Wednesday, March 31, 2010

Possible Timer State Change

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GGT employs two timers based on the Long-Cash Ratio.  They behave the same but have different time constants.  The shorter timer constant, e.g., the one that responds faster, has signaled a transition from CASH (-1) to CASH-LONG (0).  The other timer, which is slower and typically confirms the faster one after a few days of sustained trend change, is still in CASH.

Here at 6:20 a.m. on Wednesday morning futures are slightly down.  The way to play this timer is relatively simple -- watch the home page here and if you see ADV/DEC up significantly then you know we're headed to the upside.  If it's flat then you know we're going to continue to drift.  You get the idea.  If you see a move to the upside that is relatively strong then it's ok to look at the long side. 

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I'm traveling the next two days and will have limited internet access.  My next post will be on Friday. 

Keep an eye on the above but I'm still keeping much of my powder dry.

Regards,

pgd

Sunday, March 28, 2010

3/26 Weekend Summary - A Mixed Bag of Readings, but LCR Does Not Lie.

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Summary

GGT Price Index:  rangebound over the past week; Friday/Friday change is +0.97% with a daily variance of 0.7% --> barely above the noise floor of the markets.  We are either topping or resting for the next leg upward.

GGT Volume Index:  solid, @ average volume all week (1 wk average 2.23M).  No warning signs here.

GGT Price EMAs:  Still upward and parallel, which is bullish.

GGT Price Rates of Change:  Well-defined downslope since early March, but positive (so GGT Price is still trending upward). These two things balance and make this indicator cautionary.

Relative Recommendation Ratios:  We are coming off a 3/15 peak where we have had a huge number of stocks rated LONG.  When this has occured in the past we have always corrected within 30 trading days and at least -4% drop to the downside. 

GGT Long-Cash Ratio:  The LCR continues to drop, which is bearish.  Stocks prices in the database cannot remain horiztonal or slightly upward-trending in direction if the number of CASH recommended stocks continues to increase.  Either the LCR must reverse and sync with the drift upward of prices or prices overall must drop to sync with the dropping LCR.

GGT LCR EMAs:  3 of the 4 (13d, 21d, 34d) are moving south off of recent peaks.  Only the 55d is trending upward, and it is doing so at a very slow rate.  Falling EMAs is a confirmation of the weakening database and is bearish.

GGT LCR Rates of Change:  The LCR ROCs have all moved into negative readings, indicating that on a sustained basis the database is growing in numbers of CASH-recommended stocks on a day-over-day basis.  This is clearly bearish.

LCR Change Timers:  Both are recommending CASH, which means to protect long profits and to get your contra ETF shopping list ready.

GGT Strength:  bullish divergence between price-only model and price+volume model.  The price-only model has strength improving, but the price+volume model has strength down significantly.  Favoring a bearish stance here because of the 0.527 strength reading (been trending downward since early March).

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GGT Price

The GGT Price sequence, including Friday 3/19 as well as this past Friday, is as follows:

$24.66 -0.964%

$24.87 0.852%
$25.09 0.885%
$24.89 -0.797%
$24.75 -0.562%
$24.99 0.970%

If you started with $1 on the morning of 3/19 and multipled the daily changes, you ended the day on 3/26 @ $1.0097.  Put another way, if you started with $10,000 on the morning of 3/19, you ended $97 to the upside this past Friday, not including commissions.  Daily variance is 0.70%, or $70 on $10K, so we are just barely above the noise floor of the broad markets. 

Sometimes it pays to sit on the sidelines, and I've been talking about being cautious for over a week.  There is nothing in the price action to suggest otherwise.  I'm not seeing anything in the pricing that tells us we are headed south, nor am I seeing anything that could propel us upward from here.  I reiterate:  caution is advised.

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GGT Volume

GGT Volume is solid, with 2.2M shares indicated on Friday with 50d MA volume of 2.09M shares.  When prices do not move on constant volume we typically see "churning".  The ever-so-slight upward drift of prices on solid volume still qualifies as cautionary.  I typically like to see in groups of stocks:
  1. slightly falling prices on lower volume (bullish),
  2. rising prices on solid volume (bullish), or
  3. rising prices on higher volume (bullish). 
If we are not in these three categories I typically wave my yellow flag, and will do so here too.  Despite this, by itsself, volume is solid.

Here's the combined GGT Price and Average Volume chart; as with all my charts, right-mouse click on the chart for options to open it in a different window so you can see a larger view:



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GGT Price LCRs

The following graph is interesting to me:




The graph above tells me that we're still very early in any potential downtrend.  Certainly, the past week has been challenging, but if you look back at the data since 5/27/09, "corrections" always were indicated with the GGT Price Index dropping below the EMAs, if not the EMAs crossing each other from above.  It's clear that this has not yet occurred, so jumping either long OR short is very early.  For now, the graph above tells me that we've been bullish, and up to this past Friday, we should remain bullish.  If there is *any* cautionary view above, it's that the GGT Price Index is hitting some form of "resistance" (although resistance does not exist for the GGT Price Index because fewer than 300 people know about it).

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GGT Pricing Rates of Change

Take a close look at the following graph:



Here, I plot the GGT Price Index against EMAs of the changes in GGT Price.  This is known as Rates of Change, or ROCs, and basically tells us how fast we are moving upward or downward in price.  I smooth these ROCs with different EMAs.

What the graph above tells me is that:
  1. the EMAs of the ROCs are all still greater than $0.00.  This means that GGT Price still has an upward trajectory, e.g. average stock prices in the data base are moving upwards (we're making money if we're long).
  2. the EMAs of the ROCs has been falling steadily since the beginning of March.  This means that although the GGT Price Index has been moving up, it has been doing so at a slower rate as this bull leg gets tired.  THIS IS CAUTIONARY.
  3. if the slowing in ROCs continues, we will most likely cross below $0.00 prior to April 12th (see the red arrow pointing downward and connecting the ROC values.
Because of #1 balancing #2, I'm coloring this as cautionary.
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Relative GGT Ratios

Many of you have responded favorably to the next graph so here is the update:


Note that in the above graphic I've enlarged the ovals (not circles) to show the "zones" that the number of LONG recommended stocks (bright yellow) has played within.

