Thursday, September 16, 2010

Short-Term Timer LONG (but long-in-the-tooth), Elder Intermediate Timer LONG

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Let's jump right into the dashboard view:


The fourth column over from the left is the Long-Cash Ratio (LCR).  The LCR continues to show great strength, rising daily and indicating that we are certainly in a bull leg.  Neysayers notwithstanding, this has been a good run (although I missed the majority of it because of my vacation when it launched).  The LCR moved upward a modest 4% to end the day at 2.529, and indicates that we now have over 2.5 : 1 LONG:CASH ranked stocks within the database.  From the LCR data alone we are continuing to move upward, but this sustained run of 10 continuous days of increase is getting old and I would not be surprised at some form of pullback.  Nevertheless, this is a great rally.

The sixth column from the left is the database strength, and it bears watching.  The present value of 0.718 is on the no-man's threshhold of 0.7-ish, which when we are below this, the market is ranging or indeterminant.  After Monday's spike upward we've been sliding backwards each day, and if this downward-slope in trend continues, we certainly could be in trouble from the long side.

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Short-Term LCR Change Timer

The LCR Change Timer continues on the LONG side, and the earliest we could see a move to CASH would be with the close of markets on Friday (expiration day).  To have this type of signal we need both Thursday to trade lower in terms of the LCR, as well as Friday.  Since the LCR Change Timer went long on 9/1 the GGT Price Index Equity Curve has moved from $1.552 to $1.63, or a change of over +5% (column 9).  As I presented at our meeting this past weekend, tying this with the VTI (Vanguard Total Index) ETF can be profitable, as this equity curve has moved from $1.745 to $1.803, a change of +3.3% (columns 10 and 11) .

This is all hindsight, as I was on vacation on 9/1 and did not participate in this bull leg.  Correspondingly, I do NOT chase this signal, as the duration is too short to do so and at the end of the day, chasing ususally means losses.  I am sitting on the sidelines with respect to this timer, and given that we have just completed our 10th day of gains, I think that we are long in the tooth on this leg and are due for a pull back.  Please review my blog of July 16th, where I talk about the average length of the short-term LCR change timer signals.

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Intermediate-Term Elder Timer

The Elder timer system continues to be LONG.  This is evidenced by our primary gate signal, which is a 13d EMA placed on the Elder Force Index (FI -- column 12).  This tells me it is okay to purchase equities on the LONG side.

The Elder FI(13) has a positive slope -- column 13.  This is bullish and indicates that through Wednesday's action, the market was growing stronger in terms of upward momentum.   Although you can't see it with the data I've presented, within the GGT system the FI(13) is at a value of +459K, it's highest level since 7/23.  We would literally need a market crash to move this value negative in the next day or two, so our intermediate-term timer position of LONG is most likely assured for the rest of the week and into next week, independent of Friday being an expiration day.

Note that the slopes of the 13d EMA and 34d EMA on GGT Price are positive (columns 14 and 15).  This is a necessary condition for a sustained bull and gives us confidence at this leg. 

Based upon the above, I will continue to hunt for equities that are good entry candidates.

The following stocks are not recommendations, but are on my watchlist for possible entry if they continue above yesterday's highs:

PCLN
AXTI
NBIX
LDSH
SLH
OPLK

My entry criteria on the above list is as per usual for intermediate-term holdings:
  1. entry price must be a few pennies above the previous day high
  2. volume must be up, relative to the 10d volume.  My minimum threshhold for volume is:

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

    To answer a private question that came in (please don't send me private questions, use the GGT or Tri-State Financial Investor's forum), the LCR value has NO IMPACT on this investment timer, as it is done purely as a function of Elder's Force Index.
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Trading plan for Thursday, September 16th

I'm watching the Elder stocks above and will enter under the conditions I stipulated.

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

Regards,

pgd