Monday, September 27, 2010

Elder Timer LONG (barely), Short-Term LCR Timer MAY Move Long

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Obviously, this past Friday was a powerful day as far as the talking heads would want you to believe.  While I'm glad I was long on a number of stocks, as well as in my TSP portfolio, I am cautious because "things just don't seem right".  Let's see if I can quantify that.

Here's something I can't explain:




























In the figure above, the 50d MA on GGT volume has been decreasing since he peak of the previous bull leg.  While this in itself is not reason to do anything rash, as we certainly can fuel a rise with less participation across the board, falling volume off a peak, specifically a peak that corresponded to the end of a bull leg, doesn't give me a warm fuzzy feeling about the longevity of this market.  Why does volume continue to fall?  Where is the volume, relative to the markets in April/May 2010?

In the figure above I also see something in price that is easy for the eye to pick up:  lower highs in price (but not necessarily lower lows).  If this is a true bull with legs I want to see that the GGT price clears $26 and keeps moving higher -- we'll see.

This next image is interesting, as it presents a different view of Elder compared to my normal view using HGSI:



The graph above is my Elder system, with a simple moving average (SMA) (contrasting with my normal plots of exponential moving average - EMA) of the Elder13d  Force Index (solid black), and the pricing MAs (light black - 13d and red - 34d).  Note that from a simple moving average perspective, the slope of the 34d MA on price is pointing DOWNWARD -- this is the wrong direction for a sustained bull (simply look back at the price action where both the 13d and 34d were pointing upward in unison).  Also note that while the Elder 13d Force Index is positive, it is *just* barely so, and any further weakness in the markets will have us back on the intermediate-term sidelines.

Also note in the figure above the light blue trace, which is Elder's Force Index (unsmoothed).  Note that even though Friday was a banner day as far as the talking heads would have you believe, in terms of price AND volume, it was a yawner and a ho-hum day in terms of Elder.  Big moves (look back in history) have often been marked with large price AND volume, and we're not seeing that in the present data.

Remember, the graph above uses SIMPLE moving averages, not EXPONENTIAL, so the presentation will be more conservative as the data of 13 or 34 days ago is weighted equally as what happened yesterday.

I enjoy this next chart because it shows us where we are in the cycle compared to past periods:



The graph shows the states of the different assignments of GGT classifications:  #NC = New Cash, #AC = Affirmed Cash, #C = Cash, #L = Longs, #AL = Affirmed Longs, and #NL = New Longs.  The yellow area -- the number of LONGS in the database, generally sticks out.  Dark Green (NL), Light Green (AL), and Yellow (L) all comprise the longs in the database.  What we see is a very high number of these values, and historically, while we can certainly remain here, we generally ebb and flow, resulting in a pull-back.  I think we'll stay here for a week or two, but overall, I do think we need to pull-back in order to maintain upward momentum.

So now that I've given you something else to consider, let's look at the dashboard:



The Long-Cash Ratio (column 4) jumped up 19% on Friday, indicating that yes Dorothy, it was a good day in the markets. You can scan up column 5, which is the daily percent change of the LCR and see that we've had much bigger changes in recent history.

The GGT Strength index (column 6) moved upward dramatically, showing broad participation in terms of either/all price, volume, and/or rates of change relative to historical optimized levels.  This was a broad move on Friday and is a good sign for the bulls.

So overall, I think that while this bull may last for the short-term, I think that unless we see the Elder 34d SMA reverse slope and point up, and unless we see the GGT price break and hold $26, that the days are numbered. Further, the Elder 13d FI is just above 0, and unless this moves more positive, it may force me to sit on the sideline. I am riding the long trend and will continue to do so, but with a careful eye.

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Short-Term LCR Change Timer

As you can see in the dashboard view above, the timer is in CASH.  IF MONDAY IS AN UP DAY this timer will whipsaw back to the LONG side, and we should move long accordingly.  TODAY AT 3:30 or so is the time to do this!

I watch http://www.finviz.com/, specifically the ADV/DEC of stocks in the upper left corner.  If this is decidedly in favor of the ADV side of the equation, then you have a better-than-50:50 chance that the LCR Change Timer will transition to LONG.  If this is the case I then will open a position in the VTI (because it is presently above the 150d EMA), UWM (it needs to be above the 200d -- see last month's presentation). QLD (again, it needs to be above the 200d and it is), but I will avoid the UYG, as it is below the 185d.

Conversely, if the ADV/DEC line favors the DEC side of the equation, then I will do nothing, as I am in cash and the timer will remain in the present limbo-state of CASH-LONG (0).

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Elder Intermediate Timer

The above discussion about Elder notwithstanding, my daily Elder timer view, and the one I've been discussing with each of you on a daily basis, is long and telling us to continue on that path.  To that end I will look at stocks and ETFs that meet my normal filter, which I published last week.  Here are my candidates for today:

BBD
DTG

It makes sense that the list is short (why?), so today will be an easy day to trace these two.  I intend to use price above Friday's high and my normal volume requirements (listed at the bottom of the entry here).

My Elder gains are mediocre at this point:

VHC, +1.98%
IDCC, +1.62%
JJG, +1.47%
IGN, +1.43%
EWH, +1.08%
BKF, +0.03%
IWD, -0.35%
INAP, -0.81%

Given the weakness in the Elder 13d FI (just above 0) I may prune the losers if they slip more today.

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Trading Plan for Monday

With respect to the LCR Short Term Timer, I'm only interested in the action around 3:30 pm EDT.  My plan is outline above.

With respect to the Elder Timer, I'm only interested in BBD and DTG and will enter those if price and volume are appreciating.  I may prune my Elder losers if it appears the day is moving against me.

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Remember, you are responsible for your own trading decisions, not me.  Please take ownership for your work and behavior.

Regards,

pgd