Monday, August 16, 2010

Intermediate-Term = Cash, Short-Term Oversold?

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I think that the following graphic let's you know how I feel about the market overall:


A number of indicators in the graphic above, which is the summary of the 2700+ stocks of the GGT universe, should be giving you a pause at the present time:
  • GGT bull power is below 0
  • GGT bear power is moving more positive
  • Elder's 13d Force Index is PINK, which means that it is below 0.  This is our primary gate for staying away from stocks at the present moment.
  • The slopes of both the 13d EMA and 34d EMA are negative (in dollars per day, they are losing money on this time frame)
  • The 13d EMA slope is below the 34d EMA, which means we haven't yet turned up.  This means that it could get uglier.
**** Tipping your toes into the market at this time may work for a short period, but on the 13/34 intermediate time frames that Elder plays, the market is quite dangerous.

As many of you know, I liquidated my intermediate-term portfolio this past week, and I'm happy to have missed the collapse of the markets on Wed/Thurs/Fri.

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Short Term LCR Change Timer

The short-term LCR change timer is clearly in cash, and there is nothing on Monday's docket that will change that.  The Long-Cash-Ratio, which is a measure of how many stocks in the GGT database have a LONG recommendation to those with some form of CASH recommendation, fell sharply on Wed/Thurs/Fri, having ended the week at 0.456.  This means that we've dropped from over 1678 stocks long on 8/4 to 851 on 8/13, almost a complete inversion of cash/long recommendations. 

By itsself, the LCR Change Timer is saying avoid stocks on a short-term basis.  There is somthing thought that is possibly challenging that:

An internal measure of strength within the database is possible using the GGT strength indicator.  This indicator is an oscillator, moving from 0 (completely oversold) to 1 (completely overbought).  Right now we have had three consecutive days of strengths hanging tightly in the 0.27-0.34 range, which gives me reason to believe that for the more aggressive of you, you may want to consider looking at some opportunities on the long side.

This timer is normally traded with long ETFs, and there are a long list of 2x ETFs that look relatively good.  I'll leave it to you and HGSI to work on the filter details and identify the candidates.  As a hint, keep an eye on leveraged ETFs that
  • are above 200d MA
  • have short-term slopes in an up-trend
  • have long-term slopes (65d) in an up trend
  • have been oversold hard the last few days (significantly below their 7d but above the 17 or 21d)
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I will be traveling for the next three weeks but will do everything I can to have timely posts in the morning.  Note that starting September 1st, through the end of labor-day weekend, I will not be posting, as I will be climbing Mt. Whitney (look it up) with my 11-year-old son.  I doubt seriously if they have internet coverage there ...

There will be a combined GGT / HGSI meeting on September 11th.  Details pending, so check back.

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

Regards,

pgd