Wednesday, November 3, 2010

ST Timer (VTI) Signals LONG

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Summary

  • The Short Term LCR Change Timer on the VTI has moved LONG.
  • The Price Index jumped, but volume was ho-hum, which is acceptable but not ideal.
  • The slope of the 5d EMA on the LCR has turned up after 12 days of pointing downward (bullish); all the other longer slopes are still pointing downward (bearish)
  • Strength Index has moved upward off support lines, which is bullish
  • The Short Term LCR Change Timer system may transition to long if today is an up day as far as FinViz ADV/DEC indicators


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Details

The VTI, which is the Vanguard Total Index ETF, has signaled "LONG" with the move yesterday.  This is the actionable part of the GGT Short Term LCR Change Timer, and it has been in cash for the past 28 trading days.  A move long is not a guarantee that it will work going forward, but it does indicate that conditions are such that failure to participate means that I could be leaving money on the table.

The equity curve value on this timer is $1.556, meaning that a $1 invested on 7/28/08 would be worth this amount today.

I plan to place a trade today in the VTI after the market settles out at 9:45-ish or so, buying any dip that I can find.

Let's take a look at the Dashboard:

























The GGT Price Index jumped +1.32% on volume that was -2% lower volume than the 50d MA.  A major move in prices on average volume is okay, but it certainly is not a resounding "I'm a bull and I'm not ready to climb in my coffin."  I would have preferred to see volume up significantly with such an increase, so color this as the glass is half full.

The Long-Cash Ratio jumped +18%, ending the day at 1.567.  While I do not provide the daily details, this was enough for a fixed, 4d SMA line on the LCR to move to long (e.g., the LCR is now above the 4d SMA),  and this is the first time this situation has occurred in 12 trading days.  The equity curve on this simple timer is less than the VTI equity curve at $1.4022, but this is still a 17.1% internal rate of return.  Note that the Maximum Draw Down using this method is a bit higher as this is not an adaptive signal, with the MDD clocking in at 13.4%.

Yesterday's action did cause a crack in the bear-ice that has been plaguing us in terms of the LCR EMA slopes.  Here's the chart:






































Of significance here is that the slope of the 5d EMA on the LCR has turned upward ("Bullish", green) and this certainly is a necessary but not sufficient requirement for any form of sustained bull leg.  We absolutely need this trend to continue as far as the slopes of the EMAs on the LCR are concerned, AND, we need the overall crossings of the 5d, 8d, 13d, and 21d LCRs to reverse.  Right now investing on these time frames is very, very risky -- the trend is clearly pointing us down, not up.

Database strength is shown in Column 6 of the Dashboard; we've jumped up a significant amount, so we're not in any perceived danger of violating the support line I've been discussing the past few days.  Here's the chart, and it shows that we've got room to move up from here:


































From the perspective of the markets, we need a follow-through day to have any confidence of this bull leg.  Today's action, and some of tomorrow's, will be crucial.

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Short-Term LCR Change Timer

Of particular interest now will be whether the system short-term timer on the GGT value will transition to long today.  We need to watch http://www.finviz.com near the end of the day, and if we see the ADV/DEC line showing a significant favoritism to the ADV side of the equation we can have confidence that the LCR has moved to the LONG side.  Conversely, if it's only within a couple 100 stocks of the DEC value, then we should not act and wait until we get confirmation from the GGT system.  Here's the indicator on their page:






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Intermediate-Term Elder Force Index

The 13d Elder Force Index was hanging by a thread on the long status and has now a comfortable margin in terms of staying long.  While I'm not saying the bear influence is dead, some of the trends we saw in the breakdown of the FI(13) and Elder/GGT Universe have reversed, which gives me hope.

A number of the Elder candidates from yesterday did very well, storm clouds not withstanding.  Given this, the candidates for today are few and far between, because the FI(2) < 0 requirement is blocking entry on most:

CEDC
GSIT

Note that CEDC is coming out with earnings this week so is not a good candidate unless you have good risk management capabilities.

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GGT New and Affirmed Longs

This is a new selection list that is purely all-things-GGT.  It is NOT screened for Elder criteria, it simply is my pickings of equities that we should be watching.  The list is not all-inclusive -- you can download the latest ETF listing from our Yahoo! group, and the weekend stock listing is also provided.

Here are stock candidates that hit the top of my list for today:

SKH
LF
CGNX
SNCR
ININ
VMC
AKRK
SMP
DRWI
AMSC
HRL
MUI
APT
ASCA
AUTH
CAR
CCMP
COHR
IRR
MGAM
GXG
FDM
DBA
BND
CIU

Happy Hunting!

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Remember, you are responsible for your own actions, and I am not.  Please think before you pull the trading trigger.

Regards,

pgd