Monday, August 30, 2010

Short Term Timer May Move Long, Elder clearly Bearish

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I'm still in vacation mode through Labor Day.  I'll be traveling again Wed-Fri of this week, this time with my 11-year-old son Greg, as we embark on a western adventure in the Sierras.  Tomorrow (Tuesday) will be my last commentary of this week.

Let's review the GGT Dashboard:


























The week was relatively ugly through Thursday's action, but Friday reversed the sideways market.  We started Monday at $22.75 and ended Friday at $23.62, so clearly a nice jump (Thursday's price was $22.47 so this was a major jump on Friday).  Volume continues to be anemic, with 11 consecutive trading days trading below the 50d MA, which is presently 2.3M shares.  Friday's action was 10% below this at 2.1M shares.  The big boys simply are not playing in this market.

The GGT Long-Cash Ratio (LCR), which is a measure of the number of stocks in the database with some form of long status compared to those with some form of cash status, bottomed on Thursday at 0.3 and moved upward with a 43% upside change on Friday, ending the week at 0.429.  We started the week at 0.548 so I wouldn't say that this is the reversal.  Nevertheless, Friday's action was strong as far as the entire database is concerned, so it does bear watching.

Short Term LCR Change Timer

The short-term timer is waffling back and forth, and is presently giving us a cautionary sign.  It is shown in yellow in the above figure, and you see that it has three consecutive days of 0's.  This means that we are more-or-less alternating up and down days, which is the sign of a choppy market.  I AM PRESENTLY IN CASH on a short-term basis because of this timer, BUT, if MONDAY, August 30th (today) is up, it is very possible that this timer could move to the long side.

How to anticipate a move long?  Watch the main page at www.finviz.com, specifically the ADV/DEC bar in the upper left corner, and if this is clearly favoring the ADV side of the equation by 3:30 pm you have a fairly good confidence that this timer will move long.

Note that if you move long right now you are swimming up stream:

  1. The raw LCR value is below 1.0.  This means that there are far more stocks that are bearish than bullish.
  2. Volume sucks.  There are no major players driving up prices, so the market is languishing.  This means that you are at the mercy of surgical strikes by the big boys, as well as the folly of the retail market.  Don't bet the farm.
IF the market is up near the end of the day I MAY (my option) choose to move long.  If you had a gun to my head right now I'd say I'm content to sit on the side line, especially since I will be out of town starting Wednesday.  We'll see.  Today will have to be a powerful follow-through day for me to put much cash out there.

The Intermediate-Term Elder Timer

Elder continues to indicate a 13d Force Index below 0, which is my main gate for investing long on the intermediate-or-long term time frame.  While you can't see it in the graphic above, it is negative only by a slight margin. It bottomed hard Tu-Wed-Thurs of last week, and has now started to move up rather significantly.  I like the Force Index because it includes both price and volume, so we apparently have both for those stocks that are moving upward.

EVEN IF MONDAY DUPLICATES FRIDAY in strength, it is very doubtful that we will see the 13d FI move positive.  No need to get your shopping lists ready just yet.

I intend to sit pat on intermediate-term holdings, at least today.

For those of you who are curious, here is my view of Elder through the HGSI lens:






























In the graphic above, note:
  • Bull Power is terrible and flat near 0.  We want this strongly trending upward and positive.
  • Bear Power is non-zero.  We want this much smaller than Bull Power (in magnitude, and it's much larger right now)
  • The Elder 13d FI on the entire GGT database is PINK, which I have colored and changed from the default.  When pink, Elder 13d FI < 0, and this tells me to avoid intermediate-term holdings.
  • The 13d/34d EMA slope window shows that while both are trending upward:
    a) they are both below a value of 0, meaning that the 13d and 34d slopes are NEGATIVE (losing money on these time frames)
    b) the 13d slope is LESS THAN the 34d slope, which means that the 34d slope is stronger than the 13d.  This is inverse of what we need for a bull
  • Database volume is anemic, as I said above.  Remember, GGT stocks are filtered for those that have:
    a) price above $1
    b) 50d MA above 100K shares (does not include ETFs, but they are not in the graphic above)
    c) trade on the primary exchanges
Again, I intend to stay away from Elder until the 13d FI moves positive.

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Trading Plan for Monday

Easy.  Live your life, and if you can around 3:30, check www.finviz.com.  If the markets are solidly positive at  this time, as determined by the ADV/DEC bar, then I'll look carefully at QLD, DDM, UWM, MVV, etc.  These will ALL need to be up a good amount (broad participation).  If this fails then I'm sitting on the sidelines.

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Make it a great week.  I may post tomorrow, but again, do not expect a post after Tuesday until the end of Labor Day weekend.

Local Tri-State Investor's meeting on September 11th, to include HGSI.  Details have been sent by Ray; let me know if you're interested in attending by leaving a comment below.

Remember, you are responsible for your own investment decisions, not me.  Please do your own work.

Regards,

pgd