Friday, July 30, 2010

Short-Term LCR Timer: CASH; Elder Intermediate still LONG

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Thursday saw another drop in the GGT Price index, a slight movement down of -0.19% to $25.62 from $25.67.  Volume was average at 2.7M shares traded.  Again, rather unremarkable when taken in isolation.

The Long-Cash Ratio (LCR) continues in sync with price, dropping to 1.523.  This consecutive 2-day run caused the LCR Change Timer to move to CASH with the close on Thursday.  In accordance with this and the generally wild volatility in the markets I closed my UWM position yesterday for a loss.  Note that I did NOT open a position in the contras, as the majority are NOT above their 200d MA (the only ones above with significant volume right now are DGP, DRN, DTO, EUO, MVV, SAA, UGL, and URE).

Interestingly, GGT Strength moved UP slightly on Thursday, possibly signifying a local bottom.  The value of 0.597 is neither too high (overbought) or too low (oversold), as I like to see dramatic movements through 0.7 from below (aggressive long) or a plunge below 0.2 (aggressive cash).  We have neither so we are drifting in no-man's land, unable to effectively determine any form of a strong trend.

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Short-Term LCR Change Timer

As I indicated above, the LCR Change Timer moved to CASH with the close Thursday.  I have no open positions locked to this timer.

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Intermediate-Term Elder Timer

Elder's 13d Force Index continues to be positive, which is the primary gate for intermediate-term entry into positions.  The SLOPE of the 13d Force Index is positive, which is bullish.  These two indicate to me that we're going to hold our intermediate-term Elder positions.

My Elder portfolio is presently underwater by -1.2%.  BRCM's Elder 13d FI has moved negative so I will sell this with a 1% TSL (not limit).  I'm looking for stocks that meet the following criteria:
  • 13d Force Index Positive
  • 2d Force Index Negative (as indicated by Thurs close)
  • 13d Price EMA slope positive
  • 50d Price EMA slope positive
  • 13d EMA > 34d EMA (visual verification on chart)
  • Instantaneous price (now) is higher than yesterday's high by a few pennies.
  • Volume is higher than 10d MA (graduated to the time of the day)
I've covered how I do this over the last few days; here's the Relative Strength list (ACC and VEL are left to you)



















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Trading Plan for Friday

I intend to do nothing with my short-term holdings according to the ST LCR Change Timer.  None of my favorite contra positions are above their 200d MA, precluding entry.

I intend to add to my Elder intermediate-term holdings if they show strength, as well as additional candidates from the list above (as well as the velocity and acceleration lists).

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

Regards,

pgd

Thursday, July 29, 2010

Short-term timer transitions to LONG-CASH

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Forgive the abbreviated entry today.  Sorry, no graphics, as I'm doing this from my iPad.

The GGT Price index fell on Wednesday by -1.04% on slightly lower than average volume.  The price decline was a bit higher than normal, so color this a bit more bearish.

The LCR dropped from 1.929 to 1.719, hence the indicator is back in sync with price (see yesterday's blog).

The strength index fell a huge amount, dropping from 0.811 to 0.591.  This places it squarely in no-man's land, and figuring out where we go to from here is difficult if we use just this indicator.

Of greater importance is that the LCR Change Timer has transitioned to LONG-CASH.  If today is a down day according to the LCR (proxy at http://www.finviz.com/ using the ADV/DEC on the home page), we will see a transition to CASH today. 

Elder continues to indicate that we can enter stocks with strong metrics.  The 13d Force Index is positive.  The 2d Force Index is negative.  These are signalling entry into stocks.  Of immediate concern is that Wednesday showed three consecutive days of a downward-pointing slope in the 13d Force Index, and this is a rare event.  If today (Thursday) is down then Katie, bar the doors, as I think (if volume is strong) we will see the Elder 13d Force Index transition negative, basically telling us to close all of our long positions.  The slope has been growing in negative magnitude day-over-day, so having it reverse is absolutely essential to continuing our focus on long-sided positions.  Failure to reverse today will be huge for our intermediate-termed holdings.

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Trading Plan for Thursday

Unfortunately, my intermediate-term portfolio is now underwater by -0.3%.  I will continue to purchase Elder candidates (use my filters for HGSI to screen, shown in previous blogs), if they move higher in price and volume.  I closed my VLTR position for a significant loss, as it continued to slide yesterday.  I picked up CMCSA @ $19.71, so add that to the list if you are following along.

My UWM position is very underwater, down -5.75%.  I had set a TSL but fat-fingered the entry to be a Trailing Stop LIMIT, so it blew through my limit order and never exectued.  Now I have a significant loss and very vew days to recover from it.  It may be moot -- if today is a down day as measured at the end of the trading day I'll sell this for a loss and lick my wounds, elseif today is an up day I'll continue to hold, in accordance with the LCR Change Timer.

I sold my QLD position yesterday at a very slight gain (just enough to cover commissions and make about 0.1%).

If we are down today I will close my UWM position and enter TWM/QID positions before the close.

Tough market.

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

Regards,

pgd

Wednesday, July 28, 2010

Price and LCR Divergence ...


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The GGT Price Index moved down -0.65% to $25.94 on normal volume of 2.7M shares.  Standing alone, these two metrics are unremarkable.

Of interest is that the GGT Long-Cash Ratio (LCR), which is a ratio of the number of stocks with some form of LONG recommendation to those with a CASH recommendation, continued to grow in a dramatic fashion, jumping another 15% to 1.929.  We now have 1678 stocks that are LONG and 870 that are CASH, the highest level of this ratio since late April.  This continues to be very bullish.

The LCR is comprised of three components:
  • price action
  • volume action
  • rate of change of price
When price action, volume action, and rate of change all move to the upside faster than some "optimized" level of the past, we get some form of a LONG signal on a stock.  Failure of volume action, or rate of change of price, compared to historical levels, simply results in the individual security remaining with a CASH signal.

For the price index to drop, which means that the average price of the database is dropping, but for LCR to go up, we have had a couple of things happen.  First, think of the database as having some price/volume/ROC (P/V/R) level that causes stocks to move long.  Every day this level changes, because the lookback period marches forward one day at a time (e.g., I don't reference to January 1st of 200X, I simply look back in a sliding window fashion for a fixed 1 year or 2 year period).  If we were above this P/V/R level yesterday, and with today's action, even though prices may have fallen, we have a greater "distance" between where we are today and today's new P/V/R level, we can see that prices could have fallen but the LCR could have moved up, as more stocks will have crossed their threshold from CASH to LONG.  This is where we are today.

So what does this mean for our trading?

Prices falling but the LCR increasing cannot be sustained.  Either the LCR must also fall, because to get a CASH recommendation all we need is a breakdown in prices, or prices must resume a march upward, because ROC levels are being sustained.  It's impossible to predict, but for now, my feeling is that we can continue higher with some minor pullbacks.

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Short-Term LCR Change Timer

Back to the chart above.

The LCR Change Timer continues to indicate that we should be long on a short-term basis.  My positions in UWM and QLD are up, but are under tremendous pressure of losing ground.  Given that the LCR has moved aggressively upward I will continue to hold these positions.

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Intermediate-Term Elder Timer

The Elder 13d Force Index continues to sit firmly above 0, which is our primary gate for intermediate-term investing.  Somewhat worrisome is that we have had two consecutive days of the 13d FI pointing downward, which is mildly bearish.  Three consecutive days would be a warning shot across our LONG bow, so pay attention to today's action/tomorrow's blog.  The 2d Force Index is positive, which is indicating that the market is overbought.  We must be selective on our entries if we continue to move long into new positions.  Bullish for this leg are the slopes of the 13d and 34d EMA prices of the database -- they are both in an upward trend.  Further bullish is that the 13d > 34d EMA prices, which means we are clearly rising in overall value and this long call is quite valid.