A few observations on the chart above:
  1. We're coming off the top of LONG recommended stocks (not New Long or Affirmed Long, just LONG), which peaked at 61.9% on 3/15. 
  2. The all-time LONG high was 64.5% on 9/21/09.   On this date the Price Index was at $19.12.  The next low after this high was 10/2 when the Price Index was $18.39.  We achieved a lower peak on 10/16 then started a significant drop until 10/30/09, where we hit the price index of $18.09, a reduction of -5.4% from the overall 9/21 peak.  I would not be at all surprised to see equivalent behavior going forward.
  3. Friday's value was 54.5% and declining, in case you're interested.
This graph is simply telling us that the underlying database is weakening.  The decrease in LONGs ususally proceeds a drop in the Price Index, so this is cautionary.  I would not be surprised to drop a couple of % from here, recover to a lower high, then drop more.  Another view of this data above that might be a bit easier to interpret is as follows:


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Long Cash Ratio

The GGT Long Cash Ratio continues to fall and closed Friday 3/26 at 1.942, indicating that 2033 stocks in the database have some form of long status and 1047 have some form of cash status.  This continued decline in underlying database price strength (the only thing that can cause the number of cash-status stocks to grow) does not portend well for an up leg at this point in time.  Here's the LCR/Price Chart:



What should be evident in this graphic is that we're 50% of the way down in a "reset" of the LCR before an upleg has resumed.  Aside from the extreme left-side of the graphic, we've not typically reversed from these levels, hence I think we have a bit more dropping of the LCR to experience

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GGT Long-Cash Ratio EMAs

The following graph is telling:



The graphic above shows the raw LCR value smoothed with 4 EMAs.  What we see here is that the 13d, 22d, and 34d have all started to fall over and move more negative than their recent peaks.  While the past is no predictor of the future, I think that the graph gives us some insight into the behavior of the markets and when bull-legs get tired, LCR tends to drop, pulling the respective EMAs down after some period of time.  I think that this chart gives us insight about what is happening, so I am coloring it red.

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GGT LCR Rates of Change



The graphic above is clear:  All ROCs of the LCR are now negative, which means that the LCR and its EMAs are all in agreement and the LCR is losing ground fairly rapidly.  Until we get a reversal in these ROCs we have a bearish condition.

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GGT LCR Change Timers

Friday morning 3/19 the GGT LCR Change Timer (slow) confirmed a move to cash; I notified you about this here.  I sold all my longs, except for my Contra ETFs, and in hindsight while I could have kept them with minimal impact, the reward/risk ratio grew with no apparent upside to the markets.  Interesting to note that my contras haven't done anything, so movement to contras still has been a bit early.

The LCR Change Timer (fast) is presently in cash. 

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GGT Strength

I have the ability to track the strength of each individual stock in the GGT database.  When I do this and normalize all the strengths between a value of 0 and 1, I can track the strength of the database.  Furthermore, I have the ability to separate the strength of the database based purely upon price, as well as price & volume.  The latter capability is important, because volume offers a way to confirm price action.

With Friday's close we have a bearish divergence.  The non-volume portion of the tool has indicated that the strength of the database has improved, e.g., when volume is removed from the equation, 2%  more stocks appreciated on Friday in price than fell.  Indeed, http://www.finviz.com/ shows that 48.1% of the stocks on the exchanges did in fact advance, and 44.0% of the stocks declined.  The percentage difference between http://www.finviz.com/ and GGT is simply that the universes are different, as is the methodology.

What is more striking is that when volume is inserted into the tool we have a significant drop in strength, e.g., of the stocks that fell in price, more did it on higher volume.

Typically, these two indicators travel with each other -- when one goes up, the other does too.  Here, the divergence indicates that there is a lack of broad participation in stock price appreciation, e.g., the big boys did not play on Friday on the upside, but for those that did, the volume of the declining issues outpaced those of the gaining issues.  This is a bearish divergence.

For the record, the price & volume strength of the database is at mid-scale levels of 0.527.  A reset below 0.4 before starting the next up leg would be welcomed, but I'm not sure we'll see it.

Two things are going to happen here:  a reversal upward (strength can improve dramatically from 0.527, powering the stocks upward), or we're going to have prices get in line with the LCR.  Given that this is the last week of the month I would not be surprised at a short rally here, then continued dropping of the market.

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As always, you are responsible for your own trading decisions, not me.  Please do your homework.

Regards,

pgd

Friday, March 26, 2010

Bullish Divergence in GGT Price+Volume Strength

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GGT Price fell another -0.5% on Thursday, giving us 2 consecutive down days in price on above average volume of 2.5M shares (2.083M shares is the 50d MA Volume).  This is a 23% difference above average and is significant -- down prices on above average volume means larger selling, which is bearish

GGT Bull/Bear Strength continues to fall, indicating that the bears are gaining foothold.  There are more bears than bulls over the last two trading days and this could be pre-evidence of a sea change.  Correspondingly, I am very cautious at this time.

The GGT Long-Cash Ratio has fallen two consecutive days and now indicates that 67.9% of the database is LONG, e.g., 2162 stocks have a long recommendation and 1022 have a CASH recommendation.  The slope of the 65d EMA on the LCR has fallen now the last 6 consecutive days and shows that the database is not appreciating in price as fast as previous.  This latter point is cautionary -- we want consecutive up days, not down days of this indicator, so continued caution is advised.

The GGT LCR Change Timer (slow) continues to indicate CASH (-1).  On the day of the original down signal the historical return using this timer was 89.4%; 7 trading days later we are still at 89.9%, so we have not see a huge move either way.  A few of you have sent me a note asking "what's up?" -- all I can say is that with the underlying numbers of stocks in the database increasing in the number of CASH recommendations and contributing to a falling LCR, it is prudent to protect profits.  You should be watching contra ETFs for an early breakout, or watching long stocks for continued consolidation/sideways movement then a breakout to the upside.  We have neither right now.

[ Please note and remember that you're in this for the long haul.  Not all signals will exactly time the top, and not all will exactly time the bottom.  This has been a very good system over the long haul. If you have a better system I'm willing to listen...  :o) ]

GGT database (Price + Volume) strength INCREASED on Thursday, which is a BULLISH divergence.  What this means is that the strength of stocks falling in price was X, but the strength of stocks rising in price + volume was Y, where Y > X.  This means that for the stocks that did rise, they did so on higher volume, which points to institutionals playing with the bigger names.  We need to keep an eye on this situation for a potential new bull leg.

The DJ30 increased it's strength on Thursday over Wednesday's value, but is still considered overbought by my standards.  While there is upside available in the DJ30, I think that there is a greater likelihood of a downdraft.

The NASDAQ 100 fell in strength on Thursday, and is now at it's lowest level (58.5%) since 2/23.  When we get to this level we could go either direction.  I would prefer to see a reset below 40%, but it may not happen.  Remember, the 40% indicator is not an exact science.

Brazil continues to get the heck beat out of it.  It has fallen to it's lowest level since 2/24 (25.3%), so looking at EWZ or other long positions in Brazil may be warranted.

Russia gained on Thursday and has now just crossed the 40% threashold from below, a bullish sign.  Watch the RSX or the individual Russian stocks for continued strength if the markets move higher.

India followed Russia and is now at 49%.  Watch India for continued strength.

China continues to weaken and has been floating around 43% all week. There is very little direction here, so caution is advised.

