Friday, September 17, 2010

ST LCR Timer moves to LONG-CASH, Elder candidates are few

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Somehow the markets climbed out of the hole they fell into during the day, started by the open, and by 4 pm the Dow and the NASDAQ had finished in positive territory (S&P was only down -0.04%).  Nevertheless, the underlying secuirities fired a bow shot that we have to acknowledge -- the Long-Cash Ratio of stocks in the database fell a significant amount, so the window-dressing of the primary markets simply isn't going to hold water.

Here's the dashboard:


The GGT price index, which is made up of 2900 liquid stocks, fell -0.24%.  Volume continues to be light at -16% below the 50d moving average, and as far as I'm concerned, dropping prices on lighter volume is no reason to panic.

Of interest to me is that the LCR dropped -11% to 2.241, a significant drop when we saw stocks on the Dow and NASDAQ claw their way back.  There is clearly a disconnect in the markets.

Confirming the drop in the LCR is the strength index (6th column), which has continued to fall all week and indicates that the market is losing steam.

In general, we have falling prices and a falling LCR.  Whether this is a breather to a newer high or something more ominous is beyond the abilities of my crystal ball.

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Short Term LCR Change Timer

The ST LCR Change Timer has moved to LONG-CASH (0), and indicates that the ice has cracks in it.  Continued weakness today will cause this to move to CASH.  Since I do not update this value until after the markets close, use http://www.finviz.com/, specifically the ADV/DEC line in the upper left corner, to get an idea on what the LCR will do today.   If this value at http://www.finviz.com/ favors declining issues, then we know that this run is over.  Contrasting, if the LCR moves upward today, we'll be in limbo-land across the weekend, which simply means that Monday will be an interesting day ... :)

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Intermediate-Term Elder Timer

Our intermediate-term Elder Timer continues to indicate that it is okay for us to buy stocks long.  Unfortunately, only one stock -- KWR -- has positive slopes on the 13d MA and 34d MA (out of 60 candidates with positive 13d Force Index and negative 2d FI), so pickings are VERY slim.  When this has happened in the past we have been at a fork in the road -- either prices will plateau for a few days (consolidation) before they continue a run upward or they will start falling faster.

Again, while we may continue higher from here, there simply are no candidates that are available.  Given this, I'm placing trailing stop losses on my holdings that were acquired this week (MIPS, up 4.26%/4 days, NNI, dn -2.59%/4 days, and SIRI, up 3.55%/4 days) so that the exits are above 1% net gain for the two that are in the money and a 1% TSL for NNI.  If the TSLs fire on MIPS and SIRI I'll lock in small gains but on an annualized basis they will be over 100% each.

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Trading Plan for Friday, September 17th

I do not intend to purchase stocks today, as there is only one Elder candidate (KWR) that is worthy of consideration.  I've placed a 3% TSL on MIPS and a 2% TSL on SIRI, as well as a 1% TSL on NNI.  Time to let the markets do what they do.

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

Regards,

pgd