Friday, August 6, 2010

ST Timer Could Move to CASH, Elder still LONG

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Let's start with the dashboard:



I'll combine the last two days in the discussion since I could not post yesterday.

GGT price hasn't moved much over the last two days, ending this past Tuesday at $25.74 and ending Thursday at $25.86.  We are somewhat rangebound, with the lower end of the box somewhere around $25.25 and the upper end of the box just shy of $25.95 or so (not an exact science).  Volume has been progressively weaker all week, and was down -18% with Thursday's action.  I actually like periods such as this -- higher volume on rangebound prices is a historically bad turning point in the market, as it indicates churning -- we're not seeing that phenom at the present moment, so I think that there is hope.  A volume number that is -18% lower is at the bottom threshold of "normal" and certainly indicates that people simply are not being aggressive either way in the market at the present time.

The Long-Cash Ratio peaked on Wednesday at 1.879 and dropped on Thursday to 1.769.  1642 stocks are presently in some form of long status and 928 are in some form of cash status.  IF FRIDAY IS DOWN a significant amount I would expect that we have signaled a top to the short term bull and that we should protect profits.  We'll see.

The strength index continues to weaken, and is sitting at 0.62.  Again, we're in no-man's land with this value, as we peaked at 0.78 on Monday and have been sliding downward in a staircase fashion since then.  Values above 0.7 are indications of being overbought; values below 0.2 are indications of being oversold.  When we're in the middle it's hard to figure out where we are using the index in a vacuum.  I will say that since we've been drifting most of the week that we can essentially ignore this 0.62 value for now.

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Short Term LCR Change Timer

The short-term LCR Change Timer is presently sitting in a LONG-CASH (0) status, and has been here since Tuesday.  This is because we've been waffling back and forth between up/down days, causing this timer to sit on the fence.  Since we had a clear LONG signal on Monday we are biased long, but for the week our equity curve using this timer has been horizontal, with a Monday close of $1.645 and a Thursday close of $1.641, barely a change in 4 days.

This timer is certainly affected by short-term news events, and the data today at 8:30 (Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, and Consumer Credit) will all influence what happens with this timer today.

Watch http://www.finviz.com/ near the end of the day; if the ADV/DEC bar is decisively favoring ADV we'll continue in the LONG-CASH (0) state, but if we devisively favor DEC this timer will flip to CASH, indicating that I should sell my positions in DDM (literally at 0.00% gain), QLD (up +0.62%), and UWM (down -2.23%).

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Intermediate-Term Elder Timer

Our Elder system continues to march forward on the long side.  As you can see in the table above, the 13d Force Index continues to be positive, which is bullish for the intermediate-term.  We've been bouncing back and forth on the slope of the 13d Force Index all week, so consider this neutral to slightly bearish (lack of trend).  The Elder 2d Force Index is postive, which states that stocks are actually overbought here and that we need to be very selective in our entry.  The good news is that the 13d and 34d slopes are positive, which is bullish for stocks in general, and that the 13d > 34d price EMA, which means we are continuing to see price appreciation on the intermediate-term scale.

My Elder intermediate portfolio is up 3.6%, and I have the following holdings:

KWR, up +13.92%
NBIX, up +13.27%
IDT, up +12.73%
AXTI, up +6.67%
ARUN, up +4.84%
GMCR, up +2.31%
ROVI, up +0.98%
CCE, up +0.28%
F, down -1.73%
NLC, down -1.76%
LSCC, down -3.98%

These are not equal weighted, as they were adjusted in sizing at the time of purchase using the ATR(20) value.

Many of the same stocks continually make it to the top of my Elder scan for the day.  Here's the list, according to Relative Strength.  Again, I leave the Velocity and Acceleration screens to you to determine:



I will move on these if they show higher-than-yesterday's high price action on volume that is pro-rated off of the 10d MA of Volume.   For reference, here is my purchase rule:

1) IF the instantaneous price is higher than yesterday's high AND
2) IF the instantaneous volume is higher than X% of the 10d MA Volume at the present time by the following amounts, then purchase a single position in the equity. 

Here is the time scale for volume -- I suggest that you print it out and paste it by your monitor, as it really does seem to work:

10:00, 12.5%
10:30, 25%
11:15, 33%
12:15, 50%
1:15, 60%
2:15, 70%
3:15, 90%

I have a spreadsheet that I can send to you if you are interested that will help you do this.  Takes a bit of work on your part every day, as you have to look up the 10d MA AND the high of the previous day for a list of stocks, but it uses an Excel macro to update the prices/volume and colors blocks accordingly.  Simply leave a note in the comments field and if there are enough of them, I'll post it in the files section on the Yahoo! GGT site.

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Trading Plan for Friday

We have a mixed bag of results coming out of the 8:30 report and futures are down nearly -0.7%. at 9 a.m.  So, we have the start of a down day. 

From a short-term timer perspective, if the markets sell off through the day, especially after 2 pm, I'll unload my ST positions.  Keep an eye on http://www.finviz.com/ in the ADV/DEC department.  This generally ties well with the LCR when there is decisive movement, but less so when the ADV ~= DEC.

From an intermediate-term perspective, I will continue to purchase Elder stocks that meet the criteria above.  Use these pullbacks to get good prices on strong stocks.

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

Regards,

pgd