The SP400 MidCaps fell another 11% and are now at 60.9% strength.  THIS IS THE LOWEST LEVEL SINCE 2/11

The SP500 strength fell to 64%, now the lowest level since 2/26.  Certainly, reversal is possible from here, but with GGT LCR falling, I think we'll continue to see a drift down while LCR drifts downward.

The SP600 has fallen to 48.8%, and is now at the lowest level since 2/10.  These are the small caps, and as I indicated at last weeks meeting, we've seen a gradual rotation from small caps to large caps.  This is further evidence of that rotation.  A reset below 40% would certainly put us in place for upside movement.

Finally, the Russell 2000 Small Cap index has fallen to 53% strength, which is just above the 2/10 level.  Same comment as above for the SP600.

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We've had 7 days of boucing back and forth, not really gaining overall.  The LCR has been drifting downward.  Small caps have been drifting downward in strength to their 2/10 and 2/26 levels.  We have a divergence in Price+Volume strength, hence I think it's very plausible that we could go either way.  The indicators are telling us to be biased to the bearish side, and until the LCR Change Timer moves long, I will continue my "where are the contras" mantra.  Note though that I am still selectivly purchasing long stocks from my VectorVest Gorilla Trades strategy, as well as some of the Larry Conners ETF strategies, so we'll see how things progress.

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Remember, you are responsible for your own trading decisions.  Please do your homework.

Regards,

pgd

Thursday, March 25, 2010

Another Indicator Pointing Us To Contra ETFs

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I ran the GGT ETFs tonight (Thursday, 3/25), and selected all the Contra ETFs that have some form of long status (New Long, Affirmed Long, or Long).  When I import this into HGSI, we get the following graph, which I've modified from the standard default graph:


Note the following:
  1. 3rd ribbon from the top is Accumulation.  Over the past week we have seen it move from bright red --> light red --> yellow, indicating solid accumulation of the ETFs used in this chart.  This is bullish.
  2. 4th and 5th ribbons from the top are the Elder Force Index, 13d and 2d respectively.  They both transitioned to GREEN on 3/24, which is bullish.
  3. Bollinger Band and %B transitioned from a "green" background color to "bright red" in one day (3/24), indicating that we have had a significant price explosion of these stocks.  This goes to reason ... they are all relatively new to the GGT Long category.
  4. The 65d slope EMA window has 4 EMAs plotted.  These are EMAs on the slope of the 65d EMA.  ALL are turning upward, another bullish sign.  The last time these turned upward was 1/19 and 1/20, and we all know what happened between then and 2/9.
  5. In the Price window, this index has closed above the 50d EMA.  While this is an artifical index that has been built from the equity upward, anytime the price closes above the 50d for the first time I pay attention.
  6. The 50d EMA has just turned to a positive slope within the last few days.

For the record, here are the ETFs that have some form of GGT LONG status, as of the close tonight:

Note:  I'm NOT recommending any of these specifically, but be aware, the basket shown above is telling us to pay attention.

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Remember, you are responsible for your own trading decisions, not me.  Please do your homework.

Regards,

pgd

Wednesday, March 24, 2010

The Euro Opportunity ...

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I've been watching FXE sink over the last month, only to watch it reverse over the past couple of weeks and attempt a breakout relative to the recent past.  Well, it's resumed the downward slide, and with sinking EMAs, I think we should look at the contra ETF EUO.

EUO has been showing strength all week and it is very close at clearing $21.00 again, which it touched on 2/25.  Important here is that when we look at the slope of the 65d EMA, and we smooth that value with an 8d, 13d, and 21d EMA, the 8d has just crossed the 13d from below, a bullish sign.  Furthermore, the 2d EMA of the slope of the 65d EMA has closed above those EMAs, effectively "pulling them up".  This too is considered bullish.  Finally, with today's action, the 8d will cross the 21d from below on Thursday if the EUO continues upward.

I'm looking to enter a 50% position on Thursday if EUO continues upward on strength, the 50% being comprised of 25% from the first 8x13 from below, and another 25% as the 8x21 from below.  The final 50% will be when the 13dx21 from below.

Thoughts are appreciated.

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Remember, you are responsible for your own trading decisions, not me.  Please do your homework.

Regards,

pgd

And the beat goes on ...

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I learned a long time ago not to fight the tape, which is why even though I'm waving yellow caution flags, I'm still moving into long positions, albeit timidly.

I entered KMB yesterday and am above water, but just barely.  A check of the charts this morning shows that it's a good, intermediate-term stock, provided it keeps the momentum.  I also entered AMGN on Monday and I think it will do fine over the next several weeks, a correction not withstanding.  As I indicated this past weekend at our meeting I am mostly in cash, as GGT confirmed a move to cash last week.  While some of you may be second guessing my decision, the important thing is to:
  1. believe your indicators
  2. believe your indicators
  3. believe your indicators
The GGT LCR Change Timer has never been wrong in 18 months of published signals, e.g., the market went up dramatically even though the timer indicated CASH.  It's certainly been early, which tests your meddle, but I'm in this for the long haul so I don't care if I'm early.  I think the risk is simply too high to be 100% committed at the present time.  Tip your toe in, certainly, but keep your bathing suit dry for now.

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The GGT Price index closed at an 18-month high of $25.09, up 0.885% from Monday's close of $24.87.  Volume was normal at 2.068M shares, with 50d MA volume at 2.053M shares.  Again, all within statistical averages, so up prices on steady volume is bullish.

GGT Bull Strength, which is the ratio of (New Longs + Affirmed Longs) / (New Cash + Affirmed Cash), jumped dramatically on Tuesday, showing that underlying changes in the database were strong.  We need BOTH volume AND price to get New Longs/Affirmed Longs to signal, and a major jump in this indicator shows that we experienced just that.  Continued Bull Strength is very bullish, so although we've watched this indicator drop several consecutive days, continued dancing up here at these levels is bullish.  Here's the chart (click on the image to see a larger view):



Note that I've circled when the Bull Strength indicator was very weak ... when it has been in the low areas this typically has signalled a significant and sustained moved to the upside.  We're at the opposite end right now, so I'm not sure where the fuel for a sustained run will come from without a reset.  Food for thought.

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The GGT Long-Cash Ratio moved UP on Tuesday, reversing a 3-day drop.  It is now at 2.777, and indicates that 73% of the database is LONG (2341 stocks), while 843 stocks are in CASH.  Of greater importance is that the 13d EMA of the LCR Rate of Change has reversed for two consecutive days, and although it is still negative, it is becoming less so each day.  This is bullish, especially if it crosses back into positive territory.  Here's the chart:



I was expecting a bigger "reset" with this indicator, so we'll have to watch it in the following days.

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The fast LCR Change Timer has moved from CASH (-1) to a CASH-LONG (0) status.  This is normal when the LCR reverses and is an early indicator of a bullish change.  The slow LCR Change Timer is indicating CASH (-1).  If we have another up day the fast LCR Change Timer will move to a LONG status.  We are at least 2 days away from confirming this change with the slow timer (Wed and Thurs action).    Watch the ADV/DEC line on stocks throughout the day ... if we have more ADV than DEC there is a good possibility of the fast LCR Change Timer moving to LONG status.

