Thursday, January 28, 2010

Notables from Wednesday, January 27th

.
Yahoo! is finally back to normal and I am caught up on GGT file updates.

===========

I'm traveling to Atlanta today so this will be brief.

The GGT Price index is walking back up, closing at $22.15.  It is up from Friday's low of $21.74, and has been meandering upward since then.  We are 4.8% above a lower channel line, and 1.3% below the upper channel line, so I do not think we're out of the woods yet.  Pricing EMAs continue to walk upward, which is bullish.

We have a divergence.  The LCR, our long-cash ratio, continues to drop on higher GGT prices.  This is bearish, and indicates either that 1) the LCR will reverse, or 2) prices will reverse.  Our high was 2.124 on 1/19 (2.4 on 1/14), and we've been decreasing ever since, with a closing value of 0.537.  We are oversold right now, so I am guestimating that prices will continue upward for a short period, causing a reversal in the LCR.

The LCR Change timer is still in CASH at a value of (-1), although if today is a strong day I could see it moving to Cash-Long with today's action.  You may want to consider protecting contra gains if we have a strong day, but I personally am not closing any contra positions today.

GGT strength overall is very oversold but is now advancing upward.  The value is 0.185 -- which means entry for leveraged bull ETFs could still possibly work.  We've been down here all week, so caution is advised.

Overall, our various strength indexes of the indices we track are walking up from very oversold levels:

DJ30: 0.33, up two days
NDX100: 0.226, up two days
Brazil: 0.104, up two days
Russia: 0.083, up one day
India: 0.050, up one day
China: 0.193, up one day
SP500: 0.278, up two days
SP400: 0.314, up two days
SP600:  0.347, up one day
R2K: 0.299, up one day

Note that the small caps were hit very hard in the last week and are rebounding fast.  Any values over 0.2 and continuing upward is bullish.... stalling in the 0.4-0.7 range is dangerous.

=================

Remember, you are responsible for your own investment decisions.

Regards,

pgd

Friday, January 22, 2010

Banking AND Is the time right for Contra ETFs?

.
Before I anwer that question, the strongest performing group (according to GGT) from yesterday's plunge was Banks (Multi-Regional), Banks (Midwest), Banks (Northeast), and Banks (West/Swst).  Make sure you're looking in these areas for opportunities, as they are flying under Obama's radar...  To facilitate this, the strongest are (according to GGT):
  • Midwest Bank: ASBC
  • Multi-Regional: FITB
  • Northeast: BPFH
  • Southeast: UCBI
  • West\Swst: COLB

==============

Here is my HGSI chart of Contra ETFs -- all of them that have 50d MA volume greater than 100k shares:





The chart is interesting for a number of reasons:
  • The Bongo weekly, which is a signal is determined by the value relationships of 3 different Wilder RSI's and a moving average, just moved into a green zone.  This is bullish for contras.
  • The Bongo daily, which moves faster than the Bongo weekly, is already green, which is bullish.
  • Accumulation / Distribution is green, so we have the expectation of prices moving higher.
  • For an index, we want to see the Elder FI(13) in a green zone, which means that (volume * price change) for the index is above 0.  This is the case now, and is bullish.
  • The %B and Bollinger Width is presently green, which indicates overbought.  This is a cautionary flag.
  • Price is poised to break above the 50d EMA for the first time in quite a while.  Take a look at the past -- this has been a point of resistance.  CLOSURE ABOVE the 50d MA would be bullish, failure to close will be another resistance line.
  • Two light-blue Little Kahuna's appear in sequence on the bottom ribbon, which is longer-term bullish.  This does point to the %B rising very quickly and now indicating overbought.
Bottom line:  I still think it too early to enter full positions on Contra ETFs, at least until we cross and close above the 50d MA, but overall, we are very close.  We need to watch these very carefully.

Thursday, January 21, 2010

Notables from Wednesday, January 20th

.
Let's start with a composite picture of the GGT New Long ETFs that are only CONTRA ETFs, as of today (click on the image for a larger view):





Captured above are the Contra ETFs which appear as a New Long on January 20th.  Before we get excited that GGT is signalling a change in the market, there are a number of warning signs in the graph.
  • The top ribbon indicates a weekly measurement of something the HGSI software calls Bongo.  The signal is determined by the value relationships of 3 different Wilder RSI's and a moving average.  When this is red it is a major caution signal.
  • The window entitled 65d Slope EMAs shows values that are completely negative.  While by itsself this is not a death nail, the red line in this window represents the 21d EMA of the slope of the 65d EMA of price, and it's still pointing down.  A negative absolute value on all these EMAs, coupled with a downward-pointing 21dEMA of 65d EMA slope, prevents me from moving into contra ETFs.
  • The 50d EMA is well below the 200d EMA, and both are still pointing down, e.g., losing money.  Not good until we start seeing some convergence.

Given this red, there are some positive indicators on the graph:
  • The 2nd ribbon from the top is Accumulation/Distribution.  It has moved from the poorest reading to the next poorest, e.g., it is starting to show accumulation.  This means prices will continue to improve if they become in higher demand.
  • The 3rd ribbon from the top is Elder's Force Index, 13-day.  This is now showing green, which means the 13d EMA of (volume * price change) is above 0.  This is good and reflects what we're seeing in the Acc/Dis window.
  • The Bollinger Window (%B and Bandwidth) is showing a breakout.  This is bullish for contras.
  • The 65d Slope EMA window, while showing absolute negative values for different EMAs on the 65d Slope, has both the 8d and 13d pointing upward.  If we get the 21d to point upward this would show sustained momentum for this group of contras and could give us a very good entry point for the intermediate term.
  • The bottom window shows a light blue kahuna, which indicates a significant change in the Bollinger window and is ususally a good sign.
So, caution is advised on Contra ETFs, but they need to be on your radar.

