Tuesday, October 5, 2010

Ouch! Short Term Timer --> CASH, Elder --> CASH

Well, Monday's action hurt.  Let's start with the dashboard:

GGT Price fell -0.88% on Monday on volume that was -12% below the 50-day moving average.  The standard deviation for volume movement is +/- 14% so we are within the daily noise.  Generally, falling prices on "normal" volume isn't cause for concern, but other "red" in the figure makes me pause.

The Long-Cash Ratio (LCR) fell to 2.284, nearly -30%, and now indicates that 2074 stocks have some form of LONG status (down from 2285) and 705 stocks have some form of CASH status (up from 705).  This is a significant jump but again, we've been here before so no cause for exits.  Out of nearly 475 trading days this absolute change ranks at 88, so nothing too remarkable.

Of particular note is that the data base strength, which looks at the strength of individual stocks on a scale of -5 to 5, then sums those values and scales it between 0 and 1, dropped from 0.809 to 0.573.  This is a very large change and indicates that yesterday's action was broad -- strengths dropped, and strength is tied to price (which we saw drop in the GGT price index), volume (which was lighter than normal),and price rate of change (which isn't presented above).  If we drop much more than this we could have issues.

So, from where I am sitting, today's action is very important.  We need to move upward today on volume as well as price.  Failure to do so will be problematic for long positions.


Short Term LCR Change Timer

If you were watching http://www.finviz.com/ yesterday around 3:30 p.m. EDT you would have seen that the number of declining stocks far outweighed the number of advancing stocks, on nearly normal volume.  The LCR confirmed this last evening, and as a result, the Short Term LCR Change Timer has moved to CASH.  In accordance with my rules I have closed my position in VTI (at a loss).

As my indicators would have it, the VTI timer, which is wholly-derived from the ST LCR Change Timer, also confirmed the move to CASH.  There is no ambiguity.

Correspondingly, the GGT Equity Curve dropped to $1.5971 from a peak of $1.63333 which occurred on 9/20, and the VTI Equity Curve has remained constant since 9/23 @ $1.5564, which is when it transitioned to CASH.


Intermediate Elder Force Index Timer

The Elder 13d Force Index Timer has transitioned to CASH, with the 13d EMA on the GGT Force Index sitting at 38K, barely above 0 but the 13d pricing slope now negative.  This is the first time the 13d pricing slope has been negative since 8/31 and tells us that the bears have their hammers out and are starting to nail the bull coffin shut.  Because of this downtrend the Elder timer indicates we should move to the sidelines.

Adding to this is the crossing of the 8d EMA of price and the 13d EMA from above.  If you look far to the right in the figure above you'll also see that both the 8d EMA and 13d EMA of price both have negative-pointing slopes, and this a warning shot.

What you cannot see, simply because I cannot fit it in the screen shot is that the slopes of the 5d, 8d, and 13d EMAs on the LCR have all started to point downward, again, another warning shot.

Because of this, I am placing the weakest of my Intermediate Elder holdings with a 1% TSL (trailing stop loss).  If they move up today, so be it, but I will exit my holdings in accordance with the Elder FI timer rules.  See below for the list.

Note that there is precidence for a whipsaw with this timer.  This timer signaled CASH on 3/20/09, then moved LONG on 3/23/09.  If you didn't believe it then you would have been chasing one of the largest bulls in a decade, so we must pay attention.  We certainly can whipsaw, as we can with ALL trend-following timers.  Nothing is perfect.

My Elder Portfolio looks as follows:

VHC, +29.79%
EGHT, +5.39%
IDCC, +5.09%
EWH, 3.55%
BKF, 3.29%
EWO, 1.42%
FXI, 1.03%
IGN, 0.47%
PID, 0.41%
GXC, 0.36%
PFM, -0.73%
EWN, -1.63%
CSUN, -4.09%

Unrealized gains are 2.64% with most of these being purchased around 9/22 or after.  This is a bit more than 106% annualized over the 10 trading days.

ENTR was sold yesterday for a loss, as was INAP.


Trading Plan for Tuesday

My short-term timer is in cash, as are my holdings.  No change there.

My Elder timer is weak-weak-weak, but I am holding strong stocks.  I will sell the weakest:

  • PFM has a 13d slope line that has crossed the 34d slope from above, with both sitting at less than $0.02/day. This is a weak ETF and will be marked for selling.
  • IGN has the same situation as PFM, and is in the $0.07/day range. A bit stronger, but the crossing is ominous. Mark for selling.
  • EWN is in danger of the 13d x 34d slope from above if today is down. Mark for selling.
  • CSUN is struggling at just barely above $0.01/day on both lines. Mark for selling.

If ANY of the other positions give up significant gains they will be sold with a limit order. I have the luxury of sitting at my PC for about 1/2 the day so I can do this.

Remember, you are responsible for your own trading decisions.  Please do your diligence.