markets do not make good markets for trend-following systems.

I've added a column above -- an equity column -- where 9/11/08 = $1.  You can see that as of yesterday we finished the day at $1.633, or an IRR of ~30%.  MDD since that time has not exceeded 10.1%.  The equity will update daily going forward so you can see the efficacy of this timer.

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Intermediate-Term Elder Timer

Elder continues to indicate that it is okay to purchase equities on an intermediate-term basis.  Here's HGSI's view of the GGT Universe:



Supporting this statement we have:
  • Bull power is very positive
  • Bear power is slightly negative
  • 13d Force Index is green, indicating that it is positive
  • slope of 13d EMA on price is positive
  • slope of 34d EMA on price is positive
  • slope of 13d price EMA > slope of 34d price EMA
  • 13d price EMA > 34d price EMA
Although we could certainly pull back, I view it as an opportunity to add to or create new positions.

Here are some candidates that I am going to watch:



I'll leave the VEL and ACC screen to those of you who have HGSI.  Note that the filter above requires that
  • Last > $1
  • 50d SMA Volume > 100K shares
  • 13d Force Index > 0
  • 2d Force Index < 0
  • 13d Slope > 0
  • 34d Slope > 0
  • ERG > 240
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Trading Plan for Wednesday

From a short-term perspective, I'll close my long positions in DDM, UWM, and QLD if the ADV/DEC line at http://www.finviz.com/ is clearly favoring the DEC side of the equation.

From an Elder perspective, I'll continue to add single Elder positions, from the list above, if they move above yesterday's high AND have volume greater than their 10d levels.  I posted the volume scale vs. time last week.

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

Regards,

pgd