============

My pick for today is Dress Barn, DBRN, above $24.98.   Here's the chart (click on the image for a larger view):



DBRN is set up nicely for entry above $24.98, with a stop loss at $22.78 and a first goal of $27.23.  Ideally, entry above $24.98 and volume above 137K by 10:00, 275K by 10:30, or 370K by 11:15 would give added confidence to the trade.  Note the apparent resistance right around $25.5, and breakthough with a close above this level would be bullish.

==============

Remember, you are responsible for your own trades.

Regards,

pgd

Wednesday, January 20, 2010

GGT Notables from Tuesday, January 19th

.
Summary

I am playing it relatively safe today.  The GGT price index is at an all-time high and is over 8.5% from the bottom channel -- over bought.  The GGT LCR Change timer is indecisive, but could move long today if we move upward on the major indexes.  Database strength, as well as index strength is unimpressive and is indicisive, causing me to want to lean more towards protecting profits.

============

GGT Price has hit another all-time high, $22.71, on volume of 1.84M shares, which is 40% over our average volume of 1.38M shares.  As would be expected with a strong day all the pricing EMAs and their day-to-day deltas are pointing upward and accelerating.  The GGT price is now 8.5% above the bottom channel line discussed this past weekend in the blog, which is an overbought condition.  While upward pointing prices and EMAs is very bullish, we are in territory where we normally see a pull-back, so caution is advised.

The GGT Long-Cash Ratio (LCR) jumped from 1.727 to 2.124 and is now indicating that 2445 stocks in the database have a Long recommendation with 1151 stocks showing a cash recommendation.   The 13d EMA on LCR is still pointing down, which is bearish, but the 21d, 34d, 55d, and 65d have resumed their upward slopes, a bullish sign.  Together, this action is bullish, but we need to see the 13d point upward for the "all-in" confirmation.

The GGT LCR Change Timer is indicating Cash-Long and has a value of (0).  If Wednesday is an up day, this timer will move back to the Long side (+1).  One way to get an advance on this movement is to watch the ADV/DEC line of the three major indexes around 10 to 10:30; if we are up by a non-scientific ratio of 1.8:1.0 by this time most likely it will be safe to enter long positions.  Note that this timer, when applied to the GGT index, has returned a total return of 87.5% since September 2008, so it pays to listen to this timer.  This is a fast moving, short-term timer, so if you follow it, then make an effort to follow it.

In terms of strength of short-term ranges, all the major indexes are in mid-scale strength areas. Here's the chart, superimposed with the GGT LCR Change Timer signal:






The challenge that I have with where we are as indicated by the above graph is that we are neither overbought, nor are we oversold.  Consequently, this lack of directional strength gives me pause, and although I may go long today if the major indexes are up, I will not be fully investing my powder keg.  I want to see several days of sustained up movement to above 0.7-ish, or a sustained drop to 0.2-ish.

Remember, you are responsible for your own investment decisions.

Regards,

pgd

Tuesday, January 19, 2010

Addendum to the Jan 16th Weekend Post

.

I want to make you aware of something that came out of my weekend analysis but that I was having difficulty posting in the previous blog entry

The GGT LCR is a measure of the number of stocks in the GGT database that have a Long recommendation compared to those with a Cash recommendation.  Presently, the long-cash ratio is 1.727, down significantly from the peak on Monday, January 11th, 2010 of 3.203.  This divergence in price and LCR is significant -- a greater number of stocks in the database are falling below their optimized EMAs (moving them to a cash status), but the price of the GGT database continues to move higher and higher, at least through this past Thursday.

This behavior cannot be sustained.  Either the GGT price will fall, aligning itself with the LCR, or the LCR will reverse and climb, locking itself with the increasing prices.

Here's the chart:




I've colored the area above the LCR peak in pink so that you can correlate the price change with the peaking change of the LCR.  Obviously, we're seeing a significant change in LCR relative to GGT pricing, and this is a huge shot across our bow as a warning. 

Regards,

pgd

Saturday, January 16, 2010

GGT Weekend Update for January 16th, 2010

.
Summary

A crack in the ice?

A number of key ETFs and stocks are changing state, and it's important to take note of the sea change.  It's too early to call the bull dead, by any means, but certainly, caution is advised.  There appears to be an opportunity in longer-term bond ETFs, so we need to watch them.  Emerging Market ETFs, while appearing to reset in the recent pullbacks, are a bit early for re-entry.  Contra ETFs for this space look ready for purchase if the slide continues.

The GGT price index looks significantly overbought.  Caution is advised, as it suggests a fall of -7% would not be unexpected, relative to what happened in 2009.

Note that I like using the 3x-leveraged family of funds from Direxion for analysis because they highlight changes that are not immediately visible in the 1x ETFs.  Folks, these ETFs are dangerous and if you want to rank their volatility on a scale of 1-5, with a 5 being the most risky, they are a 6.  I am not advocating that anybody invest in the Direxion ETFs, or any other of my notes below -- remember, YOU are responsible for your own investment decisions.

The latest Greek God Trading pages, which will be used and discussed below, can be downloaded from our Yahoo! web site.  You need to be a member, so send an email to

mailto:GreekGodTrading-subscribe@yahoogroups.com%20

to let me know you want to join.  Once you have gained entry, you can access the latest files in the Files section at:

http://finance.groups.yahoo.com/group/GreekGodTrading/files/GGT%20HTML%20Archives/2010-01%20%28January%29/

You'll find the latest lists in the form of a zip file.