My intermediate-term positions came under tremendous fire yesterday.  VLTR hit estimates, but because it did not blow them out of the water, the market rewarded them with a drop of nearly -13%.  I have placed a 1% TSL on the position simply to protect my downside, and because the 13d FI on VLTR moved negative.  My intermediate term portfolio went from being up +4% to being flat on the day, which certainly hurts.  Overall though, when looking at the group as a whole, the index chart pattern looks very strong:
































Note that in the figure above:
  • Bull-power is still very positive,
  • Bear-power is weaker than bull power, and is getting smaller,
  • The 13d Force Index ribbon is green, which means it is positive
  • The 2d Force Index has moved green (for this basket of stocks), which means that it is NEGATIVE.  Conceptually, if we wanted to add to my basket of stocks, if prices resume an upward march, today would be a good day to do so because of the status of the 2d FI,
  • The slopes of the 13d and 34d EMAs for this basket are very positive (bullish)
There is NOTHING in this basket of stocks that is telling me to dump them (except for the individual performance of VLTR).

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The pullback in prices has expanded the Elder list.  Here it is, sorted by strongest Relative Strength:


























I haven't screened these as far as chart patterns, so you'll need to do that work yourself.

In terms of velocity (change in relative strength), here are the strongest:































Definately some surprises in there.

Finally, here is the list of strongest accelerations (change in velocity)






I like how some of the same names keep coming up.

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Trading Plan for Wednesday

Futures are down, so I may lock in my gains in UWM and QLD before they go underwater.  If I see a classic "V" during intra-day I may repurchase these, or add to these.  My discretion.  Remember, this is with respect to the short-term LCR Change Timer.

With respect to the intermediate-term Elder timer, I'm watching to see if we have a breakdown in the primary Elder signal (13d FI < 0), but if any of the stocks show strength today, I'll most likely jump in.  Remember, I'm looking for price action above yesterday's high AND %volume greater than the 10d MA of volume.  Read back in my previous blogs for the scale.

Note that WE HAVE A DIVERGENCE in price and LCR.  This is a fork in the road.  Continued weakness will cause the LCR to reverse, and this could be dangerous for our gains.  Watch the ADV/DEC bar at http://www.finviz.com/ to see what the market is doing intraday.

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

Regards,

pgd

Tuesday, July 27, 2010

Continue LONG on Short and Intermediate Term Timers

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As with all my images, right-click on them to open in a new window.

The price index moved up +1.40% Monday, to end the day at $26.11.  Volume was down just a tad but is within a standard deviation of the mean, which I consider unremarkable. 

The Long-Cash Ratio continues to grow by leaps and bounds, and is now at 1.682, indicating that 1598 stocks have some form of long status and 950 stocks have some form of cash recommendation.  This latter situation with the LCR is very bullish. 

The strength index continues to grow, and is now at 0.879, where a value of 1 would be completely overbought.  If your time horizon is short you may want to protect some of your gains if the market begins to reverse.

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Short-Term LCR Change Timer

This timer is in Day 2 of being LONG.  I purchased positions in UWM ($29.85, up +4.1%) and QLD ($58.70, up +1.4%), both of which are just trading above their 200d EMA, which is a newly-established gate that I have for each of these ETFs.  The 200d isn't universal, but it will keep you on the right side of the market.  It's modeled on some of Larry Connor's work.  I will sell these positions if they drop below the 2-day-ago low, or if they are giving up all of their gains.

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Intermediate-Term Elder Timer

This timer is LONG, but is showing some weakness.  The slope of the 13d Force Index is negative, so we are losing steam.  The 2d Force Index is positive, which means we should wait for a pullback.

Because the 13d Force Index is long, it is ok to enter stocks that on a micro-scale (e.g., evaluate each stock), meet the Elder criteria.  My scan for today shows some good candidates, if the continue higher:








































Relative Strength candidates are GSB, IGTE, SY, RDWR.  Velocity candidates are GPK, DEP, SY, and IGTE.  Acceleration candidates are GPK, RCNI, DEP, and QUIK.  The chart patterns of some of these are questionable, and I'll leave that as an exercise for you.  SY is flatlined, so disregard.  Here's a hint though:  use my slope chart, and pick stocks which have upward-trending EMAs of the 65d EMA slope.  Here's GSB as an example:



Note how many of the EMAs on the 65d EMA of price slope are starting to trend down.  While GSB certainly can go higher, the 21d and 34d are out of sync, and more importantly, the shorter ones are clearly heading down.  Wouldn't you want to get into something that is heading upward?  Do this for the other stocks in the list.  So while the stocks do meet the 13d/2d Force Index criteria, they clearly need to get some momentum behind them in order to warrant our monies.

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Trading Plan for Tuesday

Watch for continued strength in the Elder stocks, and add if they show pricing strength above yesterday's high on higher volume than their 10d (I posted my intra-day volume levels last week).  IDT popped up to nearly 12% gain yesterday so I intend to tighten my stop to yesterday's low on that one.    In premarket this morning it looks like it could move even higher now.  Here are the total gains per position for my intermediate-term holdings:
  • BRCM - up +0.86 
  • GMCR - down -1.84%
  • IDT - up +11.84%
  • KWR - up +6.26%
  • LSCC - up +7.70%
  • ROVI - up +3.03%
  • VLTR - up +1.73%
As I indicated yesterday, these are not equal weighted, so my total gain within this portfolio is +4.05% over two days.  I will add additional Elder candidates under the intermediate-term timer if they show strength.



I will continue to hold UWM and QLD and protect their gains.

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

Regards,

pgd

Monday, July 26, 2010

Short Term LCR Change Timer has moved LONG

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Let's start with our normal dashboard view:



Over the last two trading days I've watched the GGT Price Index move up 2.64% and 1.82%, finishing Friday at $25.75.  Volume over the last 6 trading days has been right in line with the 50d MA, which is now at 2.6M shares.  Strong price movement on solid volume cannot be ignored, hence we have a fundamentally-solid setup to the long side.

The 4th column from the left is the GGT Long-Cash Ratio (LCR).  The LCR has moved above 1.0, indicating that more stocks in the database are above their historical EMAs than are below.  To be precise, we have a LCR of 1.273, a value not seen since May 4th.  We now have 1430 stocks with some form of a long recommendation and 1123 stocks with some form of a cash recommendation.  These are stocks that
  1. Trade above $1
  2. Have daily trading volume above 100K
  3. Are on the three major exchanges
Hence I consider them all to be very liquid and very indicative of the market as a whole.  The fact that we have crossed over with more stocks long than not is a tipping point achievement -- if we can maintain this, I think we'll continue to move higher.  We'll see.

Providing a cautionary view is the 6th column from the left, which is the GGT database strength.  This is an oscillator that moves between 0 and 1, with 1 being completely overbought.  Right now we are at 0.834, which indicates that we are significantly overbought and the probability of a pull-back is increased.  Typically, values higher than a less-than-scientific-level of 0.7 are indications of being overbought, and when this value resets to an-again-less-than-scientific-level of 0.2 we typically start moving upward.  I would be cautionary in jumping on new longs today, but of course, this depends on your timeframe.  This strength indicator is a very short-term indicator, and in terms of using it for intermediate-length holdings, is probably more powerful when it is used to signal entry than to indicate buying/selling.