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The DJ30 strength indicator is at 0.96.  All the index strength indicators are above 0.65, and moved upward yesterday.  There is still room for these other indexes to move upward, e.g., this tired bull isn't done yet if it doesn't want to be....

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Remember, you are responsible for your own trading decisions, not me.  Do your homework.

Regards,

pgd

Tuesday, March 23, 2010

What say GGT for Tuesday, March 23rd?

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The GGT Price index rose to $24.87, up from Friday's value of $24.66.  Volume was slightly below average, with 2.041M shares indicated on an average of 2.047M shares.  All within statistical norms so don't read anything into this.  Higher prices on steady volume is bullish.

Monday was not particularly strong in pushing stocks from CASH to NEW LONG, or from LONG to AFFIRMED LONG.  We are on the lower fringes of average here, which indicates a tired bull.  In fact, our Bull-Strength indicator, which is the ratio of (New Longs + Affirmed Longs) / (New Cash + Affirmed Cash) has fallen to the lowest level (0.79) since 2/26.  This is borderline bearish.

There are presently 2312 stocks in some form of a LONG status, and 872 stocks in some form of a CASH status.  This provides a Long-Cash Ratio (LCR) value of 2.651, which is down from Friday's value of 2.735.  This is bearish.

The LCR Change Timer is indicating we should be in CASH.  The fast portion of this timer flipped to cash on 3/15 and the confirmation portion of this timer confirmed this move this past Friday.  You are playing with fire if you enter large long positions at this time.

Prices moved higher on Monday with below-average volume.  This is called a sucker's rally, and is not good.  I determined this by an increase in the non-volume price strength indicator, but a decrease in the price-volume strength indicator.  Again, extreme caution on the long-side is advised.

All the major indexes fell in raw GGT strength (I calculate the strength of the stocks in the index, then average each with equal weighting) even though they were up in value.  This is a bearish divergence.

As I've indicated in the past, we can remain here for some time.  Here's a now-familiar graph; read this entry if you want details on what the colors mean:



What's important to realize about this chart is that compared to past periods, we may already be starting the downward slide.  Certainly, other indicators are showing that this bull is tired.  In the graph above, pay particular attention to the oval'd area in March-June 2009 and compare to now (right side of graph) ... there is NOTHING suggesting that we couldn't remain here, bouncing around.

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We are still in overbought territory, so caution is advised.

Remember, you are responsible for your own trading decisions, not me.  Please do your own homework.

Regards,

pgd

Friday, March 19, 2010

GGT LCR Change Timer Confirmed CASH

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Lackluster price action across the GGT database yesterday caused the Long-Cash Ratio to fall from 3.532 (2483/703  Long/Cash stocks) to 3.305 (2446/740).  While not a big jump in the cash side, it's obvious that we're splitting hairs and the market is struggling.  With this the LCR CHANGE timer (slow) has confirmed the move to CASH, and both LCR Change Timers are now in cash.

Correspondingly, I sold all of my positions that were below water (ROI < 0%) and placed 1% Trailing Stop Losses on all positions, except my contras, that are above water (ROI > 0%).  If the market continues higher today I will gain in these, if the market falls they will get stopped out for a profit.

Quad witching day today so anticipate volume will be quite high.  Action near the end of the day will be critical, as the 1150 level of the .SPX will be viewed as a major psychological test of support.  Futures are up slight as I write this, so we may move higher in the next 6+ hours.

I have decided not to add to my positions today, content to watch the markets do what they must do.

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Remember, you are responsible for your trading decisions, not me.  Do your own diligence.

Regards,

pgd

Thursday, March 18, 2010

GGT LCR Timer (slow) Remains Indicisive @ Long-Cash (0) Status

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Even though the GGT Price Index moved to the all-time high of $24.99 on Wednesday on solid volume, and despite the fact that the Long-Cash Ratio (LCR) pushed upward to 3.532 (2483 stocks LONG, 703 stocks CASH), the confirmation signal on the GGT LCR Timer remains at a 0-level, which is 1/2 of the way between LONG (+1) and CASH (-1).  A strong day today in the markets will cause this to push back to +1, and a positive but weak day (ADV/DEC roughly equal) will cause this to move to -1.

Simply be advised.

The DJ30 Strength Index, which is literally composed of the 30 stocks of the DJ30, hit an all-time high of 1.0.  While it is too early to add to a contra (we could certainly hit another 1.0 today), any strength in DOG (Strength = -3) or DXD (Strength = -5) could be a prudent hedge.

The S&P500 Strength Index hit an all-time high of 1.0.  Again, while it is too early to add to a contra, any strength in SH (Strength = -3) or SDS (Strength = -3) could be a prudent hedge.

The NASDAQ 100 Strength Index FELL on Wednesday to 85%.  Hedge positions for the NDX100 are PSQ (Strength = -1) and QID (Strength = -5).

The S&P 400 Strength Index is at 97.4%, up 2% on Wednesday.  Hedge positions for SP400 are MYY (Strength = -3) and MZZ (Strength = -3).

The S&P 600 Strength Index is at 83%, up 12% on Wednesday.  Hedge positions for SP600 are SBB (Strength = -3) and SDD (Strength = -5).

The Russell 2000 Strength Index is at 79%, up 6% on Wednesday.  Hedge positions for the Russell 2000 are RWM (Strength = -3) and TWM (Strength = -5)

The strengths of various ETFs and Stocks can be found in the Files section of the Yahoo GGT  website, and they are updated at least on the weekends (sooner if I could find people willing to sign a non-disclosure form).  Let me know if you're interested.

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Remember, you are responsible for your own trading decisions, not me.  Do you homework.

Regards,

pgd

Wednesday, March 17, 2010

LCR Change Timer DID NOT CONFIRM

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This market continues to astound me.  Nevertheless, I'm still playing longs.

My pick for GS yesterday paid off ... GS went up 1.53% and my gain was a bit over 1%.  We'll see if it continues to move upward.  This is a risky trade, so be careful if you followed me.

Today's pick is LIHR, but we may be a bit early for this stock as well as industry group.  We'll see.

The GGT Price index hit a new all-time high of $24.83, up nearly 0.7% from Monday's value of $24.66 and a full $0.10 higher than the peak last Friday.  Volume continues to be steady, with 2.0M shares indicated.  New highs on steady volume is bullish.

There was a below-average number of New Longs (64) and above-average number of Affirmed Longs (707), indicating that well-performing stocks continue to perform well, but we're not rotating.  The number of New Cash and Affirmed Cash stocks was well below average, so the bulls clearly won the day.