=========================

Treasuries

I  presently have a position in TBT, the ProShares Ultra Short (-2x) leveraged 20-year bond fund. I entered earlier this week and the position is underwater by -3.84% as of Friday's close, which obviously is the wrong way to go.  Note that GGT has signaled "New Cash" for TBT as of the close Friday, so we're seeing my position  behave like GGT indicates.  Let's take a look to see if we could have seen this coming; like all my charts, click on it for a bigger image:




There is a considerable amount of information in this chart, but I draw your eye to the window just above the pricing window, the one entitled "65D EMAs of SLOPE (...)".  Here, we're looking at the slope of the 65D EMA of price,  but with three different EMAs applied:  an 8-day, a 13-day, and a 21-day.  When these values are below 0.00, the slope of the 65D EMA of price is falling, and when these values are above 0.00, the slope of the 65D EMA of price is rising.  When these 8/13/21d EMAs are pointing upward we have price momentum to the upside, and when they top out and fall, we are losing price momentum.  We want stocks where these are breaking out to the upside.

With respect to the 8d and 13d EMAs in the 65d EMA of slope window, we see that these are falling from a positive value.  The positive value means that the 65D EMA is still rising (slopes above 1 mean rising), but is doing so at a slower rate (e.g., less positive).  The 21d is still pointing upward, so price is still in a long-term uptrend, although on shorter time scales it's apparent that it is under pressure.  We see that the 8d and 13d started flattening around the 11th of this week, right when I was purchasing.  Had I paid attention to this graph, I would have realized that we were in a bit of pressure here and probably would not have entered.

If you take a close look at the pricing graph, you'll see that the blue line is below the red line.  The blue line is the 50d EMA, and the red is the 200d EMA.  Further, you'll see that Friday's action was completely between these two, e.g., this gives evidence why GGT has signaled "New Cash".


Given the "New Cash" recommendation for TBT, coupled with the peaking/falling values of the 8d/13d EMAs of the slope of the 65d EMA of price, I will be selling my position in TBT on Monday.  I will do this by placing a 1% Trailing Stop Loss (TSL) that will be in place at the open.  Note that I still believe that the longer-term contra bond funds will do well in the future, especially as the FED raises rates, but right now the tide is changing.


==============


If TBT, the contra 20-year bond ETF is falling apart and is worthy of a sell, is there a corresponding buy?

TLT is the non-leveraged, +1x ETF that represents the 20+ year bonds.  Here's the chart:































We're seeing some interesting action on this chart:
  • The 3rd ribbon from the top is the Accumulation/Distribution line for TLT.  It is rising from poor Accumulation, a positive sign.
  • The %B, which is the price in relation to the Bollinger band boundary and Bollinger bandwidth of TLT is significantly increasing.  In fact, the present reading of 68% indicates we may have missed the move in TLT.
  • Although the 65d EMA slopes are all below 0, indicating that this has a long-term downward price movement, the short term 8d and 13d EMAs of the slope have reversed and are pointing upward.  This is a shift in momentum.  We need to see the 21d EMA reverse also, so by this indicator, it is too early to get into TLT.
  • Price gapped up on Friday, but we have a Doji -- indecision.  We need to wait and see what is going to happen over the next few days.

    Conclusion:  it is too early to get on the TLT bandwagon, but continue to watch.


    TYD, the 10-year +3x leveraged ETF from Direxion, has signaled "New Long".  This is a thinly-traded ETF, but we can glean some trending info from the price action of this family of ETFs.  Here's the chart:




    Now you know how to read this chart above.  Note specifically at the crossing of the 65d EMA slope lines, specifically the 8 and 13, which crossed on the 6th.  Even though these are still negative values, they certainly are indicative of a change in momentum on this ETF, hence we need to watch closer.

    Note that we want a pullback in TYD to enter, as well as more volume, but this one is interesting as an indicator of what long bonds are doing.

    ================

    The Emerging Markets ETFs interest me for a number of reasons, but mainly that I think we need to keep some money reserved for those overseas opportunities.

    The Direxion 3x funds for the EAFE can give us some insight as to what is going on in the emerging markets aggregate:



    The top one, DZK, is the +3x bull, which means that it goes up 3% for every 1% increase in the underlying, and the bottom one is DPK, which is the -3x bear.  Click on the image above.  When you scan the GGT dashboard, you see that the bull is "Long", and if you look at the right-most column, you'll see that the strength is a "1", which is about midscale.  Conversely, the bear is showing "Cash" and a strength of 3.  What?  The bear is showing a strength greater than the bull yet the recommendations are Bull/Long and Bear/Cash?  Yes, and this indicates the following:
    • The bull ETF DZK is in a long-term uptrend and its PRICE AND VOLUME are higher than it's historical optimized EMAs.  This is long-term bullish.
    • The bear ETF DPK is in a long-term downtrend and it's price is lower than it's historical optimized EMAs.  This is long-term bearish.
    • The bull ETF DZK is experiencing a pull-back causing the decrease in strength, which is a short-term indicator, to fall towards negative numbers.  The range is +5 to -5, and when it hits -3, it will recommend a "New Cash" status.
    • The bear ETF DPK is experiencing a short-term trend reversal, causing its strength to go more positive.  A value of +5 would cause this to change to a recommendation of "New Long".
    Here's the chart for DZK:































    • The dark green in the third ribbon indicates that this equity has been under significant accumulation, which is long-term bullish.  
    • The 4th and 5th ribbons are Elder's Force Index, both on a 2d and 13d view.  Right now they are showing that the 13d is above 0 -- volume and prices are increasing, which is bullish -- yet the 2d is below 0, possibly signaling an entry for Monday. 
    • Bollinger Bandwith and %B follow in the next window, with the bandwidth at 0.22 and the price at 72% of the band width.  We want to make entries into an equity when this is lower, say below 50% or so, hence we'd like to see a bit more correction but maintain our "Long" recommendation.
    • The 65d EMA window, where I plot EMAs against the slope of the 65d EMA of the price, is showing interesting behavior.  First, all slope EMAs are in an uptrend, which shows upward momentum and is heavily desired.  Two of these EMAs, the 8 and the 13, are above 1.0, indicating that the 65d EMA slope has transitioned from falling to rising, also a bullish sign.  If you look upward into the ribbons, you'll see that the 8 and 13 started their upward march about the same time the stock started serious accumulation as well as the Bongo daily changing to green. The 21d is still below 1.0, indicating that we don't have an all-in condition, but that in the longer-term time frames, we are gaining upward momentum. Also note that when you look at the 21d and it is falling, you can see that historically, this could have hurt you.  Hence the 21d EMA of the 65d EMA of price is a good overall gate for us to review.
    Nothing really stands out in the Emerging Markets ETFs overall as a Monday trading opportunity.  Here's what GGT says (click on the image for a larger view):





    and here is how HGS ranks the same set in terms of relative strength (apples to oranges, but we get an idea):




    The first thing to realize is that both rank 4 of the top 5 in the top 5, here they are with GGT listed first and HGS listed second:
    1. EWX (1/3)
    2. DGS (2/5)
    3. GML (3/1)
    4. GMF (4/10)
    5. PIE (5/4)
    GUR is listed as #2 in HGSI and is listed as #10 in GGT.  Despite the differences, picking long-rated GGT equities is highly correlated to picking high relative-strength equities in HGSI, and visa versa.  For those of you using HGSI, I used the Ian Slow RS criteria.

    GML looks interesting as the #1 pick in HGSI and #3 in GGT, provided it can maintain it's GGT "Long" recommendation.  Here's the graph:






























    • Distribution has been occurring, as evidenced by the yellow ribbon on the 3rd line.  This isn't good.
    • The Elder FI(13) has moved to red, indicating a down trend (4th ribbon).  This is problematic.
    • Elder FI(2) is red (5th ribbon), but we expected that with Friday's action ...  This most likely will block me from entering this equity.
    • %B is falling, so we have upside room to grow, a good thing.
    • The purple magenta line in the 65d EMA window is the real-time slope change of the 65d EMA of price.  Almost every single EMA is pointing south -- this is also problematic.
    • Overall, pricing EMAs around 75d (not shown), 65d (black dotted line), and the 50d (solid blue line) have held in the past.  If we see a reversal in the next week, we know where to set our (mental) stops :)
    ------------

    If we can look at the long Emerging Market ETFs through these lens, then we certainly can look through the contra-ETF side.  EUM and EEV comprise the non-leveraged (-1x) and leveraged (-2x) of the Emerging Markets ETFs.  Here is EEV, since it's leverage will amplify trends:






























    • Notice that we're starting accumulation, relative to where we were last week, on EEV.  This is bullish.
    • Both the Elder screens for Force Index are now green.  Certainly we want a red FI(2) for entry with a green FI(13), but having these as green is a bullish sign.
    • Bollinger readings look good.  Obviously the transition on the 1/11 and 1/12 would have been a better entry, but this looks very appealing if we have a light pullback.
    • All of the 65d EMA slope EMAs are below 0, which means we are in a long-term decline on EEV.  Nevertheless, we are pointing upward in the 8 and 13d EMAs, and although the 21 is just turning back downward (a warning sign), continued upside movement will cause all of these to point upward.  This would be very bullish on EEV.
    • The price of EEV has just crossed over the 8D EMA -- we need continued closing above this to have a strong bull sign, so watch for it.

    The GGT strength of  EUM and EEV are both +3 -- any further volume into either of these ETFs will cause them to move to a "New Long".    This too will be bullish.
      Emerging Markets Conclusion:  while we need to be ready to move into a long position in the Emerging Market ETFs, especially watchful of a false failure to the short side, there is no question that the contra ETFs on Emerging Markets could continue to present a significant opportunity.  Be vigilant.

      ================

      One thing that my work with GGT allows me to do is easily look for rotation in industry groups.  Banking-North East wins in this category; GGT is tracking 25 stocks in this group.  Here's the list and ranking of each of the stocks:




      The right-most column is the GGT strength of the individual stock, as of Friday's close.  I've highlighted it in yellow.  The 4th column from the right is the average Gain-Per-Buy signal for the GGT stock, and it shows that on average, when a stock has signaled "New Long", that it has appreciated that amount per long call.  This helps me to select those stocks that typically have been movers in the past.  I have highlighted the stocks with the highest GPB value in green.

      Let's see how the overall group is doing using HGSI charting:



      There's a LOT of green on the ribbons; this group has been doing well for some time, and is again showing considerable strength.

      • The 3rd ribbon from the top is Accumulation/Distribution; the group has been receiving increased accumulation for some time (dark green), which is bullish (in demand) but also bearish (at the highest ratings);
      • The FI(13) is green (4th ribbon), so the group is in a longer-term uptrend (bullish).
      • The FI(2) is red (5th ribbon), so we have potential entry points into the group (bullish)
      • %B and the Bollinger Band is very high, suggesting that the group does not have much running room before a pull-back.  This is bearish.
      • All the primary 65d EMA slope values (8d/13d/21d) are in an up-trend.  This means that the group is in a sustained uptrend, and momentum is with the group.  This is very bullish.
      • The 50d EMA of price (solid blue) is crossing the 200d EMA of price (solid red) from below.  This too is very bullish.

      So now what?  The key here is to use the GGT dashboard to see if we can find gems in the pile of Banking-NE stocks.