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Short-Term LCR Change Timer

The LCR Change Timer, which is a short-term timer, has moved LONG with Friday's close.  I use this timer to enter the index leveraged ETFs, and will do so today (Monday).  See last week's blogs for a better idea on the timing/duration of this signal.

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Intermediate-Term Elder Timer

The Elder timer system has been long since 7/13.  I entered stocks this past Thursday afternoon, after they indicated that they were moving higher on solid volume.  I posted my stocks, and a question came up over the weekend on how I chose the stocks, as my blog from last week only contained those meeting Elder's criteria and those that met a HGSI relative strength criteria.  Let me explain, although due to limitations with HGSI I cannot recreate the scans on Wednesday of last week (it is not a historical database per se).

Today's Elder scan based on Acceleration, Velocity, and Relative Strength is as follows:



These are the only stocks in the HGSI database that meet the following filter:


It should be very evident in the view above how I am selecting stocks.

The key here is that HGSI allows us to look at Relative Strength, which is a comparison to a specific company's price change over the past 12 months, Velocity, which is the CHANGE in Relative Strength over some period of time, and Acceleration, which is the CHANGE in Velocity over some period of time.

So look at the figure above the filter selection criteria.  Globalscape is showing a 99% in Relative Strength, which means in price action, it is outperforming 99% of the database.  The Velocity of Globalscape is also a 99, so it's change in price action is presently outperforming 99% of it's history.  Note though that it has an Acceleration of 20, which means that compared to the past, it's not moving up as aggressively as it has in the past.  The result is that while Globalscape is a good candidate for entry, it does seem to be losing steam in moving upward (acceleration is slowing).

So, in my selection of good candidate stocks meeting Elder's entry criteria, I look for strong Relative Strength, then I look for those stocks which also have a strong Velocity -- those that are moving up in Relative Strength to their history -- and I also look for those stocks which have a strong Acceleration -- those stocks who are gaining price value at an increasing rate.  THIS is how I selected my entry list for Thursday -- it was a combination of RS, VEL, and ACC stocks that were "Green", as well as those that had good volume for the day.

Putting this in context, the portfolio is up since my entry late Thursday:
  • BRCM - down -0.33%
  • GMCR - down -2.60%
  • IDT - up +2.62%
  • KWR - up +3.68%
  • LSCC - up +4.83%
  • ROVI - up +0.45%
  • VLTR - down -0.66%
These are not equal-weighted, as I used the ATR(20) to size the positions.  Net-net the portfolio is up an actual +1.65% for the day on Friday and going into trading this Monday morning.

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Trading Plan for Monday

For my short-term timer, I intend to enter the leveraged 2x index ETFs if they are showing strength.  Market futures are down as I type this so entry early in the day is suspect.

For my intermediate-term timer, GSB and QUIK have strong Relative Strengths.  As part of the Elder system, they have to clear Friday's high for me to enter.  GSB and GMCR have strong Velocities, and again, I want to see price strength before entry, at least above Friday's high.  QUIK and GMCR have strong Accelerations, but since they are already in the list, this criteria is moot.

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

Regards,

pgd

Thursday, July 22, 2010

3:50 pm Thursday Update

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In accordance with my earlier blog, and more specifically, on the strength of the intermediate-term Elder timer and the status of various stocks meeting Elder criteria, I have purchased single positions in the following:

IDT
LSCC
GMCR
VLTR
KWR
BRCM
ROVI

We'll see how they fare over the intermediate-term.
 
Regards,
 
pgd

Keeping my Powder Dry

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The markets tanked yesterday, in response to the FED's statements, so we didn't whipsaw.  I suppose that's the good news.  The less-than-good-news is that we are not moving in any general direction, which makes it hard for those of us who trend-follow.

I intend to keep my powder dry today -- there simply is lack of conviction to move the markets in any direction.

Here's the status dashboard:





























As with all my images, right-click on them to open in another window.

The GGT Price Index fell -1.32% to $24.64 on average volume of 2.7M shares.   Unremarkable when observed in a vacuum.

The GGT Long-Cash Ratio moved downward slightly, falling from 0.616 to 0.589, indicating a slight downward bias in the database.  The movement isn't dramatic, so we're in the "noise" -- neither up nor down.

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GGT Short-Duration LCR Change Timer

This short-term timer is biased into CASH, as triggered this past Monday, but I'm holding no positions on either side of the trade.  Data at the end of the day is generally counter to the short-term direction of the timer, hence I've been precluded from entering.  As this signal is now three days old I will wait for a move to the long side before entering -- contra positions are risky at this point unless we see some clear trending to the downside.  The "yellow" on the graph above indicates a back-and-forth movement of the smoothed LCR change signal, and it's hard to make money when we have a "yellow" block indicated.

Futures are UP as I write this, so if this holds for today, we'll see ANOTHER yellow block with the close of the markets.  If the markets finish DOWN across the board, this will move back to another CASH call and limited exposure to contra ETFs could be evaluated.  I intend to wait until the last 30 minutes of the day to make a determination.

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Intermediate-Duration Elder Timer

Elder continues to indicate LONG, although the 13d Force Index slope is pointing downward (bad news if this is sustained).  It's also indicating that the 2d Force Index is POSITIVE, which means we need to wait for more of a pull-back to enter stocks on a broad, long basis.  This being said, there are candidates to review.

Of interest is that of the HGSI stocks that I listed yesterday, all the "green ones" were moving up solidly yesterday until 2 pm, then their bottoms fell out.  I'm glad I waited to make a determination.  Again, I will do the same today; here's my list:






















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Trading Plan for Thursday

In terms of the short-term LCR Change signal, I'll enter contra positions if we continue south today, as determined by the behavior of the market in the last 30 minutes or so.

In terms of the intermediate-term Elder signal, I'm watching the list above, specifically looking for strength (higher than yesterday's high on volume greater than the 10d MA), as measured in the last 30 minutes of the market behavior.

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Remember, you are responsible for your own investment decisions.  Please do your own diligence.

Regards,

pgd

Wednesday, July 21, 2010

Short Term Whipsaw? Watch for Reversal to Short-Term LONG

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Let's start with our dashboard:

























Monday saw a reversal of sorts, with the markets opening significantly down and then moving upward steadily throughout the day.  The GGT Price Index moved up +1.67%, ending at $24.97.  Volume was steady compared to the 50d MA @ 2.6M shares.  I consider this data normal.

The Long-Cash Ratio (LCR) moved upward again, a jump of 15%, to finish the day at 0.616.  Overall, 972 stocks are above their historical optimized values and 1577 are below, with the trend moving upward at the present time.  Rising prices on rising LCR is bullish on a short-term basis.

The GGT Strength Index, which is an oscillator between 0 and 1, jumped a huge amount from 0.318 to 0.619.  This has moved us into never-never land -- the area above 0.2 and below 0.7 it typically wishy-washy and using this indicator in a vacuum is a crap shoot.  Although I like to see price, LCR, and strength aligned, it's hard to tell what's going on right now.

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LCR Short Term Change Timer 

The LCR Change Timer, which is a short-term timer, has moved back to CASH-LONG (0) from it's transition to cash on Monday.  It is very possible that if Wednesday is up that we will move long again.  This whipsaw in the signal, while not "normal", does happen.  Here's a chart I posted last week which shows the number of times, when the timer is in CASH, that it transitions back to LONG:

























The chart above shows us that since August 2008 we have had:

  1. 5 occurrences of the signal changing within 2 days 
  2. 2 occurrences of the signal changing within 3-4 days
  3. 4 occurrences of the signal changing within 5-6 days
  4. 6 occurrences of the signal changing within 7-8 days
You get the idea.

