Tuesday, October 26, 2010

Elder FI(13) Long + LCR EMAs Pointing Down = Mixed Signals

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Good morning from Dallas-Ft. Worth.  Let's get a view of the GGT universe:


The price index moved upward +0.57% on Monday on normal volume that was +4% above the 50d MA.  As far as the close was concerned it was a ho-hum day, but if you look at the intraday, you see that we gave up much of the gains of the morning.  An up day is an up day, so we should have seen our portfolio rise.  My personal portfolio rose +0.17%, the lower amount than the GGT price index simply because I'm mostly in cash.

The Long-Cash Ratio rose yesterday, moving upward +12%.  The LCR is at 1.889 and indicates that more stocks in the database are LONG than with a CASH recommendation.  This rise in the LCR broke a 7-day streak of falling, so we'll see today if the trend continues.  Here is a detailed snapshot of the LCR status:



The left area shows us that the 8d EMA of the LCR is below the 13d EMA of the LCR, which is bearish.  The remainder of the EMAs are aligned properly (13d  > 21d > 34d > 55d) which is bullish.

The right area above shows us that across the board, from the 5d to the 65d EMA, that the slopes of these EMAs are all pointing downward.  This is very bearish for stocks in general and until we see this reverse, I'm remaining mostly in cash.  We need a significant up day to reverse the right side of this graph, and with futures down mildly as I write this, I don't think it will happen today.

Back to the primary dashboard.  The 6th column is the strength index, and like price and the LCR, it moved upward from 0.641 to 0.759.  This is bullish for the day and shows why we moved up overall in the price index.

Hence, overall, we are experiencing mixed signals.  We have a solid increase in the price index, the LCR, and the strength index.  This occured on normal volume, so we can lable the day as bullish.  We have a head-wind though, and with the slopes of the LCR EMAs all falling, we're definately in trouble in terms of bleeding within the database.  With history on my side I am choosing to remain mostly in cash until we get these LCR slopes turning green.

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Short-Term LCR Change Timer

The timer has transitioned from CASH (-1) to CASH-LONG (0), so if today is an up day, as measured by the ADV/DEC line at http://www.finviz.com/ at 3:30-3:45-ish, moving into short-term holdings could be a good move.  I note that the VTI has been in cash since September 23rd, and on this date the price of the VTI was $57.60.  Yesterday's closing price was $60.77, or an increase of 5.5%.  Aside from the waffling within the normal LCR Change Timer, the internals simply have not been in sync with the VTI, preventing us from entering.  Frustrating, but I intend to stay with my timer.

If today is up significantly, at least in a ratio of 14/10 as measured by the ADV/DEC value at http://www.finviz.com/ then I will most likely take a position in VTI, QLD, and/or UWM.

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Intermediate-Term Elder Force Index

Columns 12 -16 of the dashboard address the Elder 13d Force Index.  It presently is positive, which is the primary gate for entry into stocks from the long side.  The slope of the FI(13) is positive (column 13), which shows strength in general within the database.  The slopes of the 13d EMA and 34d EMA on price are both pointing upward, which also is showing strength in the database.  When we wrap all this together we have green flags waving to move into the market from the long side.

Of course, Elder makes no use of the slopes of the LCR, so these two signals are beating against each other.  This should cause you to pause at jumping in with both feet.  This being said, here's my list for intermediate-term entry:

AEL
KELYA
MNTA
VVTV
EGP
LMT
EXP
NCV
PNC
FCT
COL
S
MKC
DHR
SO
MRVL
IDG
AGCO
COT

If you look at this list, ensure that you have volume AND price appreciation before entry.

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

Regards,

pgd