      Look at the 4th column from the right in the GGT industry view above, the one where I highlighted different columns.  BPFH, Boston Private Financial Holdings, has a GPB value of 28.2%.  It is flashing an "Affirmed Long" signal, meaning it showed strength on Friday, even though it was down in price.  It has been long since 12/1/09; here is the GGT chart, which shows the Long/Cash calls compared to the price action:



      The stock has run up 32.9% since 12/1 initial buy signal, which is higher than it's average per long call of 28.2%, and while it certainly could continue higher, it is a bit overextended relative to the GPB signal as well as recent history.  Because of this, I'm going to pass on BPFH and look at other high-GPB values:
      • WL, @ 29.8%
      • TBBK, @ 26.1%
      • MTB, @ 22.6%
      • INDB, @ 18.4%


      Let's start with WL.




























      • WL signaled New Long on 1/5/10.  If purchased on the open on 1/6, it is up 10.6%
      • The GPB value for WL is 29.8%, suggesting that there is another 19% or so upside left in the stock.  This is bullish.

      Let's take a look at HGSI charting for WL:






























      • 3rd ribbon from the top:  the stock is experiencing significant accumulation, as evidenced by the dark-green ribbon color.  This is bullish.
      • Both Force Indexes (13 and 2) are green.  This is bullish.  Note we want the FI(2) to be less than 0 then rise above the previous day's high for entry.
      • All three 65d EMAs of the slope (8d/13d/21d) are in an uptrend, although the 21d is still less than 0 (what does this mean?  Hint:  the answer is above).  This uptrend of all three EMAs of the slope signifies momentum and is bullish.
      • %B and the Bollinger width is indicating very high levels, suggesting a greater likelihood of pull-back.  Given that the stock has been playing here for the last couple of weeks, this is neutral, but some caution is advised.
      • Price is trading well above the 17d EMA (green line), which is bullish.
      • Price is trading well above the 8d EMA (purple line), which is a riskier trade.  I would wait until it kissed the 8d to enter.
      • The 50d EMA is in an uptrend (blue line), which is bullish.

      Here is the GGT chart for TBBK, which has been long since 11/17/09:




























      • TBBK has risen 32.2% since it went long on 11/17/09, which is higher than it's average GPB value of 26.1%.  While it certainly can move higher, the risk is higher.  
      Here is the HGSI chart for TBBK; I'll allow you to draw your own conclusions:


      Here is the GGT chart for MTB:




























      • MTB signaled "New Long" on 12/18/09.  Since this time it has appreciated 12.4%, which is below the GPB value of 22.6%.  This suggests that it could rise another 10%, if the past is any predictor of the future (which we all know it is NOT).
      Here is the HGSI chart for MTB; I'll allow you to draw your own conclusions.


      Here is the GGT chart for INDB, which signaled new long on 12/28/09:




























      • Since the "New Long " on 12/28, INDB has appreciated 1.3%.  This is much lower than the GPB value of 18.4% and suggests considerable upside to INDB, if the past is any indicator of the future (yes, yes, yes, we know, we know).
      Here is the HGSI chart for INDB; again, I'll allow you to draw your own conclusions:


      =================

      Conclusions: if the market continues to rally, there are some stocks within the Banking (North East) industry group which could be attractive.  I intend to watch these if the market continues higher.


      =================

      GGT Price and Volume Action


      GGT Price hit an all-time high of $22.52 on volume of 1.6M shares this past Thursday.  Friday saw higher volume (2M shares) on a lower price of $22.32, the volume rise most likely due to Friday expiration.

      We keep hearing that Friday was the death of the bull... I'm not so sure.  Let's look at pricing EMAs to get a glimpse what has been happening.

      Friday's action was a big negative blow -- the GGT price fell nearly -0.9% from Thursday's high, but prior to this time we've see a tremendous run up with little pause in prices.  EMA prices give us a view of how smooth the road has been, and as many of you know, I believe that the differential of these prices, and the slopes of these differentials tell us a considerable amount about changes in the market.


      The figure above is the GGT Price since 4/09, plotted with the EMAs of the Rates of Change (ROCs) on Price.  ROC (13) is the 13d EMA of the daily changes in GGT price.  Read this graph as follows:

      • the EMAs of the ROCs are all above 1.0.  This means that the slopes of the respective pricing EMAs are all pointing upward, but are slowing (e.g., losing momentum). 
      • When these EMAs of the ROCs close below 1.0 (the pink zone) we'll certainly be losing money.


      I pay great attention to the above chart as an indicator of the overall market.  This is the 65d EMA change in slope, plotted with GGT price.  As a raw value, it is choppy, but you get an idea of how it responds as price changes.

      • The first thing to realize is that as long as this value is above $0.00, we're okay:  prices are still going upward, albeit slower. 

      • The second thing to realize is that when this value crosses into the pink zone, much like the previous graph, it's time to protect profits. 

      • The final thing to realize is that if we're in the pink zone and the change in slope line reverses, then we best be seriously thinking of going long in the market.  Failure to do so makes us miss a considerable amount of gains.

      Can we fuel a bull on decreasing volume?  Don't ever let anybody tell you differently; review the next chart:



      The chart above is from early January 2009 and shows that certainly, volume helps in the early stages to get things moving, but the lesson learned here is that decreasing volume can still fuel the markets.  If you have a rational explanation for this please post in the comments section.  Another take away from the chart above is that average volume is reversing; whether we get back to the levels of April 2009 or even September 2009 is to be seen.  A fellow colleague, Paul Sutton, has suggested that the increase in volume early in the bull phase was simply a tremenous amount of sideline money hitting the market, and after the gains had been made, then the smart money started entering, fueling things higher.  Note that the chart is trading volume on a day-for-day basis, so once new money hit the equities, it stayed there, with lower and lower new money entering the market.