The Long-Cash Ratio moved higher to 3.237, up from 3.178 and now indicates that 2434 stocks are long in the database and 752 are in a cash status.  Just so that you are under no illusion, the fast LCR EMA is falling in day-over-day change, which means deceleration.  This continues to flash caution overall.

The LCR Change Timer did NOT confirm the transition to CASH.  3 up days of LCR changes and 1 down day of LCR changes were not enough to move this, although it is very close.  If the markets are up only slightly today it is very possible that we could get a confirmed move to CASH, because the down days will have more strength than the up days, so beware.

I continue to hold my longs, but I'm typically setting stops tightly to protect gains.  My typical set point right now is a penny or two below the 2-day-ago low.

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

Remember, you are responsible for your own trading decisions, not me.  Do your own diligence.

Regards,

pgd

Tuesday, March 16, 2010

Signal Change: GGT LCR Change Timer (fast) has moved to CASH

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Independent of what the popular markets did yesterday, the GGT Price index fell -0.3% on above-average volume of 2.0M shares.  Correspondingly, the GGT Long-Cash Ratio Fast Timer, which signaled a transition from LONG (+1) to CASH-LONG (0) over this past weekend, also transitioned to CASH (-1) with Monday's close.  The LCR continued to drop on Monday and is now at 3.178, indicating that 2425 stocks have some form of a LONG recommendation and 763 stocks have a CASH recommendation.  This is off the peak established last Thursday of 3.625.




The GGT LCR Timer will post a confirmation signal with tonight's close IF the broad markets continue south with today's action.  Yesterday saw 2433 Advancing stocks and 3668 Declining stocks -- hardly a loud bear -- but it was enough to pull the GGT Price index AND the GGT LCR lower, causing the present warnings.  Watch here throughout the day, specifically the ADV/DEC values in the upper left corner, to get a view of what the broad market is doing.

Although I've posted a recommendation for GS, this is a risky trade at this point in the game.  Certainly enter on strength, and if GS continues to pull back, we'll monitor daily to determine whether we should enter or not.

Historically, watching the ADV/DEC level mid-day and closing longs (if transitioning from longs to cash) has been prudent.  Today will be different though because of the FOMC meeting and release of the statement around 2 pm.  I suggest waiting until after 2 pm EDT before making big decisions on anticipating what the GGT LCR Change Timer will do.

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

Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.

Regards,

pgd

Sunday, March 14, 2010

Price / LCR Divergence -- Pay Attention!

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Summary:  Read the content for yourself, but the yellow colorings are no mistake.  Caution is advised.

GGT Price Index:  New Highs on solid volume --> Bullish
GGT Price Rates of Change:  Deceleration all week, but still positive in magnitude.  Possible topping indicator.
GGT Long-Cash Ratio: Decreased on Friday, which is a warning sign.  Possible pausing or topping indicator.
GGT LCR Change Timer (fast):  Transitioned from Long (+1) to Long-Cash (0) on Friday; if the market drops on Monday this timer will transition to Cash (-1).
GGT LCR Change Timer (confirmation):  Still indicating Long (+1) status.
GGT Strength: @ 0.82 (bullish), but down 18% from last Friday's peak of 1.0

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

GGT Price Index

The GGT Price index moved higher Friday, reaching an all-time high of $24.73, a change of +$0.02 over Thursday's value and about 1.38% higher than last Friday's value of $24.39.  Volume continues to beat the 50d MA volume, with 2.1M shares indicated on Friday, 12% higher than the 50d MA of 1.9M.  Note that we have had 46 consecutive days of volume beating average volume, which is unprecedented in GGT history since September 2008.  If we look purely at price and volume these are bullish, and we certainly should be long in the market as viewed solely by these two indicators.  Here is the chart; as with all my charts, right-mouse-click on the image to open in an adjacent window and ENSURE you can see the right-most side of the graph, as this is where the relevant data resides.


I've drawn an artificial channel on the GGT pricing data; you can see that we are well-extended above this upper channel line.  You can also see that we are experiencing more average volume than we were compared to any time in the past since January 2009.

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

GGT Price EMA ROCs

The Price EMA rates of change (ROCs) are a telling indicator because as they decrease, even while being positive, they can give us a good idea of topping or bottoming formations.



The graph above is the ROCs plotted against GGT Price and date.  You can see for yourself that this week was one of DECREASE in acceleration, a.k.a. deceleration.  This is a warning sign and we need to pay heed.  Next, the ROC values are still above $0.00, so GGT prices are still moving upward, but are doing so at a slower clip.  Until the ROC values drop below $0.00 (into the pink zone) we are still in an intermediate-term up leg, but it is being threatened.  Hence, because of the deceleration but positive value, we need to be cautious here.  Entering a zillion long positions at this stage in the market is not advised.

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

GGT Long-Cash Ratio

The LCR, which is a direct measure of the number of stocks in the database with a Long recommendation compared to those with a Cash recommendation, DECREASED on Friday.  Presently it is indicating that 2495 stocks are long and 696 stocks are in cash status.  This indicator has risen day-over-day since 2/24, which is an amazing run.  Take a look at the following graph:



I posted this graph last week; this week it is updated and I've added the red circles so that you can see some correlation with the past.  The yellow sections are the number of stocks with JUST the LONG recommendation -- Affirmed Longs and New Longs are not included in the yellow data.  What is important to realize is that we are nearing (or have hit) historical levels where we have reversed.  Also note the area that I ovaled -- we have history that shows that we can remain at these lofty levels for some time, so a reversal duration is not necessarily indicated.  While there are 696 stocks that can move into a long status of some sort, history does not favor the entire database being all long and no cash, so we need to be careful here.

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

GGT LCR Change Timers

I've created a confirmation signal for the GGT LCR Change Timer, which is a slower EMA than the fast EMA used on the LCR Changes.  WE ARE IN A TRANSITORY PERIOD.  The fast LCR Change Timer has indicated a move to LONG-CASH (0), which means that IF MONDAY IS DOWN, this timer will flip to CASH (-1).   Watch the FinViz home page here and pay attention to the area in the upper left corner, which will tell you ADV/DEC for all markets:



Note the specific area just above this text that states 3089 issues Advancing and 2992 issues Declining, or a ratio of 47%/45.5%.  If you see more declining than advancing, typically a ratio of 1:2 (ADV:DEC) throughout the day then you can have assurance that the fast LCR Change Timer is moving to cash.

No matter what happens Monday, we will NOT see confirmation of the LCR Change Timer until Tuesday's market, simply because the slower LCR Change Timer signal is still Long @ +1.  Whether you wait for the confirmation signal or not is entirely up to you.  If you got in to the market when we signaled long back in early February then you probably can afford to wait; if your trades are more recent and gains are lower then it would be prudent to protect profits on the newer positions.