Bottom line:  don't be surprised at a call to long.

To determine whether we should move long, I use http://www.finviz.com:





























Here, we see that for Tuesday's action, we had 4699 ADV stocks and 1428 DEC stocks.  Volume was below "average".  194 New Highs were reported, and 114 New Lows were reported.  Aside from the volume, these are bullish indicators.

Watch FinViz near the end of today.  If you see the ADV/DEC favoring the ADV side of the balance, then there is a high probability that the LCR will move to LONG.  You'll have confidence if you also see the New Highs > New Lows.  Conversely, if you see the DEC > ADV, we'll be stuck in this limbo-land at least another day or two.

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

Our Friend Elder, the Intermediate-Term Timer

Elder continues to indicate a bull leg, as evidenced by the following:

  • Elder 13d Force Index is positive (indicated by the green LONG in column 9)
  • Elder 13d Force Index slope is upward (indicated by the green BULLISH in column 10)
  • Elder 2d Force Index is positive (which is showing that we should WAIT to enter now, column 11)
  • GGT 13d EMA slope is positive (column 12)
  • GGT 34d EMA slope is positive (column 13)
  • 13d EMA > 34d EMA (column 14)
My watch list for stocks, using HGSI, is the following:

























Note that all of these stocks have a positive 13d Force Index and a negative 2d Force Index, yet have an ERG > 240.

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

Trading Plan for Wednesday

I sold my positions in UWM and QLD using the 1% TSL, which in hindsight was probably a bad thing to do but the rules are the rules. 

If the markets move higher today I will enter the index ETFs.  I will do this because of the LCR Short Term Change Timer transitioning to a LONG call with the close today.

If stocks on the list above are up above yesterday's highs on good 10d volume (see yesterday's blog for my chart of "good volume"), I will open intermediate-term positions in the stocks above.  I will make the evaluation later today, say after 3:15 pm.

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

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

Regards,

pgd

Tuesday, July 20, 2010

Tuesday 3:15 pm update

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Contra ETF volume is mixed in terms of meeting the 90% of the 10d MA by 3:15 standard.  Some of the contra ETFs (SMN, SCC, SKF, SRS, UDN, TWM) are all below threshold, while some (DXD, DUG, SSG, BZQ, FXP, EFU, QID) are above threshold.  All that are above, with the exception of DUG, are below yesterday's high, precluding entry.

DUG typically moves higher as confidence falls, but who knows where it is going to go.

Consequently, I'm not moving on any of these until we get a clear signal downward.  Note that the bias in the database suggests that we could have more upside room than downside (as measured by the GGT strength indicator).

Regards,

pgd

LCR Signals MOVE TO CASH

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Despite the markets being up yesterday, the underlying momentum of the database was down, as evidenced by the LCR moving down.  Given the length of this bull leg, and this type of divergence, I will close my positions in UWM and QLD using a 1% Trailing Stop Loss, placed before the open of normal trading.

Here's the tea leaves:


GGT Price moved up +0.45%, in tandem with the markets, on volume that was +6% above the 50d MA of volume.  This is normal price/volume action and is unremarkable.

Contrasting, as evidenced by the 4th and 5th columns, the GGT Long-Cash Ratio (LCR) fell -12% to 0.536, which is a divergence from the price action of the day.  It takes more to cause the LCR to move up or down than simple price action, and a falling LCR tells me that for the underlying stocks, price, VOLUME, and RATE OF CHANGE are all collapsing.  This isn't to say that we can't see a reversal, but right now the foundation of price action is falling, which is worrisome.

Confirming this move downward is that the entire strength of the database, as indicated by the GGT Strength Index (6th column), also fell.  I know it says 0.366, the same as the previous day, but I grabbed the screen shot before this field updated -- THE ACTUAL STRENGTH IS 0.318, which is below yesterday's value.  Correspondingly, I think that the falling LCR and falling strength are in sync, and it is thus prudent to close my long ETF positions (UWM, QLD).

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GGT Short Term LCR Change Timer

The short term Change Timer has signaled a move to CASH.  I am chosing NOT to ignore it.  If the markets are up today we will not get a signal to move long until the close on Thursday.  If the markets are down then we will be confirming the signal.

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Elder Intermediate Timer

Elder continues to indicate LONG on the intermediate-term timer, and with the 2d Force Index below 0, continues to indicate that there are good entry positions within the present market.

Yesterday, I provided a HGSI list of stocks that met the Elder Criteria.  I watched these throughout the day -- not one cleared the previous day high (Friday).  Correspondingly, I DID NOT ENTER ANY INTERMEDIATE LONG POSITIONS.

I'll watch again today, using the same filter and selection criteria.

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Trading Plan for Tuesday

I will close my short-term positions in UWM and QLD using a 1% TSL.  I will open positions, on strength only (volume and price), in QID, DXD, TWM, etc.

I will open intermediate-positions, as determined by my HGSI filter I presented yesterday, if they show strength (volume and price).

For review, my volume criteria is:

12% 10d Avg Vol by 10:00
25% by 10:30
33% by 11:15
50% by 12:15
60% by 1:15
70% by 2:15
90% by 3:15

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

Regards,

pgd
3 pm update. Although the markets are in positve territory, not one of the Elder stocks is making highs larger than Friday. I'm keeping my powder dry today...

Monday, July 19, 2010

LCR Change Timer - Poss Transition, but Maybe Not...

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Let's start with our GGT status figure.  As with all my images, right-click on the picture to open in a separate window.



As we all know, the markets took a major hit on Friday.  GGT indicated this, with a drop in the price index of -1.77% on volume that was +14% above the 50d MA of volume.  We are now sitting at a price of $24.45 and 50d MA volume of 2.69M shares.  Typically, a big down-draft in prices on higher volume should be cause for pause, but this volume number is well within average standard deviation, so actually, we can consider it "normal".  Given too that this was expiration day, I'm not overly concerned, despite the talking heads about "failed breakout", etc.  It simply is too early to tell if this is a failed breakout.

The Long-Cash Ratio (LCR), which is just what it's name indicates, fell a huge amount on Friday, indicating that we had a huge downward shift in the database.  It is now at a value of 0.608 and indicates that 964 stocks have some form of long status and 1585 stocks have some form of cash status.  We saw a number of days last week where the LCR was moving upward but the price was drifting down, and as I'm fond of saying, there is no way that that type of divergence can be sustained.  Correspondingly, the world is whole since these two are in agreement, and given the sustained run of this mini-bull (see my blog from Friday morning), I think a pull-back over the next few days would not be very surprising.

THIS BEING SAID, the 6th column from the left shows GGT Strength, and this value acutally states that we are more likely to move upward than we are to drop.  A value of 0.37 on a scale of 0 to 1 means that the underlying database is more oversold than overbought, although I like to see values below 0.2 before I call a next run up.  I'm not convinced that we're starting down here, as we've moved down a good chunk this past week (in terms of strength).  Make sure you look at the numbers and see the trend yourself.

