Thursday, October 7, 2010

We're Losing Steam and Need More Coal

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First, the dashboard:


The GGT Price Index fell -0.5% on normal 50d MA volume.  I consider this normal market noise and mostly unremarkable.

The LCR fell -4% to end the day at 3.239, with 2277 stocks LONG and 703 stocks in CASH.  76% of the database is LONG right now, and this is a very bullish stance.  On a day-over-day basis the bulls are still very much in control, although I am expecting weakening as profits are taken.  I also expect that this will be somewhat mitigated because earnings season is here.

The GGT strength index fell from 0.984 to 0.839, so we're seeing a gradual weakening of the overbought condition established by Tuesday's action.  I still consider this overbought, so right now is not a prime time to jump into the market if you've been sitting in cash.

This next chart is important to understand where we are in the present bull cycle, relative to the past:



The chart shows that we are certainly in an up trend, and that the 13d EMA of the LCR is > the 21d, which is > the 34d, which is > 55d.  This is bullish, and the fact that they are all pointing upward is a very good sign.  We probably have some steam left in this bull.  But also note the relative peak of where we are right now to the past -- we are at these same levels, if not higher.  While I don't want to throw water on this market I think that we must be vigilant for a rapid breakdown in the market, as we simply cannot sustain these lofty levels indefinately.

This next graph should give you pause too:



This is the GGT Price and the GGT Smoothed Rate of Change, and it shows that we have topped locally in the GGT SROC and are now starting to decrease.  While we certainly can go higher, this is telling us that on a day-for-day basis we are having difficulty moving upward at the same rate that we were at the beginning of this run -- we are definately losing speed and momentum.

Personally, I am increasing my cash position and taking profits.  I'm not exiting, as you will see below, but I certainly am going to take profits off the table.

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Short-Term LCR Change Timer

The timer is remaining in limbo-land at a CASH-LONG (0) state because the market fell in terms of the LCR yesterday.  Given this, I did not move into any new positions in the VTI, UWM, or QLD areas.

Watch again around 3:30-4:00 today for the ADV/DEC line at http://www.finviz.com/ to be far more on the ADV side than DEC side.  If this is the case, I most likely will open a position in VTI, UWM, or QLD.  If not the case, then the timer will reset to CASH (-1) and we'll be at least two days from a long call.

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Intermediate-Term Elder Force Index Timer

The Elder FI(13) timer continues to indicate LONG so in the big picture, it is okay to purchase stocks on the long side.

Here's my watch list for today:

BIDU
TKR
OPLK
XXIA
CIB
DISCA
AMZN
CBT
ORLY
PPG
PPO
PTEN

TYH
IYZ
EWD
IWP
IJR
BRF
PIZ
PIE
PDP
QQQQ
MVV
QLD
TQQQ
RWR
XBI
MDY
XLU
VO
VOE
VBK

As always, look for entries ABOVE yesterday's high AND volume above the pro-rated values according to the time of day.  I like the following schedule and use it daily:

By 10:00, volume over 12.5% of 10d MA
10:30, 25%
11:15, 33%
12:15, 50%
1:15, 60%
2:15, 70%
3:15, 90%

Yesterday I sold EGHT for a slight gain (it dropped like a rock), IGN for a slight gain, and VHC for about a 16% gain.  I purchased HTHT and FDO.  My positions are as follows:

EWO, +5.8%
IDCC, +4.7%
BKF, +4.67%
EWH, +4.4%
PID, +3.21%
FXI, +3.10%
GXC, +2.26%
EWN, +1.98%
PFM, +1.31%
FDO, -0.22%
HTHT, -7.06% OUCH!

Note that HTHT signaled a move to cash with the close of the markets so I will lick my wounds and sell this stock, even though I purchased it yesterday.  Bad timing on my part, although it looked good at my point of entry.

I still have my 1% TSLs on EWN and PFM, good-til-cancelled.

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Trading Plan for Thursday

With respect to the Short Term Timer, I will watch market action around 3:30 and decide on VTI, UWM, and QLD at that time.

With respect to the Elder FI(13) Timer, I have a busy business day today so I will not be at the PC except sporatically.  I have set my watch to alert me at the appropriate times as indicated above and will check the price/volume of stocks on the list.  I will purchase any stock that meets volume and price action as laid out above.

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

Regards,

pgd