Wednesday, October 6, 2010

Strength Index Near All-Time High, ST Timer may move LONG, Elder Whipsawed LONG

I'm not sure how many of you are downloading the nightly ETF postings by my colleague Joe (jumpinjoe), and all I can say is that if you're not downloading, then you should be.  There are some interesting tidbits going on the the ETF world.

Contained within that nightly posting are the status of 81 different flavors of Contra ETFs.  Something happened within those Contras last evening that I've never seen in over two years of watching the list:  we have only 3 Contras, out of 81 total, that are in a LONG status.  All the rest are in some form of CASH status.  This is incredibly bullish.  The three that are in LONG status are AGA (low volume, ignore), SMB (low volume, ignore) and SKF (6.8M shares volume).  SKF is the leveraged Contra of the Financials, and the fact that we don't see it's sister here (SEF, -1x Financials), nor it's bigger brother FAZ (-3x Financials), suggests that this is an outlier.  Indeed, here's the GGT timing chart for the last year:

As you can see, it's getting the heck beat out of it since signalling long, but overall, it has kept us on the right side of the trade for the larger moves.

Something that may escape you if you review the "By Recommendation" page is this:  One of the New Cash recommendations is QID.  This went to New Long with Monday's action, and with Tuesday's banner day, it whipsawed to New Cash.  In fact, three other ETFs followed the same path.  All systems whipsaw -- all I can hope for is that GGT keeps me on the right side of the trade the majority of the time.

This one whipsaws, and shows that investing in Contras during bull markets can be hazardous to your financial health:

To wrap this up, 3.7% of the Contra ETFs that I track are LONG.  The rest are in some form of CASH.  I think we can watch this ratio and see when the market begins to roll over.


The dashboard:

Our price index jumped +2.29% on Tuesday's action, on volume that was +12% higher than the 50d MA.  Rising prices on higher volume is a good sign.

The LCR jumped 47% to 3.357, and now indicates that 2296 stocks have some form of LONG status and 684 stocks have some form of CASH status.  77% of the database is LONG, and we've not been here since early April.  With history as our teacher we all know what happened near the end of April.

The 6th column from the left is the GGT strength index.  It is now at 0.984, the highest level recorded since 9/13, and in terms of 1-day change, jumped from 0.573 to its present level.  WOW.  The problem is, there isn't much we can do in terms of moving up from here ... another jump in this strength simply is not achievable. 

While we may play around here a bit there is only one way to go when you're at the top, so be in tune folks.  I wouldn't consider this market (today, Wednesday) a wonderful buying opportunity if you're sitting on the sidelines...


Short-Term LCR Change Timer

Poor ole change timer.  Just when it thinks the world is disintegrating it gets slapped with another jump upward.  My loss in VTI is evidence that this timer is playing catchup.  With the move yesterday the Short Term Change Timer has transitioned from CASH (-1) to CASH-LONG (0), and if today is an up day as far as the LCR is concerned, it will move back to the long side.

By now you should know how to play this.  If is UP at 3:30-3:45 as far as the ADV/DEC bar is concerned, we have fairly good confidence that the LCR will be up too when I upate later this evening.  This means that movement into VTI, UWM, QLD, etc. could be prudent.  Again, your crystal ball is as good as mine.  I'm not fretting that I missed this move with the ST Change Timer, nor should you.  It happens and in the course of history of this timer, it works far more often than it fails.  I intend to stay the course.


Intermediate-Term Elder Force Index Timer

Elder has whipsawed with Tuesday's action ... the timer continues to provide a positive 13d Force Index, and the slopes of the 13d and 34d EMAs are positive on the GGT universe.  This tells me it is okay to enter stocks long, if I can find any.

I trimmed CSUN from the portfolio yesterday, as it looked weak.  I placed 1% TSLs on EWN (up 3.28% for the day), IGN (up 2.48%), and PFM (up 2.06%), and the TSLs never fired. 

I will leave the 1% TSL on EWN, as it is only up +1.59% in my portfolio and I do not want to incur loss.  IGN is up +2.97% in my portfolio so I will open it up to a 2% TSL.  PFM is up +1.31% so again, I will leave the 1% TSL intact.  These were the weakest of my holdings going into yesterday's action and I am not confident that they will keep their momentum.

Here are my holdings and performance:

VHC, +43.31%
EGHT, +11.92%
IDCC, +6.27%
BKF, +5.10%
EWO, +4.27%
EWH, +4.23%
FXI, +3.17%
IGN, +2.97%
PID, +2.67%
GXC, +2.42%
EWN, +1.59%
PFM, +1.31%

Note that NO Elder-Filtered ETFs are returned by HGSI.  This is because the 2d Force Index of the entire ETF database (screened for > $1, >100K shares) is positive. I do not buy unless the 2d Force Index is NEGATIVE AND REVERSING ON THE DAY OF PURCHASE.  There are no ETF candidates for today.

Only 4 stocks are returned in the Elder-Filtered stocks (see my past blog for the setup):  SMTX, PAY, CNU, and KFN. 
  • CNU is losing momentum and the 13d EMA slope is now below the 34d EMA slope, with both pointing down.
  • KFN looks interesting and is a good candidate for entry IF it moves higher than yesterday's high of $9.08 on above-average volume.
  • SMTX is losing momentum in a big way and not only are the 13d/34d EMA slope lines inverted, they are almost below $0/day.  Bad news.  Avoid.
  • PAY is disqualified because the 13d/34d EMA slope lines are inverted AND the 13d slope line is NEGATIVE at about -$0.02/day.  Yuck.
Patience.  Wait for a 2d Force Index pullback -- it's coming.


Trading Plan for Wednesday.

Short-Term Timer:  if the markets are higher with respect to the ADV/DEC line at by 3:30-ish I will move long in VTI, UWM, and/or QLD (my choice).

Intermediate Timer:  I will keep an eye on KFN, and will move on it if it continues to move higher on higher volume.  I will keep my TSLs in place on my present weakest holdings as discussed above.


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