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LCR Change Timer

Because the LCR dropped a big amount, we expect the LCR Change Timer to signal a possible state change to CASH *** IF MONDAY IS A DOWN DAY ***.  The transition caused by the downdraft on Friday is a head's up signal to be cautious; continued weakness on Monday will tell us to close our LONG positions and enter CONTRA positions.  The best way to evaluate this is to watch the home page at http://www.finviz.com/, and in the upper left corner of the land screen, you'll see an ADV/DEC bar:






























You can see that on Friday we had 892 ADV and 5326 DEC.  Hence, if we see more DEC than ADV on Monday, there is a high probability that the GGT LCR Change Timer will confirm the move to CASH, and hence, I will close my longs (I did keep them over the weekend).

IF Monday is an up day, then we're going to bounce around as far as the LCR Change Timer is concerned.  Stay the course on the long side, as we could certainly move up from here.

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Elder Timer

Elder's intermediate timer is LONG for entry into long positions:
  1. The 13d Force Index is greater than 0, telling us that entry into long positions is "safer"
  2. NOTE THAT THE SLOPE OF THE 13d FORCE INDEX IS NEGATIVE, which is a warning sign.
  3. The 2d Force Index is LESS than 0, telling us that we are experiencing a shorter-term pullback and that we can get better prices right now
  4. The 13d and 34d EMA PRICE slopes are POSITIVE, which is bullish
  5. The 13d > 34d EMAs are aligned properly, telling us we are in an uptrend
Here's a view of candidate Elder stocks that have an HGSI ERG above 240, sorted by Relative Strength descending:



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Trading Plan for Monday

Intermediate-term holdings:  I intend to open positions in the strongest RS stocks above if they begin to move above Friday's high.  For example, IDT's high was $15.77.  If we move significantly above $15.77 today (say above $15.82 or so) then I'll open an initial position with a fairly tight end-of-day-stop loss of $15.05.

Short-term holdings:  I intend to keep my long ETFs (UWM and QLD) if the markets continue higher.  I will sell them if they look like they are going to give up their gains, and if the markets are down significantly by 3:30, I will enter the index contra ETFs.

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Remember, you are responsible for your own investment decisions, please do your own diligence.

Regards,

pgd

Friday, July 16, 2010

Definition of Short-Term and Intermediate-Term Timers...

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Sorry for the delay in posting this morning.  Returned from my trip this week to find no AC in the house, much to my family's chagrin, so I've been dealing with that this morning.

Let's start with the dashboard:


The GGT Price Index is bouncing against resistance at $24.89 (Thurs), $24.92 (Wed), and $24.94 (Tues).   The volume index has been within the normal distribution at around 2.6M shares, which is right in line with the 50d MA.  Hence we're churning -- there is buying and selling at healthy levels, and price is holding steady.  This is neither bearish nor bullish -- it simply indicates that there is some participation in the markets by the big boys.

Of particular note is that GGT price is losing ground ever-so-slightly, yet the GGT Long-Cash Ratio continues to build.  In fact, it is nearly in balance, finishing Thursday at 0.991.  This indicates that 1296 stocks are in some form of long status and 1308 stocks in some form of cash status.  Of greater importance is that bull markets see this tip in favor of more longs, so we MAY be moving from our correction period to a period of new growth -- only time will tell.  The importance of the absolute value of the LCR is not nearly important on a short time frame as it is on the longer time frames -- historically, when this value has been below 1.0, we are in a period of consolidation.  We're moving higher, so let your common sense guide you from here.  I'm cautiously optimistic.

I can't plot LCR indicators in HGSI, so here is my own window:


What is important to view above is that we've certainly FAILED once we reach the LCR greater than 1.0 level (just look to the past since inception of the GGT system), so don't bet the farm long just yet...

Another item that draws my attention is the slight decrease in GGT price over the last few days, but the incredible strength of the GGT LCR.  Here are the LCRs for the week:
  • Monday: 0.409
  • Tuesday: 0.827
  • Wednesday: 0.922
  • Thursday: 0.991
This divergence CANNOT be sustained.  The reason is that the LCR is comprised of several variables:  price movement, volume movement, and rate-of-change movement.  Price movement is just that -- price movement.  The fact that LCR is showing a tremendous amount of strength indicates that there is more occuring within the database than just price movement -- volume is improving, and prices, relative to their recent past, are moving dramatically upward.  The strength of the LCR is good, as it transcends simple price movement. 

Here's my tea-leaves prediction:  a pullback in LCR, but higher lows will signal a wonderful entry into longer-term positions.  Remember, not to be taken as gospel, as my tea-leaves are only as good as yours.

[Kevin B:  I saw your request for clarification on what "intermediate-term long positions" mean, and I'll address that shortly].

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LCR Change Timer

The LCR Change Timer continues to indicate that we should be LONG, and has been in this status without any form of a pullback since the close of 7/7/10.  This is a 7 consecutive day run, and certainly is pushing our luck with this streak.  NOBODY WOULD FAULT YOU TO LOCK IN PROFITS AT THIS POINT, especially going into the weekend.  I'm seriously considering taking my profits in UWM and QLD.

The LCR Change Timer is a SHORT-TERM TIMER.  What is short term?  For this timer, AND THIS TIMER ONLY, we can gleen the following statistics since inception in August 2008:
  • Average Signal Length (both LONG and CASH):  9.7d +/- 6.9 days
  • Average Signal Length (ONLY LONG):  9.1d +/- 6.4 days
  • Average Signal Length (ONLY CASH):  10.3d +/- 7.5 days
Unfortunately, the data is not bell-curve shaped, so normal statistics do not directly apply.  Here's the historgram for the long signal:




So, even though the data says that we have an average duration of 9.1 days with a standard deviation of 6.4 days, your eye can tell that signals lasting 2 days have the most occurances, followed by 5-6 days, followed by 7-8 days.  This tells me that the present LONG signal is getting old (it's 7 days old) and don't worry about what others would say if you started protecting profits.

When we are LONG, like right now, we can expect the average long signal to last 9-10 days.  We are at day 7 with the close on Thursday.  As I bang this out the markets are down, so we'll move from LONG to CASH-LONG with today's action, if the FinViz ADV/DEC line is favoring declines at the close of today.  This means that IF TODAY IS DOWN, we will be at day 8 in this signal.  A continued down day on Monday would be the day of transition to CASH, and hence, this signal would be counted as 8 days in length.

Here's the view of the CASH signal, again since inception:



The normal stastistics tell us that the average signal length for the CASH signal is 10.3d +/- 7.5 days.  We can see in the figure above that 7-8 days has the greatest number of occurances, followed by 1-2 days, then a tie on 5-6 and 11-12.  So although the average is 10 days, our eye clearly jumps on the 7-8 day bin as being more of the "center".

The conclusion of this is that this timer has a "feel" of being LESS THAN 20 days on the LONG side and LESS THAN 20 days on the CASH side.  Ask questions of the data above if you do not understand what you are seeing.

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Elder Timer

The Elder Timer is a longer-term timer.  The question is out there about "what is intermediate duration?"

The Elder system uses a 13d moving average on the Force Index, as well as movement of a 13d EMA and a 34d EMA.  If we just consider the 13d MA on the Force Index as our gate to be "long" or "not long", we get the following duration of LONG signals since inception of the GGT system:



Simply by using the 13d Force Index, we have whipsaws, which is evidenced by 7 occurances under 5 days in duration, 1 occurance 6-10 days, etc.    Note though that when this signal DOES move positive, we can be long as much as 71-75 days.  THIS is an intermediate-term timer signal.  The 13d FI > 0 is a primary gate for us on whether we should be long in stocks.

