Monday, November 29, 2010

ST Timer may move to CASH, Elder is in CASH, LCR Bearish, and EFU meets Entry Criteria

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It's 8 a.m. Monday morning and I've been watching the futures react to the Irish bailout.  Futures were up last evening, but the dollar was up more (Euro down almost 1%), so talk about a divergence!  Now, futures just slipped underwater and are down across the board, the dollar is up (Euro down), but now the metals are moving underwater ...

Treacherous times indeed...

Just a reminder -- I'm traveling this week starting Tuesday, and will not be back until Saturday morning.  Blog entries will be short and sweet (which may be an improvement?).

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Summary

  • The Long-Cash Ratio (LCR) remains incredibly bearish and consolidated
  • The Pricing system is more bullish, but definitely has cracks in the ice in terms of sustainability
  • The Short-Term LCR Change Timer is still on the fence, and a down day today will most likely cause it to move to CASH.  Aside from one QLD position, I'm in cash under this timer.
  • Elder's Force Index timer is in CASH.
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MSCI EAFE

I run another GGT strategy for Thrift-Savings Plan peeps (http://ggt-tsp.blogspot.com), and one of the funds there, the MSCI Europe Asia Far-East (EAFE) fund just confirmed a sell signal in the WEEKLY window.  This tells me that the EAFE is getting slammed, and I need to review it in terms of a contra position.

If you look at EFZ (-1x contra, non-leveraged) and EFU (-2x contra, leveraged), you'll see that indeed, they are looking good for long entry under the Elder system.  Here's the chart:































Here's the bull argument:
  • Both Bull AND Bear Power are positive, with Bull Power larger in magnitude than Bear Power.  
  • Both methods of calculating the Force Index (exponential moving average - EMA - and simple moving average - SMA -- are both positive (green).
  • The 2d Force Index is green, signaling entry if we continue higher.
  • MACD histogram is positive and increasing in magnitude
  • MACD and MACD signal lines are pointing upward and are moving from the lower half to the upper half
  • Both slopes of the 13d and 34d EMAs are positive
  • Both slopes of the 13d and 34 EMAs are pointing upward
  • The 8d EMA is above the 13d and 21d EMAs
Here's the bear argument:
  • %B is higher than I like for entry @ 0.8.  Still within range, but just on the upper end.
  • We are still far below the 160d EMA.  Overall, we are in a confirmed downtrend
  • We do not have proper alignment of the EMAs; only the 8d is above the 13d, but these are both below the 34, 40, and 160.  
Although not presented here, if you look at the global "Direxion -3x Bear Index" which I presented at last month's meeting, you'll see that we have a global "ok to enter contra ETF positions".  If you want a view of this let me know and I'll post in a subsequent blog entry.

EFU meets all conditions for entry under the Intermediate-Term Elder Force Index Timer, Contra ETF rules. 

So, rather than take a full position, I'm going to derate this position because of slightly higher risk  I'd like to be able to add more to this position if it confirms on the weekly as well as monthly time frames after we enter, as well as a full alignment of the 8, 13, 21 EMAs, so I'm going to enter with a 40% position.

10-day volume is low -- 41K shares, so this isn't as liquid as I'd like.  This being said, it's trading up in premarket at 8500 shares as I write this, so we've already met today's prorated volume requirement through 10:00 a.m.

I missed a premarket opportunity at $30.59, so we'll see how this behaves today and try to pick it up intraday.  It's going to gap up on the open, so I'll wait for it to relax a tad before entering.  My initial pickup level is at the premarket Volume-Weighted Average Price level of $30.60.

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Remember, you are responsible for your own trading decisions, and I am not.  Please do your homework, and please take ownership for your actions.

Regards,

pgd