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

GGT Strength

GGT Strength peaked a week ago at a value of 1.0 -- this was an all-time high, and I suggested that you protect profits and consider contra positions that were showing strength.  Since last Friday's peak, GGT strength has fallen 18% on the long side.  Had you followed my advice on Monday you're probably pissed at me, but hang in there, I think you'll be rewarded:



If you moved into -1x contras (not that showed strength mind you, just the primary market contras), you're down about -1% to -2% for the week in those positions.  The good news is that if you've held onto your long positions you're in a great hedge position, and if the market does reverse, you've got a great foundation.  This is the situation that I am presently in, and I'm quite content to be here.  I've done this with 2x leveraged contras, and here is their 1-week performance graph (which obviously is worse ...):



Seriously folks, don't worry about the -4% loss over the week ... simply ensure you have your stop losses set in case the market rallies from here.

Note, the market can certainly hang around at these strength levels.  Historically, when we have peaked at a new high, we've ALWAYS corrected.  Always.  It's not necessarily immediate, but it has always occurred.  Here's another graph showing the strength with the GGT Price Index:




Because of the falling-below the less-than-scientific level of ~0.9 I'm going to put us in a cautionary yellow zone on this indicator.

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

Strength of Various Indexes

When we take the constituent stocks of the major indexes and calculate the individual GGT strengths of each, then average these per index and scale to 0-1, with 0 being completely oversold and 1 being completely overbought, we get the following:




The figure above shows the indicated indices and the GGT LCR Change Timer, as a reference.  Note that this is the CONFIRMED LCR Change Timer, to make it clearer (some folks have difficulty interpreting the 0-state of the faster timer, as it transitions from +1 -> 0 -> -1 -> 0 -> +1.  The confirmed timer only moves between 0 and 1).  This graph is showing us that we are in historically overbought areas , and while there is no guarantee that we will reverse, historically, when we have reversed, everything moves with generally tight correlation.  This is good  :o).

Get your contra shopping lists ready.  I have this list next to my PC:



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

GGT Trading Performance for the week of March 8 - March 12, 2010:

For the past week the entire GGT Portfolio is up 3.3%. The largest realized gain was in BEE, which was closed early when it hit a 8% profit target.  This stock was found in the Turtle strategy, which purchases new 20-day highs, with the list sorted (1000 / (Range * Closing Price)) Descending.  Under the Turtle rules this should not have been sold until it closed below the trailing 10-day low, but I misclassified the stock so it got channeled into a different money management strategy.  Too many pokers in the fire.

I'm presently holding 3.81% in total unrealized gains in 23 equities, most of which are on the long side since 2/12 or so.  The largest unrealized gain is MPG @ 32.79%, and the worse performing unrealized loss is QID, which is underwater by -6.85%.  I've been protecting gains which generally takes 75% of the position off the table, leaving the 25% riding for a confirmation signal, profit target, or stop loss.  72% of my portfolio is in cash, and I see this decreasing significantly if we get a move downward.
==============

Remember, YOU are responsible for your own trading decisions, not me.  Do your diligence.

Regards,

pgd

Friday, March 12, 2010

Indicators are showing that we are topping/pausing, so advise to tighen stops/protect profits

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There haven't been any significant changes this past week to the GGT system.  We have been showing very strong strength on good volume, contrary to the talking heads on CNBC and Bloomberg.  Yes, they are on the floors of the respective exchanges so you think they would know, but data doesn't lie -- pricing and volume have continued higher, with just a few chinks in the armor.

GGT Pricing

GGT Pricing Index has hit a new high every day since 2/26, and is now at $24.71 on above average volume of 2.1M shares (average = 1.9M).  While the rate of change on a daily basis is slowing, it is still very positive, and this is bullish.

New Longs

The daily number of New Long recommendations, 61, is the lowest since 2/10, and indicates that we are either pausing or topping. 

Long-Cash Ratio

The Long-Cash Ratio (LCR) has hit new local highs every day since 2/23, and is now at 3.625, indicating that there are 2501 stocks that have a LONG recommendation and 690 that have a CASH recommendation.  This is the 3rd highest LCR value recorded since September 2008, and a reversal has always been imminent at these levels.  I would advise to tighten stops and protect profits at this level -- there isn't much you can leave on the table at this point.  Remember, you can always re-enter the positions AFTER a slight pullback.

LCR Change Timer

The LCR Change Timer is still LONG (+1), and has been so for 19 consecutive trading days.  20 is certainly possible, but this timer is telling us to remain long.

GGT Strength

There is a divergence in GGT Strength with GGT Price.  GGT Strength fell Thursday to 0.85 from 0.92 by the largest amount since peaking at 1.0 on 3/5.  There are two ways to interpret:  either the market is taking a breather and will continue higher, or this is the start of a slight pullback.  Your crystal ball is as good as mine so again, I would protect profits and tighten stops so that you can re-enter with new cash if the market continues higher.

Index Strength

With the exception of the DJ30, every single index that I track is showing new weakness:

DJ30, up 0.42% in price, up 8% in strength
NDX-100, up 0.4% in price, down -9% in strength
SP500, up 0.4% in price, down -6% in strength
SP400, up 0.48% in price, down -8% in strength
SP600, up 0.3% in price, down -9% in strength
Russell 2000, up 0.34% in price, down -8% in strength

This should give us great pause and suggests that either the market is topping or taking a breather.  I personally do not see that there are enough stocks in a CASH status to move to LONG to power the next leg, so I think that there is better than a 50/50 chance that we will not continue upward from here but will consolidate over the next week. 

Your crystal ball is as good as mine.  Comments are welcomed.

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

Remember, you are responsible for your own trading decisions, not me.  Please do your diligence.

Regards,

pgd

Saturday, March 6, 2010

GGT Weekend Summary for March 6th

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Summary

GGT Price:  Bullish New High
GGT Price EMAs: Positive in absolute value (bullish), trending horizontal or upward (bullish).  Nearing peak values.
GGT Volume:  42 consecutive days of positive increases in volume is hard to argue with -- the market is accumulating stocks, and this is bullish.
# of Long-recommended Stocks:  Approaching historical peak levels -- caution is advised.
GGT Long-Cash Ratio - Completely bullish.
GGT Long-Cash Ratio EMAs:  Very positive which is bullish, but very steep in slope, which is unsustainable.
GGT Strength:  Hit an all-time high value of 1.0 -- Overbought.  Has been in overbought territory since this past Tuesday.  Protect profits, consider contra ETFs which show strength.

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GGT Price

The GGT Price index continues to move higher, hitting a 18-month high of $24.39 with Friday's close.  This was a 2% jump in price from Thursday's value of $23.91, and for the week we have watched the GGT Price Index move upward from $23.65, or a change of 3.1%.  Bull leg indeed.

I have to be candid ...  I've been taking profits off the table, having sold 50-75% of my longs earlier/mid  week.  I've also been moving ever-so-lightly into hedge positions using contra ETFs, so while many of you may have had a great bump on Friday, I actually was mostly neutral in gains, which on one hand bums me out but on another makes me thankful that my risk right now is about neutral.