Let's look at the CASH side of the 13d Force Index:


As you can see, by using the pure 13d Force Index < 0 as a primary gate, we have whipsaws in the timer, as this has happened 9 times from 1-5 days in duration.   The important number is the 45d value -- we have seen this timer keep us in cash as long as 41-45 days, again, representing an INTERMEDIATE-TERM timer.

THIS IS NOT HOW MY ELDER TIMER IS CONSTRUCTED ... BUT BECAUSE IT IS THE PRIMARY GATE, THIS IS THE EXPECTED BEHAVIOR OF MY ELDER TIMER.

Remember, I combine the SLOPE OF THE 13d and 34d PRICE EMAs, as well as whether the 13d > 34d in value, in determining whether we should move INTO a long position.  I'll cover more of this in an upcoming blog.  Make sure you understand the colors in the status table below for the ELDER section:


What we see above for 7/15/10 is that:
  1. The Elder 13d Force Index Gate signal is LONG (green), and it has been since Tuesday.
  2. The 13d Force Index SLOPE is pointing downward, which should give us pause.  We want this moving upward.
  3. We have a NEGATIVE (green) 2d Force Index.  This means that IF I HAD MY LONG SHOPPING LIST READY (I don't because I've been traveling), that stocks that are showing strength TODAY (FRIDAY) would be good candidates for entry, despite warning in bullet #2.
  4. The 13 and 34d slopes of the PRICING EMAs are pointing UPWARD.  THIS IS BULLISH and triggered an entry IF YOU ARE AGGRESSIVE.
  5. The 13d has just crossed above the 34d EMA with Thursday's close, which is VERY BULLISH.  THIS is telling us that from a conservative point of view, Elder's methods are telling us that we can enter the market, ON STOCKS THAT HAVE STRENGTH.
Note that we could fail here.  We've had a long bull run (7 days), are due for a pull back, but as long as the 13d Force Index stays gated long, entering stocks that are showing new strength after having a 2-day FI pullback (and meet the 13/34d criteria) could be good candidates for entry.

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Trading Plan for Friday

I'm watching my UWM and QLD positions get the heck beat out of them.  I plan to NOT LET THEM GO NEGATIVE in ROI, so I will sell them if they get down to 1-2% positive gain over the last 7 days.

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

Regards,

pgd

Thursday, July 15, 2010

Price/GGT LCR Divergence

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Still traveling and am challenged to provide graphics.  I return late tonight so tomorrow should be back to normal.

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My primary short-term indicator, the Long-Cash Ratio (LCR) value, continues to move upward.  This is constructed using about 2600 stocks that have over 100K volume, prices above $1, and trade on the primary exchanges.  Correspondingly, these are liquid stocks.  The new LCR value is 0.922, indicating that we have 1249 stocks with some form of LONG status and 1355 with some form of CASH status.  Why this is important is that
  1. if we continue, we'll have more stocks on the long side than cash; this has not occurred since May 5th, and
  2. this continues to tell us that we should remain LONG if you are following the LCR Change Timer.
Correspondingly, I am continuing to hold my long positions in UWM and QLD, which are up 9.4% and 6.9% since the signal last week.

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The Elder 13d Force Index continues to indicate a positive value, indicating that it ok for us to enter intermediate-term long positions.  I've been quite busy this week and have NOT been able to research which stocks to review, so I cannot provide guidance on what I'm going to do.  Check back tomorrow and across the weekend to see how I will look forward with stock selections.

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The GGT Price Index fell from $24.94 to $24.92, although the LCR moved upward.  Volume was within statistical norms.  Correspondingly, even though we now have a significant divergence, my money is on the LCR moving upward.  I am short-term bullish, and am becoming more longer-term bullish, but have to look deeper at the tea leaves.  I'll do that this weekend.

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Trading Plan for Thursday

I am staying the course in terms of my long ETFs and will make no changes today.

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Regards,

pgd

Wednesday, July 14, 2010

Elder Force Index 13d has Moved Positive

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I'm traveling this week so I cannot write much at the present moment.

I note that the Elder Force Index, 13d, has moved positive.  This is bullish for the intermediate term and indicates we need to look at entry of long positions.  Tempering this is that although the 13d and 34d EMAs are positive, in the big picture, they are still inverted, which means we have a ways to go. 

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Trading Plan for Wednesday

Unchanged.  I continue to hold positions in UWM and QLD, as well as AAPL. 

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Regards,

pgd

Tuesday, July 13, 2010

Price/LCR Divergence

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This will be incredibly short, as I'm waiting to board an aircraft to Ft. Worth.

GGT Price FELL -0.45% Monday on below average volume of -27%.  Nevertheless, the Long-Cash Ratio increased +10% to 0.409, which is the first day of a divergence.

The LCR Change Timer remains LONG @ +1, and indicates that on a very short term basis, that I should be long in my ETFs.  I am, but only in UWM and QLD, which are both holding positive gains.

Elder's 13d Force Index is still below 0, indicating that on the intermediate-term horizon, we should NOT be in long positions.Correspondingly, I am only holding AAPL across ALL of my investments (I evaluate AAPL on a daily basis, not in view of the larger indicators).

Although the 13d and 34d pricing slopes of the GGT price index are pointing upward, they are inverted (34d > 13d), which is bullish for the upward-pointing aspect but bearish for being inverted.  In fact, ALL of the pricing slopes are pointing upward, which is bullish.

The slopes of the LCR EMAs are just starting to move upward, with the 5d,8d,13d and 21d pointing upward, all to be considered bullish.  The 34d is pointing downward, which is bearish.  The 55d remains pointing upward, which is bullish.

Conclusion:  we have the makings of a start of a good bull run, BUT WE ARE VERY EARLY.  WAY TOO EARLY TO COMMIT MONIES. 

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Trading Plan for Tuesday:

No changes.  Futures are up, so my positions in AAPL, QLD, and UWM will most likely move upward.  I intend to sit pat and watch these gain.

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

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

Regards,

pgd

Sunday, July 11, 2010

LCR Change Timer Long, Some Blocked Roads for Intermediate-Term Long Holdings

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Let's start the review with my Elder screen of the GGT universe, updated through the close of Friday, July 9th:


  • We're seeing some positive movement in Bull Power and corresponding decrease in Bear Power, which is short-term bullish.
  • The 13d MA of the Force Index is PINK, which means that it is still below 0 and is intermediate-term bearish.  Overall, this precludes longer-term movement into long positions.
  • The 13d/34d EMA slopes of the price index are pointing upward, which is short-term bullish.
  • The 13d EMA of the slope has just moved above 0, which is short-term bullish.
  • We have had a crossing of the 34d EMA slope by the 13d EMA slope from below, which is short-term bullish.
Hence, from Elder's perspective, we have a number of indicators that are bullish or moving bullish on a short-term basis, but overall, until the 13d Force Index moves above 0, we have to be intermediate-term bearish.

