Thursday, December 2, 2010

Short Term Timer still Long-Cash, Elder timer still CASH

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Summary
  • SOME slopes of the Long-Cash Ratio (LCR) EMAs have started to point upward.  Specifically, the 5d, 8d, and 13d slopes are pointing upward.  All the longer slopes are pointing downward.  So for short-termed behavior, the selection of stocks to choose from is expanding, so we are bullish, and for longer-termed behavior the database is contracting, so we are still bearish.  I'm looking for a "row of green", which means that all of the slopes, 5d through 65d, are pointing upward.  We're only 1/2-way there, so according to the slopes of the LCR EMAs, we should err on the side of caution.
  • ALL of the LCR EMAs are still negative.  This simply tells us where we are, not where we are going.  The universe of stocks has been contracting for a considerable time and this set of negative values simply tells us that "yes, risk is higher". 
  • The talking heads have said that volume the last two days has been low.  I disagree.  Compared to the 50d MA of volume, the last two days have seen a 16% increase over the 50d MA (Tuesday) and +7% increase on Wednesday.  This rising prices on rising volume is bullish, and I'm encouraged.
  • ALL of the pricing EMAs, through the 55d, are positive and properly aligned.  Again, this simply tells us where we have been, not where we are going.  Prices have been increasing, and this is bullish.
  • ALL of the slopes of the pricing EMAs are pointing upward.  We put prices in the bank, so this means that our equity values should be increasing.  The obvious problem is that these pricing gains are coming on a tremendously smaller database of longs, so bullish selection of stocks has been difficult.  Nevertheless, the bear ice is thawed from where we are today, so risk is coming off the table.
  • The short-term LCR timer is still in LONG-CASH mode, and if today is an up day according to the market's advance/decline line, we should see the timer move back to LONG.  I'm not going to chase this signal, as I prefer to only move into stocks when this transitions after resetting from CASH, which it has not done.  I personally would wait until tomorrow for interpretation and sit this out today.
  • The intermediate-term Elder timer is still in CASH, although it depends upon what method we use to make that determination.  If we use a simple moving average (take 13 values, add them up, then divide by 13), then Elder is in cash because this value is negative.  If we take 13 values, apply an "exponential moving average" (weight yesterday heavier than 13 days ago), then Elder is positive.  Until these confirm each other I'd be cautious.  Confirmation may come as early as the close of today's action if today is an up day.
  • The GGT universe %B value is 0.9351, which is high.  The likelihood of a pullback has increased, so we may see a good opportunity to jump in here.
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Top 25 Stocks

Being Thursday, I'm obligated to determine the new list of stocks and ETFs for the next week.  Recall that this portfolio is invested 100% of the time, between 65% full investment to 100% investment.

Here is the top 25 stock list:

PCLN

CMG
CEO
AZO
NFLX
CME
MTD
AMZN
RL
CKH
FFIV
MIDD
FCX
NOV
DRQ
BIDU
SLB
ETN
DECK
LVS
CSTR
MEE
NEU
NFG
TIF

Unchanged in position are (maintaining strength):

PCLN
CMG
RL

New additions to the list that were not in the top 100 last week (new because they have moved into a New Long/Affirmed Long/Long status within the last week):

CEO
CME
MTD
MIDD
SLB
LVS
NEU

Stocks that have risen in position (increasing strength):

CKH
FFIV
DECK
CSTR
TIF

Stocks that have fallen in position (increasing weakness):

AZO
NFLX
AMZN
FCX
NOV
DRQ
BIDU
ETN
MEE
NFG

Since inception on 10/28, the Top 25 stock portfolio is up 1.44%.    Since last week (11/26 start), the portfolio has increased 1.38%.  The worse maximum drawdown since inception is 5.28%.

Sell list (gain/loss since introduction)

ABV (-2.47%)
FOSL (+13.77%)
IBM (+0.24%)
MGA (+3.36%)
PH (+4.57%)
PXD (+7.90%)
UFS (-0.88%)
WLL (+5.10%)

Buy list:

CEO
CME
CSTR
LVS
MTD
NEU
SLB
TIF

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Top 25 ETFs

There has been a large rotation in the ETFs; here is the new top 25 list:

AGQ
TQQQ
OIH
TNA
ERX
SOXL
PALL
MDY
SGG
SOXX
BGU
IJK
USD
RFG
TYH
MVV
IWO
IEZ
DIG
MWJ
VBK
XLE
UYM
IYT
IJT

New additions to the list that were not in the top 100 last week (new because they have moved into a New Long/Affirmed Long/Long status within the last week):


TQQQ
OIH
TNA
ERX
PALL
MDY
SGG
SOXX
BGU
TYH
DIG
MWJ

ETFs that have risen in position (increasing strength):


NONE.

ETFs that have fallen in position (increasing weakness):

SOXL
IJK
USD
RFG
MVV
IWO
IEZ
VBK
XLE
UYM
IYT
IJT

Sells (gain/loss for the week):
EWW (+1.29%)
GLD (+2.20%)
IJR (+0.83%)
IWR (+1.13%)
RTH (+1.42%)
SSO (+2.23%)
UPRO (+3.74%)
VB (+0.86%)
VBR (+0.85%)
XME (+3.89%)
XOP (+2.0%)
XRT (+0.65%)

New Buys:

BGU
DIG
ERX
IWR
MDY
MWJ
OIH
PALL
SGG
SOXX
TNA
TQQQ
TYH
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Trading Plan for Thursday

I'm in cash across the board, having locked in some gains yesterday.  I'm also in meetings all day, so I'll not be participating in the markets.  I will update the Top 25 Stock and ETF portfolios, which do buy/sell at market when entered.

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Remember, you are responsible for your own investment decisions, not I.  Please do your diligence and take ownership for your actions.

Regards,

pgd