Friday, November 5, 2010

Reaffirmation of Intermediate-Term Bull Leg

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Summary
  • The short-term portfolio, which trades VTI, UWM, and QLD, is presently up 1.9% on this present signal.  Friday's activities will continue without change to this portfolio.
  • ALL of the slopes of the LCR EMAs have turned positive, which officially signifies the start of a new intermediate-term bull leg.
  • Several LCR EMAs are inverted, so we do not yet have confirmation of this intermediate-term bull leg.  Correspondingly, I intend to keep some of my powder dry.
  • Thursday's action achieved an all-time high in the GGT Price Index and the Strength Oscillator
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Let's jump right in to the dashboard, specifically starting with the LCR:







































As with all my figures, right-mouse click on the image to open in a new window or tab.

The Long-Cash Ratio (LCR), which is a measure of the number of stocks in the GGT universe that are appreciating (LONG) to those that are underperforming (CASH) moved up a dramatic amount with Thursday's action.  The LCR jumped +62%, ending the day at 2.878, and indicates that we have 2069 stocks with some form of LONG status and 719 with some form of CASH status.  This movement is very bullish.

The 5th column from the left indicates a major crack in the bear ice.  The 5d exponential moving average (EMA) on the LCR has now crossed back above the 8d EMA from below, which is bullish.  We still have a number of EMAs which are inverted, so we will need to see these turn green in order to have confirmation that this bull is here for the duration.  As of this morning the 8d < 13d, the 13d < 21d, and the 21d < 34d.    I personally would not commit 100% of my monies to the market at this time unless you are an aggressive investor/trader, as we want to see this inversion situation cleared.

I draw your attention to the right side of the figure above, specifically the bottom of the figure.  Whereas the left side of the figure represents the specific LCR EMAs, the right side of the figure represents the slope of these LCR EMAs.  These are (by design) leading indicators on the actual EMAs, because we cannot remove the aforementioned inversion situation unless the slopes of the LCR EMAs are positive (pointing upward).  For the last few days I've been saying that unless these all turn green that we should be concerned about the longevity of this bull leg, and with yesterday's action we have finally removed that concern.  The fact that all of these slopes of the LCR EMAs are now pointing upward reaffirms the intermediate-term bull leg and you need to participate if you are to make any money.

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Let's look at the other area of the dashboard:




Our GGT price index jumped +1.9% on Thursday, ending the day at $27.42.  I note that this is the highest we have ever been since GGT went live in September 2008.  Volume was significantly higher, ending the day with a jump of +43% above the 50d MA.  I often write of wanting higher prices on higher volume, and we achieved this on Thursday.  The bulls are firmly in control.

The Pricing EMAs, shown in columns 4-7, are all green -- this indicates that the alignment of the pricing system is bullish.  Additionally, the slopes of these EMAs (columns 8-12) are all green, indicating that they are pointing upward.  This too is bullish.

Column 13 represents our Strength Oscillator and it is showing a value of 1.000.  This is the highest value ever recorded and indicates that in terms of price, volume, and rate of change of price, we are at the strongest we have been compared to any time in the past two years.  As I frequently tell my kids, when you're at the top there's only one way to go -- down.  It will be an interesting next few days.

Overall, the bears are hiding and the bulls control the table.  If you're sitting on the sidelines you need to stop watching and simply pull the trigger.  Wait for a pullback, e.g., wait for the two-day Elder Force Index to indicate that it's okay to purchase a specific stock.  I'll post a candidate list below of equitites meeting this criteria.

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Short-Term LCR Change Timer

We are presently LONG in VTI with this timer, and the position is up 1.9% in two days.  We may see a bit of a pull-back today, and if this is the case, I will use the 39-minute bar with a MACD crossing in the lower half of the window to enter another position.  My general rule is not to chase this timer, as the GGT system signaled long on Wednesday (the VTI system signaled long on Tuesday), but we may be able to take advantage of general profit taking in the markets and the normal relaxation of prices.

QLD and UWM are also both candidates for entry under this timer system.

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Intermediate-Term Elder Force Index Timer

This timer is LONG, as expected.  It has been long since 9/2, and aside from a brief whipsaw on 10/9 and 10/19, it continues to keep us on the right side of the market.

If you do not know how to read the chart above in terms of the status of the Elder FI(13) timer please post a note in the GGT Yahoo! group (subscribe by sending a message to GreekGodTrading-subscribe@yahoogroups.com, and send a message from your email account by addressing it to GreekGodTrading@yahoogroups.com ).  Note that you must be a member of that group prior to posting any messages.

Here is my candidate list of Elder equities for Friday.  These have been screened against the GGT Universe of LONG-recommended stocks and ETFs.  The list is short, because the 2d Force Index is positive for most of the LONG universe, blocking entry to extended stocks:

MIPS
FFIV
ATHN
GLBL
SSP
NWSA
SIRO
AMED
GXDX
ECT

I intend to enter these only if they are higher than yesterday's high AND they meet prorated volume requirements.  For review, my prorated volume requirements are:

By 10:00, the stock is at 12.5% of the 10d MA of Volume
10:30, 25%
11:15, 33%
12:15, 50%
1:15, 60%
2:15, 70%
3:15, 90%

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GGT Top 25

This is a new strategy that will suggest the strongest stocks, as measured by the slope and coefficient of regression over a variable lookback period.  This list will be updated weekly, with new symbols appearing on Thursday of each week.  Enter only if price and volume are increasing (purchase strength):

GOOG
PCLN
AAPL
CMG
CEO
NFLX
AMZN
ABV
CF
AZO
MA
BAP
FCX
BIDU
SOHU
EMN
GYMB
LNN
SNP
DRQ
AMG
RVBD
MOS
SWM
BVN

For GGT, LLC members, this strategy will be added to our strategy document.

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

Regards,

pgd