      Perhaps what we have seen over the past year is indicative of all bull stages?  I don't know -- GGT only goes back to Sepetember 2008.

      As a final indicator of GGT Pricing, take a look at the following:




      I'm not a big support/resistance/channel-guy, but the behavior shown above it too compelling for me to ignore it.  What we see is that we are about 7.6% above the bottom line and 0.6% over the top, parallel line.  What is different about this chart is that you can certainly see that if nothing else, compared to historical moves, we are in the upper portion of a channel and reversion to the middle of the channel would not be unexpected.  This is roughly a 7% wide channel -- others have suggested using 8% -- but since two points make a line this was easily constructed.  If nothing else, caution is advised.


      GGT Price and Volume Action Conclusion:  From all indications, while we still have positive rates of changes on many of the pricing ROCs, they are in a down trend.  These are rear-view mirror indicators -- they only tell us where we've been, but since I trend-follow, it makes sense to give serious consideration when many of the indicators are changing direction.  Of all my pricing and volume indicators, the last chart presented suggests that we are severely overbought, and I would not be surprised at all to a correction that would take us at least to the middle of the channel, if not lower.

      Wednesday, January 13, 2010

      Signal Update for Wednesday, January 13th

      .
      Folks, I've cought the flu bug so I've been out of commission.  I rarely get sick so this is hitting hard.

      In looking at the GGT LCR change timer, with the action on Tuesday we've signaled a change from Long (+1) to Long-Cash (0).  This change arises because within the underlying database, more stocks are falling in their recommendation than are rising.  Presently, we have a LCR value of 2.400, based on 2683 stocks with a long recommendation and 1118 stocks with a cash recommendation.  This value fell Tuesday from Monday's value of 3.203, a significant drop.

      The 13D EMA of the LCR is horizontal in slope; continued weakening will cause it to point down and intersect the other EMAs, a clear sell signal for long positions.  All of the other EMAs (21/34/55/65) are all slowing dramatically and if they move horizontal contra ETFs will look attractive.

      I picked up another 25% position in TBT, for a total of 50%.  Picked up positions in CELG and BRS, both of which look good in terms of GGT (both are long), both meet Elder's entry for today, and both have upward pointing RR-Track patterns for their 65 EMA slopes.

      I've sold HL and MNRO, both for a loss, b/c both have turned to New Cash.  RT's on HL are poor, which should have prevented me from entering, and RTs on MNRO are breaking down to the lower side.

      None of the New Long stocks from 1/12 look appealing at this point.

      Regards,

      pgd

      Friday, January 1, 2010

      New Year 2010 Weekend Update

      .
      Summary:  Incredibly low volume on Thursday more or less negates the falling prices concern.  Despite this, the velocity of price change continues to be upward, but the rate of change is slowing, which if it continues, will indicate a more ominous market but present an opportunity for contra ETFs.  Although the price of the GGT index is above the 50DMA, the slope of the 50DMA is almost horizontal, which is intermediate-term cautionary. The Long-Cash Ratio trend upward is slowing, showing fewer stocks have been moving to the long side, which supports the nearly-horizontal price action that we saw this past week.  The LCR Change Timer has transitioned from a +1 to a 0-state; any continued weakness on Monday would signal this timer to a CASH recommendation, potentially closing our longs.  Strength values of various indexes and the BRICs dropped by a significant amount Thursday, but not enough to warrant new long positions in ETFs -- in fact, contra positions could still work for a few indexes.

      ============

      GGT Price Index (and Derived Indicators)


      The GGT price index, which is comprised of 4339 stocks with:
      1. prices above $1 (when originally added to the database), 
      2. 50d average volume > 5K shares (ongoing), and 
      3. only from the AmEx, NYSE, and NASDAQ exchanges
      fell from Wednesday's value of $21.01 to $20.85, on extremely low volume of 754K shares.  Normally, falling prices on increasing volume is reason for concern; since we have the exact opposite situation I do not think we need to hit any panic buttons.  Here's the graph of GGT Price and Average Volume for 2009; as with all my graphs, click on the image for a larger view:



      I believe that we can get a view of the market by looking at the GGT pricing exponential moving averages (EMAs).  Here is a graphic of primary EMAs:  13D, 21D, 34D, and 55D:




      The above graphic indicates that from the perspective of our rear-view-mirror, that all primary EMAs are pointing upward, which is bullish.  You can see from past behavior that we'd expect the slope of the 13D to move horizontal if we were to see a change outlook, so this is something to keep on our radar concerning the overall market.

      I've had a question this past week about the slope of an EMA -- specifically, what does it tell us?  When we see an EMA, and we mentally look at whether it is point upward or downward, we are looking at the slope -- the direction of the trend.  Slope is change, literally "rise over run", and in the case of the GGT Price EMAs, we're looking at "change in price day over day".  Obviously, the steeper this slope, the larger the price gain/loss on a day-for-day basis.  Because the markets do NOT rely on yesterday's action to behave today, just because an EMA is pointing upward does not mean that tomorrow will be an "up" day -- the markets could certainly reverse, causing the trend lines to move horiztonal, then point downward.  Hence, the risk here is that although all GGT EMAs are pointing upward, there is NO guarantee that Monday, January 4th, 2010 will be an up day.  Nevertheless, we can look at some other indicators to help us decide what has been going on within the internal market.