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The figure above will take some studying to interpret.  The upper pane contains EMAs of SLOPE of 65d EMA of price -- do not go any further until you understand that.  Take a price sequence (lower pane), take the 65d EMA of that price sequence (65d = 1 trading quarter of time), then determine the slope of that 65d EMA, then smooth with another EMA, varying from 2d (red) to 34d (purple).  Depending upon your investment horizon these slope EMAs can really help you understand where you are jumping into the cycle, and more importantly, if momentum is waning.  So let's look at the details in the upper pane:
  • Without exception, every slope EMA is below zero.  This means that in every time frame, 2d through 34d, that the slopes of the 65d pricing EMAs have been or are falling.  In Ken Phillips' parlance "the car has been driving backwards".  Using a broad-brush, this is to be considered BEARISH.
  • The 2d slope EMA (red) is moving upward, and has been for several days.  It is sitting at a value of -0.111.  Hence, on a short-term (day-over-day) basis, the pricing EMA is bullish because it is pointing upward:  "the car is driving backwards but is slowing almost to 0, ready to go forward".  The fact that it is poised to break positive is a good sign, and is necessary for us to move into a bullish market.
  • The 8d slope EMA (blue) just reversed and is now pointing upward, which is short-term bullish.  It is the most negative of the slope EMAs, and correspondingly, has a distance to go before it moves positive.  This is telling us that on a rolling, 8-day basis, the intermediate-term slope of price is still falling, and I see this as a huge barrier to intermediate-term entry on long positions.  I want to see this move positive for sustained up leg, so we are early.
  • The 13d slope EMA (green) is pointing downward, but it looks like it could be bottoming and possibly starting an upward move.  Hence, the intermediate-term price EMA is still losing ground on a 2-3 week basis, and this is a huge warning sign.  We MUST have this pointing upward (even if it is negative) for us to enter intermediate-term long positions.
  • The 21d slope EMA (black) has just started to point downward.  Yuck.  Another brick wall for intermediate-term long positions.
  • The 34d slope EMA (purple) continues to point upward, which is WONDERFUL.  If we can get the 13d and 21d slope EMAs to work their way pointing positive we'll have a good setup for intermediate-term entry of positions.
Remember, EMAs are LAGGING indicators.  Think of driving forward while only looking in a rear-view mirror -- this will give you my perspective of this approach.

Look at the image above again.  In the lower pane I've added a 150d EMA on the pricing sequence ... note that many people use the slope of the 150d to give an indicator of the long-term trend.  Note that the slope is horizontal/downward, so there is a slight bias to the ugly side if you use this indicator.

Conclusions?  While there may be some short-term opportunities available to us, until we see the 13d and 21d starting to point upward, the intermediate-term prospects for long positions are very risky.

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LCR Change Timer Status

I can't plot the Long-Cash Ratio (LCR) in HGSI, so all I can do is describe it here. 

The LCR jumped on Friday on terrible volume, so I'm suspect at the legs in this bull.  Nevertheless, the LCR Change Timer, which is a very short timer (2d to 11d average) continues to indicate that we should be long on a short-term basis.  I continue to hold my 2 long positions -- UWM and QLD, which are up 5.6% and 2.6% respectively since my purchase on this last week's signal.  The earliest we could see a change in this timer would be the close on Tuesday, and for this to occur, we need both Monday and Tuesday to be down.

I note with interest that Friday's action saw 149 New Highs and 50 New Lows, the first time we've had more NH than NL in some time.

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Trading Plan for Monday, July 12th

In short, no changes to my existing plans.  I intend to continue to hold UWM and QLD, and will sell them before Tuesday if they show signs of moving negative.  I only hold a position in AAPL, and will continue to hold this independent of of the larger picture (I evaluate AAPL individually based on the approach above).

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

Regards,

pgd

Thursday, July 8, 2010

LCR Change Timer Transitioned to LONG

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Before I forget, there is a good chance that there will be no blog update the morning of Friday, 7/9, as I will be traveling and it will be difficult for me to access data.  I'll try, but no guarantees.

Here's the status dashboard:

























As with all my images, right-click on it to open in a new window.

The GGT price index soared Wednesday, finishing the day up 3.19% at $22.96.  This was accomplished on  volume that was -12% lower than the 50d MA of volume.  Despite this lower number, -12% is within the standard "bell curve" and can be considered normal.

The GGT LCR Change Timer, which is a very fast timing system, has moved to LONG, as predicted in yesterday's blog entry.  If you have been following along with my trades you would have been faced with a difficult decision near the close of yesterday's market:  all the 2x leveraged ETFs were UP, but they were substantially below their 10-day MA on volume.  This is quite worrisome overall for any sustained bull.  Nevertheless, I did pick up positions in UWM, the Russell 2000 2x leveraged ETF, as well as QLD, the NASDAQ-100 2x leveraged ETF, in accordance with plan rules.  If I see strength in the others I may follow with additional long entries, but for now, I am content to hold these two.

GGT database strength, which fits on a scale of 0 to 1, moved from 0.231 to 0.537, which places it firmly in no-man's land.  This tells us that we have nearly 1:1 odds on failing this breakout, as well as possibly moving higher.  Of significance is that there are many currents working against the long side right now, but only a few in support of moving higher.  Of the ones that are pointing us higher, the upcoming earnings season, as well as being down here in the oversold area for some time are both significant psychological triggers that could overcome the lower volume and bleak economic picture for growth.

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Elder

The Elder setup is still quite bearish:
  • the 13d Force Index is negative, precluding any intermediate-term long positions
  • the 13d EMA on price slope is negative
  • the 34d EMA on price slope is negative
  • the 13d MA is below the 34d MA
These four bullets cause me to hesitate in committing any substantial positions to the long side.  Here's what HGSI has to say about Elder, when applied to the entire GGT universe of stocks.




Of significance in the above Elder graph are the following:
  • Bull power is becoming less negative, which is bullish.  I want to see this move above 0 though
  • Bear power is becoming less negative, which is bullish.  It appears bigger than bull power, so we need to see bear power "get smaller", relative to bull power.  The bears are still in control.
  • Elder 13d Force Index is pink, indicating that it is negative.  This is bearish.
  • Both the 13d and 34d slopes are negative (the car is driving backwards), but they are just starting to point upward, becoming less negative (the car is driving backwards, but is slowing down).  This is the first sign of a possible bull leg (necessary, but not sufficient for you math types)
  • The 13d slope line is below the 34d slope line.  Until these cross, we are not in any form of a bull run.
  • Prices are trading BELOW the EMAs.  This is bearish.

Elder's methods are clearly telling us to wait for intermediate-term positions on the long side.

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There was no substantial change to the status of the pricing or LCR EMAs yesterday, save one:  the 8d slope of the GGT system has now started to point upwards (whippee!).  Again, a very weak indicator, especially when all the others are pointing down, so I intend to keep the majority of my powder dry for now.

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Trading plan for Thursday

I may add to my long ETF positions that are tied to the LCR Change Timer.  I need to see higher prices than yesterday on volume that is higher than the 10d MA of volume.  A good benchmark that I use for this is the following:

@ 10:00 need to see 12% of the 10d MA Volume
@ 10:30 need to see 25%
@ 11:15 need to see 33%
@ 12:15 need to see 50%
@ 1:15 need to see 60%
@ 2:15 need to see 70%
@ 3:15 need to see 90%

Admittedly, neither UWM nor QLD met this criteria yesterday -- but because of the signal change, I had to have something in play (I believe in my own timers).

Watch MVV, DDM, UYM, UGE, UCC, UYG, URE, USD, and UPW to see if they meet the criteria.

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

Regards,

pgd

Wednesday, July 7, 2010

Volume is below 10d on all 2x ETFs tied to indices. Picked up positions in UWM and QLD only.

LCR CHANGE TIMER signals "GET YOUR LONG LIST READY"

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First, the dashboard:



























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

Tuesday's action saw the GGT Price Index fall another -0.5%, ending the day at $22.25, a level it has not seen since February 12th, 2010.  Volume was -15% below the 50d MA at 2.3M shares, which is actually in the "bell curve" of being normal, so consider this a standard market day.

