Monday, August 9, 2010

The end of the trend? ST Timer --> Cash, ST LCR slopes move negative

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Despite futures being up as I bang this out, Friday's action started to nail the LONG coffin shut on a number of fronts.  First, the LCR dropped -10% to 1.589, causing the ST LCR Change Timer to officially move to cash and signalling that we should close our ST long ETFs, and next, the 5d and 8d slopes of the LCR just started to move downward, something that they have not done since 7/21.  Finally, GGT price fell again to end the week at $25.76, and it is below its two-week-ago price. 

This will either be a great buying opportunity OR we are setting up to fall across the board.  Your crystal ball is as good as mine.

Here's the dashboard:



GGT Price fell Friday by -0.39%, ending the day at $25.76.  We started the week at $25.92 and were largely rangebound.  We may continue this -- it's hard to tell.  Volume continues to be light and fall, with volume down -11% from the 50d MA level of 2.5M shares.  We now have had 6 consecutive days of dropping volume, so the big boys are not playing (much) as we we would like to see.

FinViz (http://www.finviz.com/) helped us to make a decision on Friday:



it accurately showed that the LCR would fall (2586 ADV, 3553 DEC), which helped make some decisions right up to the last few minutes of the trading day.  While the strength in the down (and across the board) after 2:30 was impressive, and although we hit 257 new highs and only saw 88 new lows (e.g., the market is still biased upward), we're in the range-bound zone and there isn't a tremendous amount of money to be made until the trend resumes.

I hope that you all are watching FinViz.  It's a great site.

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Short Term LCR Change Timer

Based on the drop in LCR from Friday's action, we have a decisive indicator to move to cash for now.  If you placed a 1% trailing stop loss you are still holding DDM, QLD, and UWM, and I would unload those today on Monday.  I said this past week ago Monday that the week was going to be tough and yes, it was -- we are rangebound.  My QLD position exited up only 0.28%, my DDM position was down -0.35%, and my UWM position dropped the most at -3.4%.  Total loss was only -0.7% because these were not equal-weighted, but still, a loss is a loss.  Frustrating.

Our ST equity curve has dropped to $1.634, losing -0.8% off Tuesday's high.  This is normalized for 9/11/08 = $1, so the IRR using this timer is just under 30%/ year.

From my perspective, since none of the contra ETFs are above their 200d MA, this portfolio will sit in cash until it reverses back to long.

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Intermediate-Term Elder Timer

Elder continues to indicate that on an intermediate-term scale, we can be long in equities.  There is a crack in the ice though, as we're seeing more and more consecutive days with the slope of the Elder 13d Force Index heading downward than we are upward.  Unless the up moves are dramatic, we cannot sustain this long call, as we will keep eroding the positive 13d FI value.  Once it crosses 0 and goes negative we will have our sell signal.

Until that time, we have a buying opportunity because the 2d FI has moved negative.  This indicates we should purchase stocks which are exhibiting strength.  Here is what HGSI has to say about the GGT universe as a whole, from Elder's perspective:



Here is why we are positive for the intermediate-term:
  • Bull power continues to stay on the positive side
  • Bear power continues to be very weak compared to bull power
  • 13d Force Index is clearly positive.  This is a major gate for being long
  • 2d Force Index is negative, which indicates we may be at a good buying opportunity
  • the slopes of the 13d and 34d price EMAs are still well above 0 -- we are in an uptrend
  • the 13d EMA slope > 34d EMA slope -- we are still accelerating upward
  • The 13d price EMA > 34d price EMA -- we are confirmed for an uptrend.
Based on this, for ETFs, the list that "makes the cut" from HGSI's perspective is the following.  Note you will have to create the filter, but it is easy:
  • price must be above 200d MA
  • price > $1
  • 50d MA volume > 100K shares
  • 13d Force Index > 0
  • 2d Force Index < 0
  • 13d price slope > 0
  • 50d price slope > 0


Note that any ETF with "Direxion" in the name is a 3x leveraged ETF.  Be careful with those...

Candidate Elder stocks but with a ERG > 240 line in the filter return:



Some new names have appeared on the list, as well as some that we've been tracking all week.  I intend to purchase if these names move higher than Friday's high and volume is present (see Friday's blog for the volume requirements).

As far as the Elder portfolio is concerned, it is up 3.3%.  Here is what HGSI has to say about the group as a whole:



A bit troubling is that the 13d EMA slope is approaching the 34d EMA slope from above, and if these cross, we know that we have to pay strict attention to the portfolio.  Note though that we are WELL ABOVE 0 for the slope EMAs, so we are still in an uptrend on the intermediate-term scale.

Note too that volume has all but vaporized.  Not a sell signal, but simply, these stocks are not in play in the general market.  Here's the gains(losses) of each since purchase:
  • KWR, up +12.73%
  • IDT, up +11.60%
  • NBIX, up +10.12%
  • AXTI, up +6.85%
  • ARUN, up +4.13%
  • GMCR, up +1.98%
  • ROVI, up +1.51%
  • CCE, up +0.38%
  • F, down -1.28%
  • LSCC, down -2.19%
  • NLC, down -2.32%
These are not equal weighted, as position size was adjusted using the ATR(20) method at the time of purchase.

None of these stocks are individually sell candidates, so I will continue to hold.

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Trading Plan for Monday

As far as my short-term LCR Change Timer is concerned, I am in CASH and will remain here.  I don't care what the market does.

As far as my intermediate-term Elder Timer is concerned, there are ETF as well as stock candidates that, if they move higher than Friday on good 10-day volume (prorated to the time of the day), then they are worthy of consideration.

For those of you who want you can follow me on Twitter (grems8544) if you are so inclined -- I typically broadcast my buy/sells when they occur using that channel.

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

Regards,

pgd