      This next graph is the change of the various EMAs -- what the eye would interpret if it looked at the pricing EMAs and if the brain said they were pointing upward or downward:





      The chart above is interesting to me because it tells me the velocity of price change:  how fast our pricing EMAs are changing on a day-for-day basis.  We hit a peak pricing change on 12/24/09 in the 13/21/34 EMAs.  Note the positive values of the the primary EMAs, they are all above $0.00/day.  This is important -- day-over-day, the EMAs are pointing upward, which is what we saw in the previous figure.  What this graphic gives us over the previous graphic is that now the eye can see the slope of the ROC, and what we see since 12/24 is that the daily rate of change values are falling, which is deceleration.  Remember though that the trend is up -- as indicated by the Thursday 12/31 value of ROC(13) = $0.044, but is simply slowing.

      Look carefully at the peaks and valleys of the GGT Price, and correlate them with peaks and valleys of the GGT price EMAs.  There is no question that when we see levels like 12/24 that the market rarely starts a new bull leg, and there is no question in my mind that when we see ROC levels that are less than ($0.05) on the 13D EMA we typically start a new short-trend run upward.

      What we're seeing now is indicative, but not necessarily predictive, of a market that is slowing down, but we have no indication that it is going to correct.  I think it rather unlikely that we'll see a new, sustained bull leg from here although we may see a launch upward the week of 1/4; more likely we're going to see some form of very short term bump up, then a period of consolidation.  Volume is the wildcard here -- we simply have not had any participation across the board, and this clouds my crystal ball.  Nevertheless, we simply need to be ready for this period of consolidation because that is when our contra ETFs can play an important role. 

      The graphic above gives us the rate of change of the EMAs, and the slopes of those lines are indicative of acceleration when pointing upward or deceleration when pointing downward.  We obviously want these trend lines accelerating to the upside -- prices would be moving upward -- so as of right now although prices are advancing at a constant to slightly upward velocity, they are not doing so on a day-for-day basis.  This deceleration needs to be in our mindset going forward for the upcoming week.

      If you don't want to rely upon me and if you have HGSI software, you can look at the moving average of a slope of any indicator.  Here's a chart that shows three different slopes -- 5/21/34 -- of the 65D EMA of price for the GGT index:



      In the top pane I've plotted the smoothed slope of a moving average -- velocity or ROC -- of the 65D EMA of GGT Price.  The 5D EMA -- red -- is topping out and looks like it could fall.  The 21D EMA is still positive and trending upward -- the intermediate-term trend (1 mo) is still upward.  The 34D EMA is also positive in value and trending upward -- the longer-term trend (7-weeks) is still upward.  For now, we should stay the course on the long side, but we may be topping in the short term.

      This next graph takes what I've done on the previous two slides and gives us the ROC of the ROC... or acceleration and "jerk" of price:





      The important thing to realize from the graph is that acceleration is slowing -- deceleration -- and when this value drops below 0, prices are under corrective pressure.  Expand the graph above and look at price action every time that the acceleration dropped below 0 -- when this occurred, prices also dropped.

      The downward slope in this value indicates that we need to vigilant for a reversal of the short-term trend.

      ====================

      GGT Volume

      As I have indicated above, volume is poor.  How poor?  754K shares represents being -42% lower from the average of 1.3M +/- 265K shares.  Aside from Friday, 11/27, which was -50% lower than average, we've not seen levels this low since this time last year (1/2/09 was -51% lower).  Gently downward prices, such as Friday, on lower volume should not be a cause for concern, so I plan to stay the course.

      Of particular note is the application of On Balance Volume concepts to GGT.  I've been watching a divergence lately, which although is still a test, suggests that the market is going to move higher for the New Long stocks.  Here's something to ponder:



      Take a look at the right side of the OBV graph --  we see that prices have remained horizontal to having a slight upward bias over the last week, and with the OBV moving aggressively upward, we potentially have a setup for prices to move significantly to the upside.  In a ranging market a breakout of OBV to the upside signals a bullish divergence ...

      As a counter-point to this potential upside move, please review the following OBV chart:






      Here, I've plotted all of the GGT stocks and OBV.  What we see is that the database, as a whole, is topping out -- the multiple up-down-up-down transitions, combined with a less-than proportionate move to the upside, as with OBV, shows that we're tired.  Hence, while New Longs look strong (as they should), the database is tired overall.

      Here are the OBV charts for the other classifications of GGT; note that the only relevant data is very close to the right side of the graph since these are all using GGT data dated/classified. 12/31/09.



      • Affirmed Long:








      • Long 








      •  Cash








      • Affirmed Cash








      • New Cash 







      ==========

      GGT Long-Cash Ratio (LCR)

      The GGT LCR, which reports the number of stocks in the database that have a long recommendation (2676) compared to those with a cash recommendation (1663), has fallen from Wednesday's value of 1.885 to 1.609.  This is a 1-day change in trend ... we've been steadily climbing since 12/18.  Will the trend continue?  Who knows ... LCR is a lagging indicator.  What we do know is that this is a lofty value, relative to recent past, but there is nothing prevent it from going higher.  Here's the chart:




      If you look at the right side of both series, you'll see I've added some parallel channel lines.  What is important to me is that
      1. the channel lines are pointing upward in a very steep pattern -- this typically cannot be sustained, and
      2. the distance separating the lines is very small, showing very low breadth in the advance.  
      I'm concerned about these two things, but as you can see, we're at the bottom of the channel, so risk is very, very low relative to other locations.  Also note that we spanned the entire channel in one day as far as GGT LCR Change was concerned, so this is a very narrow channel indeed.  This appears to be a perfect time to enter a long trade, provided that suitable candidates can be found.  Simply keep in mind that if these channel lines are violated to the downside, then it's possible that we could see a change in the primary trend in the short-term future.