Of interest is that we squeeked out an almost insignificant gain in the Long-Cash Ratio (LCR), one that I attribute more to mathmatics than market behavior.  What is significant though is that this 2% increase from 0.142 to 0.145 on a day when the prices fell indicates that we are apparently holding our low-ground.  Is the bottom in?  Your crystal ball is as good as mine.  What I do see though is that across the entire database, the average price fell, but at the same time, we're seeing volume increase, resulting in an increase in the number of long-status stocks.  Indeed, Tuesday's action saw the largest number of "New Long" stocks since 6/25.

Also of note is that the database strength index increased from 0.208 to 0.231.  This is an oscillator that runs between 0 and 1 inclusive.  Values near 0 indicate weakness and oversold, and values near 1 indicate strength and overbought.  A movement UP in strength, but on falling prices, indicates that within the database numerous stocks are starting to appreciate in terms of rate-of-change (ROC), price, and volume, relative to where they have been in the recent past.  This is a big deal, and suggests again that we may be bottoming.

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LCR Change Timer Transition to CASH-LONG

Whether mathematical or not, the LCR moved up.  The increase was enough to trigger a transition change from cash to CASH-LONG, which means that IF TODAY IS UP, we will have a long signal with the close of Wednesday's action.  Here's how to deal with this:


























If today (Wednesday, 7/7/10) is up near the close of the markets (say after 3:30 p.m. EDT) as determined by the home page at FinViz (http://www.finviz.com/), specifically the ADV/DEC bar shown above (we want more ADV than DEC in the last few bars of the day), then we have fairly good assurance that the LCR will continue higher.  At this time I will move into my favorite long ETFs that I tie to this timer:  UWM, QLD, MVV, SSO, SAA, EFO, DDM, etc. if they are showing strength on higher volume.

[Caveat:  look at the FinViz image above:  note that there were 110 new highs and 262 new lows on Tuesday.  We could EASILY fail in any bounce here, as the currents are unquestionably against us on the long side.  Trade at your own risk.]

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Elder Intermediate Timer

Back to the GGT Status Figure. 

Elder's methods for the intermediate-term trend continue to look ugly. 
  • The 13d Force Index is negative, which is BEARISH and blocks us from holding any long positions for any extended length of time. 
  • IGNORE the fact that the 2d Force Index is negative -- it is negated by the 13d status. 
  • The 13d Price Index slope, as well as the 34d Price Index slope, are both heading downward, which is BEARISH. 
  • The 13d rice Index is below the 34d Price Index, which is BEARISH.
The status of these indicators tells me that it simply is not in my best interest to be long on an intermediate-term basis.

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Other EMAs

While I'll not dwell, ALL the pricing EMAs are inverted, e.g., 8d < 13d < 21d < 34d < 55d.  This is simply the wrong direction for a bull market, independent of the LCR Change Timer transitions (which is a very short-term timer!!!!).    I note too that the slopes of each of the pricing EMAs are trending NEGATIVE.

The LCR EMAs are the same as the pricing EMAs, so the DATABASE is heading more negative, relative to the respective EMA time frames, than not.  Same thing here:  the slopes of each of the LCR EMAs are trending negative.

Again, the macro currents are against long positions.

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Trading Plan for Wednesday

I intend to jump onto long ETFs as noted above IF the ADV/DEC bar at http://www.finviz.com/ indicates that we are up across the market, as measured at the end of the day.  I acknowledge that this is a risky set of trades, as the currents are decisively bearish, not bullish.  I also acknowledge that I am swimming up stream if I choose to go long right now.

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Remember, you are responsible for your own trading decisions, not me.  Please do your own homework and diligence, and always check my work.

Regards,

pgd

Friday, July 2, 2010

A New Divergence: Price & LCR Lower, Strength Higher

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Let's start with our summary dashboard:
























GGT Price fell to the lowest level since February 2010, and is now at $22.79.  It did it on surprisingly higher volume of 3.2M shares, where 2.8M is the 50d MA.  Lower prices on higher volume is another distribution day, and we've had two this week.  Certainly the bears are in control, and if you are buying long positions, you're swimming upstream.

The Long-Cash Ratio (LCR), which is exactly what the name says it is, continues to drop and is now at 0.177, indicating that 425 stocks in the database have some form of long status (New Long, Affirmed Long, or Long) and that 2404 stocks in the database have some form of cash status (New Cash, Affirmed Cash, or Cash).  A mere 15% of the stocks are long, which means that 85% of the stocks are below their optimized pricing and volume levels.  Buyer beware.

Of interest is that the database strength, which is a value between 0 and 1 and is one that indicates how "strong" a stock is relative to it's optimized past, is now moving UP, e.g., gaining strength.  The new value is 0.197, up from Wednesday's close of 0.113.  This is a divergence and indicates that we may be bouncing upward from here -- we'll see.  I want to see the LCR and price action of the database fall in line with this today to see some steam behind a relief rally.  Strength cannot continue to increase while the LCR and price action fall, either strength must drop as LCR and prices fall, or they all will rise together.  This is because they are inter-related in terms of volume and price action.

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LCR Change Timer

Our LCR Change Timer, which is a very short-term timer, continues to indicate that we should be in cash (if you are conservative) or in Contra ETFs (if you are more aggressive).  I, unfortunately, sold all my contras except TWM last Friday, so I've missed out on this big drop.  Nevertheless, my limited position in TWM is up 13.49%, which is wonderful.  The cash signal occurred with the close on 6/22; if you would have shorted a theoretical position in the VTI @ $55.87 (Vanguard Total Index, closely resembles the GGT price index), with the close yesterday of the VTI at $52.33, you would be up 6.3%.  If you think that this is unrealistic then you can use the following ETF chart as a guide for your favorite ETFs and invest on the Contra side to whatever your tolerance:



As with all my charts, right-click on the image to open in a new tab or window.  I suggest you print the figure and place it on the wall close to your PC.

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Elder Timer

Elder continues to look ugly.  As a whole, the 13d Force Index is below 0, indicating we should not be considering long positions.  This is the prudent approach and unless your time frame is very short, I would stay away from intermediate-to-long-term buys on long positions UNLESS your trading plan averages downward in positions (see my TSP trading blog) as the markets fall.

For the record, here is what HSGI has to say about the database, from the perspective of my Elder screen:
































As I said, ugliness.

  • Bull Power is negative and Bear Power is growing more negative, so there should be no question as to your alignment.  
  • The 13d Force Index is pink, indicating that it is below 0.  This negates the 2d FI indicator, which is showing green (I reverse the 2d from what you default in HGSI because you want to consider entering on strength off of PULLBACKS, not when the 2d FI is making new positive highs)
  • Most telling is that the slope of the 13d and 34d EMAs are

    1) below 0 -- prices are falling
    2) are pointing downward -- prices are falling faster

    Until I see some bottoming in these slope values and they start pointing upward long positions are at risk, if they are correlated with the broad markets.


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Back to the GGT status graphic:  Pricing and LCR EMAs are all looking bearish.  Again, avoid long positions unless they are counter-trending by nature (e.g., gold, long bond, etc.)

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Trading Plan for Friday

Simple:  I'm expecting poor volume, so I'm content to sit on the sidelines.  The GGT LCR Change Timer will NOT give a confirmed long call today, so no action is required at 3:30 - 4:00 pm.  Conversely, there is nothing telling me to close my TWM positions, so I'll let it ride across the 3-day holiday.

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

Make it a great holiday weekend!

Regards,

pgd