Wednesday, September 22, 2010

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Let's jump right in with the dashboard:



The price index fell -0.4% on Tuesday on average volume.  Contrasting, the Long-Cash Ratio (LCR) moved upward 4%, so we have a divergence.  This type of divergence cannot be sustained:  either price must reverse to align with the LCR movement, or the LCR movement must reverse and drop, aligning with price.  This fact results because the LCR is based partly on price, so the two are linked.

Another divergence is related to the strength of the underlying database.  It fell from 0.983 to 0.884, indicating that many stocks are weakening in terms of ROC, volume, and/or price, and certainly, strength MUST eventually align with LCR because the LCR is based (in part) on price and volume. 

The fact that price and strength fell tells me that we've experienced a shot across the bow, never-minding that the LCR is moving upward.  No one would fault you to take 75% of your profitable positions off the table, as well as closing your losers, as the waters certainly are getting more uncertain.  If you're wrong then you can always purchase back into the positions, perhaps even at a lower price.

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Short Term LCR Change Timer

This timer is in columns 7 & 8 in the dashboard figure.  We are still LONG, and weakness is not indicated because the LCR continued upward (note divergence prose above).  I am not trading this timer at the moment because it signaled long when I was away on vacation.

If today is a down day in terms of the LCR this timer will transition from LONG to LONG-CASH (0) with the close of the markets.  If tomorrow is also down this timer will then transition to CASH, so start paying attention if you are interested in a short-term method to move in and out of the markets.

The GGT equity index fell from $1.633 to $1.627.  The VTI equity index fell from $1.833 to $1.829.

Watch http://www.finviz.com/, specifically the ADV/DEC line in the upper left area of the home page, to get an idea on what the LCR will do today.

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Intermediate-Term Elder Timer

Columns 12 and higher deal with the Elder timer.  The 13d Force Index is positive, so our macro gate on whether we can invest in long positions is intact -- the answer is yes.  The 13d and 34d pricing slopes are positive, which is bullish.  Overall, the Elder signal is LONG.

My Elder list of stocks this morning includes the following:

TRS
APKT
CTXS
GRA

I'm looking for volume above the schedule I posted yesterday in my blog, and prices moving higher than yesterday's high before entry.

My Elder list of ETFs is long, and does not include leveraged or contra ETFs:

FDN
JJG
ICF
DVY
IYF
IYR
ACWX
BKF
EWH
EWJ
IWB
IWD
IVE
IJH
IGN
IJS
PDP
PGF
RSP
XLY
RWR
XBI
SDY
VFH
VO
VOE
VPL
VNQ
VB
VTI

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Trading Plan for Wednesday

With respect to my short-term timer, I'm in cash because I refuse to chase the signal.

With respect to the Elder intermediate timer, I'm looking at the 4 stocks listed above, and I want to see price and volume appreciation (e.g., demand) before I enter.

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Remember, you are responsible for your own investment decisions, not me.  Please take ownership for your decisions.

Regards,

pgd