      ==========

      LCR Rate of Change

      Much like what we see for pricing ROCs, we can apply to the LCR.  I missed this in my daily scan this past week, but the rate of change of the LCR has been slowing since 12/28.  Take a look at the following graph of the LCR Change and GGT pricing index:



      As you can see, the LCR change is still positive, so overall, the LCR is moving higher -- the trend of stocks in the database is that more are becoming "long" on a day-over-day basis.  The fact that the EMAs of the LCR lines is pointing downward means that on a day-over-day basis, fewer new stocks are moving long.  In fact, this slowing ties very well to the advance or decline of the GGT price line ... when the LCR advances, GGT price advances, as we would expect.  I think what important to see here is that we are sitting just above 0.00-change in the LCR, and if this trend continues downward into the area I colored in rose, we'll see the price index begin to drop. 

      Note that within the last week that GGT price peaked on 12/24 and the LCR change peaked on 12/28; now price has held steady but the number of stocks per day participating in a New Long + Affirmed Long + Long status is falling.  This divergence may present an opportunity for us in the upcoming week.

      ===============

      GGT Strength of Various Indexes

      Of particular note was the significant change for all domestic indexes with Thursday's action.   The chart below captures the major indexes I track:




      With Friday's change we're in no-man's land ... somewhere between sitting on contras as a hedge (I have positions in TWM and MZZ), and somewhere between holding our longs (which I have positions in ATHR, ERJ, MTRX, MYL , MAA, MNRO, MFLX, and BAS).  Here's what the graph above is indicating to me:

      1. The GGT LCR Change timer has transitioned from Long (+1) to Long-Cash (0).  If Monday is a down day as far as the database is concerned we will see this timer transition to Cash (-1).  The timer is right more than it is wrong as long as we're in a trending market, so I would follow the signal as long as volume picks up across the GGT database.
      2. The DJ30 fell from a strength of 0.611 to 0.233 in one day.  This is a significant hammer on large-cap stocks, and continued weakness here, e.g., a drop below a less-than-scientific-value of 0.2 could be cause for serious consideration of DDM, which is the 2x leveraged ETF of the DJ30.  Note that the DJ30 is now sitting in the middle of it's Bollinger Band channel. 
      3. The NASDAQ-100 fell in strength from 0.73 to 0.40, again a significant drop, and is still above the middle of the BB channel.  Watch for strength in QLD if we reverse to the upside.
      4. The SP500 fell from a strength of 0.629 to 0.263, and is still above the middle of the BB channel.  Continued weakness here could be an argument for SSO if we reverse to the upside.
      5. The SP400 Midcaps fell from a strength of 0.692 to 0.394, so it has a ways to go before I would consider MVV.  It is too late to jump onto MZZ.
      6. The SP600 SmallCaps fell a large amount, from 0.915 to 0.574.  Again, we need to fall a significant amount before considering entering the long side with SAA, as the volume is still low on SAA and it is still in the upper 25% of the BB channel.  Note too that using SDD could potentially have merit if we see any continued weakness in the market/strength in the contra side.
      7. The Russell 2000 SmallCaps fell 0.86 to 0.57, resulting in nearly the same situation as the SP600.  It's way too early to consider UWM, since we're in the upper BB channel, but TWM may still have some play, especially if we see any weakness in the markets.
      ===============

      GGT Strength of the BRICs

      The BRICs represent an interesting opportunity, but the strength trend has been becoming weaker and weaker with these stocks.  Here is my BRIC strength chart:


      Every one of these countries is struggling, more or less horizontal trending, and what is more important is that we've been seeing lower highs in strength for the last two months.  Nevertheless, here's my read:
      1. Brazil:  Fell from 0.53 to 0.42 -- in no-man's land.  TAM and GOL continue to be top performers, although TAM is a bit overbought and GOL is north of the channel center.  Proceed in Brazil with caution ...
      2. Russia: Fell from 0.22 to 0.05 -- extremely oversold reading, but as far as GGT is concerned, the strongest stock is WBD.  Unfortunately, WBD is at the top of it's BB channel, being propelled there with Thursday's action, so I consider this a risky trade. MTL is my pick in Russia if I have to pick a stock, but overall, Russia has been performing very poorly so this is a very risky country and I will not be entering until I see the group turn upwards.
      3. India:  Fell from 0.60 to 0.35 -- again, no-man's land.
      4. China:  Fell from 0.48 to 0.37; top performers continue to be TSL, VIMC, GRO, HMIN, and FMCN.  FXI has been having trouble as of late; FXP isn't faring much better, as is evidenced by the mid-scale strengths.  Wait until we get some solid movement here before entering.
      ==============

      Interesting GGT Stock and ETF changes from 12/31/09

      • TYO, the Direxion 3x inverse of the 10-year treasury, is solidly flashing Affirmed Long while TYD, it's other half, is solidly flashing Affirmed Cash.  Volume is low so be careful of the spread.
      • TMV, the Direxion 3x inverse of the 30-year treasury, is solidly flashing Affirmed Long while TMF, it's other half, is solidly flashing Affirmed Cash.  Volume is better with TMV.
      • EEM is flashing an Affirmed Long, while EUM and EEV, the contra 1x and 2x respectively, are flashing Affirmed Cash.  EEM is very liquid at 36M shares traded daily.
      • ZSL, the 2x contra of silver, is flashing an Affirmed Long, while AGQ, it's other half, is solidly flashing Affirmed Cash.  ZSL traded 624K shares this past Thursday.
      • EEB, the Claymore BRIC ETF, just reaffirmed a long call.  I'm wary of this, but it is what it is.

      ==============


      Remember, you are responsible for your own trading decisions -- not me.  Do your homework and communicate with others -- it's how you learn.

      Regards,

      pgd