Here's the graph of the GGT Price Index, together with average volume:



As with all my graphs, right-mouse click on the graph to open it in a new window or new tab.  Since relevant data is contained on the right side of the graph, make sure you can see the entire graph, not just the left side.

That is an amazing pricing graph, and the corresponding average volume graph is no slouch either.  I've layed a less-than-precise trend line on the peaks of the pricing curve since this bull started a year ago -- what you see is simply that we are now overextended above this trend line.  It's hard for me to imagine that this trend line will not continue to be tested -- we've all see prices weave in and out of lines like this but this bull trend, from the basis of this graph only, is certainly intact.  There is no arguing that you should be long in the present market.

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GGT Pricing EMAs/ROCs

More important than the absolute value of the GGT Price is the relative trend of the change in price.  If this change is upward we can expect prices to continue upward.  The converse is true too.  Look at the next graph:


There is a considerable amount of info in this graph. Most relevant to us is that:
  1. All of the rates of change (ROCs) are in the positive portion of the graph. This is bullish. 
  2. The individual ROCs are moving higher on a day-for-day basis.  This it indicates that the market is moving to higher prices faster than the previous day.  This is great, but it cannot be sustained.  I'll color this bullish but understand that this cannot continue without reversal.
  3. We are nearing an all-time high of ROC values.  We saw this on 2/22 when we hit $0.16/day.  We are presently at $0.151/day.  The "so what" here is that when we have had this type of acceleration in the past we ALWAYS corrected, and did so just around the corner from hitting those values.  Whether this is Monday, Tuesday, Wednesday -- who knows -- but we cannot continue this advance day-over-day.  The good news is that as long as the ROC remains positive (+) then prices will continue to advance; if it goes negative, like it did on 1/22, then we know we're in for a correction.  Correspondingly, the all-time high ROC values are bullish, but every time we have been here we slowed down.
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GGT Volume

I've heard the taking heads on CNBC state that "volume is lacking" and that "no conviction in the market".  I think they are wrong.

The Price/Volume graph I showed previously shows that average volume has been increasing day-over-day since January 11th, 2010.  On Friday the GGT Volume Index showed 2.04M shares traded, with a 50d MA level of 1.79M shares.  We have had 42 consecutive days of rising volume -- not rising average -- but day-for-day rising volume compared to the average of that day.  The money is flowing in from the sidelines/institutionals, driving demand, which drives prices.  GGT volume is certainly bullish due to the rise-over-rise in values.
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Ratios

I rarely show the following chart because it takes some time to look at and understand what it is you're viewing:


























GGT separates stocks into 6 classifications:
  1. New Longs (#NL - dark green)
  2. Affirmed Longs (#AL - light green)
  3. Longs (#L - yellow)
  4. Cash (#C - blue)
  5. Affirmed Cash (#AC - purple)
  6. New Cash (#NC - red)
This chart plots the absolute number of these ratings, relative to each other.  When you see the yellows (# of Longs) peaking in value (and blues getting thin - # of Cashs) we're nearing historical levels where prices have reversed.  We're not there yet, but we're getting there.  Color this cautionary.

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GGT Long-Cash Ratio (LCR)

One of the most powerful aspects of GGT is the classification of the stocks into 6 categories.  If we take a broad brush and simply group them as longs and cash, then take the ratio of the two, we get the LCR.

The LCR jumped from 1.923 on Thursday to 2.561 with Friday's close.  Out of nearly 400 trading days this is the 25th largest jump to date.  I note with interest and surprise that in the majority of cases where the jump was greater, that stocks continued upward in the near future.  There are 2295 "Long" recommended stocks in the database, and 896 "Cash" recommended stocks.  Here's a graph of the GGT Price and LCR:



I've colored regions of "up" and "down" periods, according to the direction of the LCR.  Take a close look at the above -- you can see areas where the LCR was falling but prices were horizontal or weakly ticking upward.  I'm convinced that the LCR can be an early-warning indicator for us.

Probably more telling is that there is NOTHING indicating a divergence between the LCR and the Price index -- they are both pointing upward with Friday's action, and as you can see, both have been lock-step for some time (since 2/8/10).  Correspondingly, the LCR is bullish.

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LCR Rate of Change EMAs

Just as we can plot ROCs on price EMAs, we can plot ROCs on LCR EMAs.  The data is instructive:



Just as in the Price ROC graph, we have some interesting take-aways:
  1. The ROC EMAs are all positive.  This means that the rate of change of the LCR is positive, e.g., that it is increasing within the length of the EMAs.  This is another way of saying that the trend is LONG for each of the ROC EMAs.
  2. By the time that the GGT Price was moving upward, the LCR ROCs had been already moving upward.  In fact, 2/9 was the "reversal" day in GGT Price, but the ROCs had been gaining ground as early as 2/2.  I missed this divergence, but certainly will not the next time it happens...  Presently, there is NO divergence, and the trend is upward.
  3. The ROCs are VERY STEEP.  Too steep to be sustained if you ask me, so I think we'll see some form of a relaxation in the slope of the ROCs.  THEY CAN STILL REMAIN POSITIVE, which means that the LCR continues to go up.  IF the ROCs move into the pink zone I would expect that LCR and Price has already started to move agressively downward.  I think this steepness is a warning shot across our bow. 
==================

GGT Strength Index

Another unique feature of GGT is the ability to calculate the "strength" of a stock.  Think of it as an overbought/oversold indicator.  Values close to 0 are "oversold" and values close to 1 are "overbought".

The GGT Strength index hit an all-time high of 1.0 on Friday, indicating that as a database, it is very, very overbought.  Here's a chart of GGT Price and Strength:



Price is shown in dark blue and purple indicates strength, between 0 and 1.  Red areas are where the GGT Strength has moved above ~ 0.9 (it is not an exact science).  When this occurs long trades are risky because the database as a whole is overbought.  The yellow regions are where strength was red but then dropped below ~0.4.  At this point the database is showing weaker strength and is entering oversold.  Once we resume upward above ~0.4, we move into a green zone.  Note that these values of 0.9 and 0.4 move around as market conditions change.

If you go by these rules, we see that we're presently in a red zone.  This means that the market is overbought and that profits should be protected, which is what I've been doing this week.  I also enter contra ETFs as they show strength during this period.

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

As always, you are responsible for your own trading decisions, not me.  Do your diligence.

Regards,

pgd

Friday, March 5, 2010

LCR Change Timer Transitioning to Long-Cash with Thurs' Action

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It's 5 a.m. in Vegas, Friday morning, and the futures are higher in advance of the jobs report.  Everything is pointing upward according to the talking heads, partially because it seems that the jobs report is being discounted and that Greece is going to be safe, but I see another side.

I purchased hedge positions in DRV, FAZ, SRS, QID, and SDS near the close yesterday.  I have orders pending in MZZ and DXD, which may execute today if the market even appears to reverse and move lower.

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

GGT Price inched up to close at $23.91, changing from $23.86.  If you believe in channel lines, we are 1% away from a top channel line and 7.6% away from the lower channel line.  This GGT Price is an all-time high, relative to when we started back in September 2008.  Rising prices is bullish.

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Volume continues to be strong, with Thursday's value at 1.96M shares on 50d MA volume of 1.78M shares.  This volume is 7% over Wednesday's value and this is within the daily "noise" of volume change.  Rising prices on steady volume typically indicates broad participation so the big boys are playing on a daily basis.  I take this volume ad price action to be bullish.


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

Bull Strength is something that I don't write about every day, but it can give us insight.  It's a simple indicator -- the number of (New Longs + Affirmed Longs / New Cash + Affirmed Cash), e.g., the number of stocks that are strong to the number of stocks that are weak, relative to past optimized level.s  I'm seeing the bull strength indicator drop over the last two days, having peaked on Tuesday.  A dropping value means that the numerator (bulls) are weakening relative to a growing denominator (bears strengthening).  This value is not averaged so it is a very fast, raw indicator.  It is impossible to sustain a short-term rise in the markets with this indicator falling, so I see clouds on the horizon.

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

The GGT Long-Cash Ratio, or LCR, barely increased on Thursday, from Wednesday's value of 1.914 to 1.923.  This increase in LCR continues to be bullish, but note that the rate of change of the 13d EMA on this is slowing (decelerating), as is the 21d and 34d.  While not cause for panic, slowing rises are a precursor to reversal, so I will continue to watch.  The take away here is that I would not be surprised at a reversal in the LCR absolute value within the next few days.

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

Despite the LCR moving up, the amount of change was not enough to sustain a LONG call, and the LCR Change Timer has transitioned from "LONG" to "LONG CASH".  This means that if we see the advance/decline lines show 1:1 or 1:2 (more DEC than ADV), this timer will transition to CASH.  Conversely, if today is up with more ADV than DEC, the timer will revert back to LONG status.  The way I typically treat this indicator is to watch the markets between 10 am. and 11 am, and see what direction things are moving.   If the ADV/DEC line looks like it will fall today I will move my stops to yesterday's lows and protect my profits in my long positions.  If you hold contras, if you see them gain, you'll have another indicator of what the underlying markets are doing.

Despite this guidance, the LCR Change Timer is still LONG. It has been long for 16 trading days.   If the markets finish down near 4 pm, it would not be a bad move to protect yourself with hedge positions just before the close.

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

GGT database strength continues to weaken, having hit a high of 0.947 (overbought) on 3/2/10.  It is now at 0.791 and is sinking.  We cannot sustain rising prices with a falling strength, so either:

1) prices will reverse to the down side
2) database strength will reverse and move up with rising prices.

Unfortunately, my crystal ball is as good as yours, and I have no idea what is going to happen today or Monday.  Given present strength levels and the upper channel of pricing, I'm inclined to say that we will reverse, but nobody knows for sure.

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

The DJ30 index strength moved upward on Thursday by 9% to 0.68.  This is wishy-washy -- I like solid numbers near 0.8 or above or below 0.2 and we've not seen this in the DJ30 for some time.

The NDX100 fell another 8% on Thursday to 0.67, even though the index proper (IXIC) moved up 11 points.  This is a divergence -- prices moving up but strength dropping, so caution is advised in Technology.  QID could be a good play here.

The SP500 was virtually unchanged on Thursday and sits at 0.811, up barely from 0.810.  SDS could be a good play here.

The SP400 fell 6% on Thursday to 0.85.  MZZ could be a good play here.

The SP600 fell 5% on Thursday to 0.75.  SDD could be a good play here.

The Russell 2000 fell 6% on Thursday to 0.73.  TWM could be a good play here; it fell 0.76%.

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

Enter on strength if so inclined, but like always, remember that you are responsible for your own trading decisions, not me.  Do your diligence.

Regards,

pgd

Thursday, March 4, 2010

Update on GGT Strengths, Hedge Positions in Contra ETFs should be Evaluated

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MZZ never cleared the previous day entry point yesterday, precluding entry.  Correspondingly, I have reset the entry levels for MZZ:

  • Enter above $19.87
  • 1st target ~ $20.50 or use above 5d MA
  • TSL @ ATR(20) = $0.64
Note that the GGT strengths for each of the indexes is very high, so hedge positions with our long positions would not be unwise.  The following are all strengths on a scale of 0-1, where 1 is completely overbought and 0 is completely oversold:

DJ30:  0.62, down -4% from Tuesday's value.  This value peaked at 0.67 on Monday, which is not appreciably strong.

NDX100:  0.73, down -13% from Tues' peak of 0.85.  QID may be attractive here.

SP400:  0.91, down 9% from Tues' peak of 1.0 (all time high).  MZZ is certainly attractive.

SP500:  0.80, down 9% from Tues' peak of 0.89.  SDS may be attractive here.

SP600:  0.80, down 11% from Tues' peak of 0.9. SDD may be attractive here.

Russell 2000:  0.78, down 9% from Tues' peak of 0.86.  TWM may be attractive here.

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

The GGT LCR, which is the long-cash ratio value, is at 1.914 and has been climbing day-over-day since 2/24.  This gives us a long-call on stocks and says that we should be LONG in the present market.

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

The GGT LCR change timer, which looks at a EMA of the day-to-day change in the LCR, continues to reflect a long call.  It is presently LONG and has been since it transitioned to this state on 2/10.  Since 2/10 the GGT index is up nearly 11%, so you decide whether you should more closely watch this indicator.  Since inception the GGT index is up 81% using this timer, both on the long side as well as contra side (theoretical, but you get the idea).

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

Remember, you are responsible for your own trading decisions, not me.  Do your diligence.

I return from Vegas late Friday so postings may be sporadic this week.

Regards,

pgd

The corresponding strength of the entire GGT da

Wednesday, March 3, 2010

MZZ above $20.08, 1st target above 5d EMA, TSL @ $0.59

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GGT calculates the strength of the major indexes, including the stocks that comprise the S&P MidCap 400 Index.  With Tuesday's action the GGT strength of the S&P400 MidCap Index hit an all-time high, which indicates incredible overbought conditions of the underlying stocks.  While there is always room to continue upward, placing a hedge position in MYY (-1x contra ETF) and MZZ (-2x contra ETF) is an action that I am taking this morning.

This is NOT a long-term play.  We are in a confirmed up leg and this is clearly swimming against the currents.

I intend to grab gains quickly, e.g., if the ETF moves quickly above the 5d MA, I will place a SL at the 5d MA level.  The ATR on this is $0.59, so if we move outside of this level to the upside, history proves that it will reverse and erode the gains.

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Remember, you are responsible for your own trading decisions, not me.  Do your own diligence.

Regards,

pgd