Tuesday, August 31, 2010

Short Term Timer Could Flip, but ...

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Well, that was a rather pittiful day.

As you may have surmised from yesterday's action, the short-term LCR Change Timer did NOT move long.  The alternating up and down days of the LCR (Long Cash Ratio) has kept the timer sitting at netural, and with a time constant of just shy of 1 day in length (it's adaptive), the timer goes as the market does, well, almost.

Here's the dashboard:



The GGT price index failed to follow through on Monday, which I take as a bearish indicator.  While it jumped over +5% on Friday, it gave up -1.7% on Monday.  Volume, which has been in the toilet, continues to remain there, with volume -34% below the 50d MA level.

[As an aside, we were down -32% on 8/32, -30% on 8/16, etc.  You can scan column 3 above and see for yourself that it's not been a good volume period.]

Poor volume simply means that we, the retail investors, are more exposed to large orders from the big boys and girls, simply because their volume will move the price when (and if) they play in your particular stock.  I consider this specific period of lack of volume as "swimming with the sharks".

The LCR, which is a ratio that puts the number of long-rated (New Long, Affirmed Long, and Long) stocks against the number of cash-rated (New Cash, Affirmed Cash, and Cash) stocks, fell -11% to end at 0.383.  The LCR is waffling, and when it waffles, it's hard to make money.  Also note that the LCR is significantly below 1.0, indicating far more stocks have a cash rating (2075) than have a long rating (795).  Yes, there are some great bargains out there, but also note, there is nothing indicating that the floor is in on those bargains. 

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Short-Term LCR Change Timer

This timer has now indicated it's 4th day of back-and-forth action, and is biased to the cash side simply because that is where it started back on 8/24.  A down day in the markets today (Tuesday) will cause this timer to revert back to the Cash (-1) side; an up day will cause it to flip to a Long (+1) status.  As you know, the financial web site www. finviz.com has everything you need to determine what this timer has done -- simply review the ADV/DEC box in the upper left of the site around 3:30 to 3:45 pm EDT to get a feel for the overall market.  Here's yesterday's view of the ADV/DEC picture:



Note a couple of pieces of useful information:
  1. The ADV/DEC was decisively bearish by the end of the day, with only 1245 advancing and 4954 declining.  From this alone you knew with a high degree of confidence that the LCR Change Timer did not flip to long (see yesterday's blog).
  2. Volume was poor for the DOW stocks, with it sitting nearly at 75% of the normal volume.  The NASDAQ and S&P500 are also indicated on the same page, so you can see if there is a bias or not (did Technology get hammered more than the S&P500?)
  3. The New High/New Low indicator is relatively balanced.  In a bear market we typically see this behavior all the way to favoring a strong bias to New Lows.  In a bull market we see a large number of New Highs and a dry-up of New Lows, starting from this point.  Entering the market now is risky, simply because you are swimming up stream.
I believe it is doubtful that we will see a new bull emerge within the next 4 trading days, and correspondingly, because I will be out of all electronic coverage until the weekend, I do think I will move to the sidelines and sit pat.

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Intermediate-Term Elder Timer

I received a question yesterday about "what is meant by Elder?".  Elder refers to Dr. Alexander Elder, and you should become familiar with his literature, as it will help to make you money.  If nothing else, it will help to keep you on the right side of the market almost all of the time.  Google his name on Amazon and pick up his books -- you will not be disappointed.

I recieved another question about "what filter is used to develop the watch list?".   What I presented yesterday is not a filtered watch list, it was the entire GGT universe.  You can download the universe in the files section at Yahoo! by subscribing to GreekGodTrading-subscribe@yahoogroups.com and going into the files section.

Yesterday's presentment of the GGT universe, but through the HGSI Elder lens, is my own view of a default screen within HGSI.  Here's today's view:



Nothing has changed much from yesterday, although we do see that the slope lines of the 13d Force Index are moving upward.  We need this to cross the 34d from below AND, to be absolutely confident that we're bouncing upward, we need both of these slope values to go above 0 (they are presently below -- make sure you understand what you're seeing above).

As you see above, the 13d Force Index is PINK, which tells you that it is below 0.  Nothing else matters -- if the 13d FI is below 0, do not invest in intermediate-term holdings.  Period.

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Trading Plan for Tuesday

I'm leaving on a mountain-climbing trip with my son in the weee-hours of the morning tomorrow, and will be out of radio contact (literally) for the next few days.  No cell phone, no internet, just the stars, planets, and moon above me and the wind whipping through the rocks.   Oh yes, and my 11-year old who already can't sleep because of anticipation.  Correspondingly, I'm sitting pat for today.

For those of you who are not going with me (all of you), I would watch the ADV/DEC line at http://www.finviz.com/ to get a jump on any bounce.  Note though that we're still bearish, September is a historically bad month, and as of yesterday's data, nothing looks attractive on the long-term.  You'll have to be surgical in order to make money right now, and I don't have time nor the inclination for such a headache.

Note that as the last day of the month I am moving all of my wife's TSP funds to CASH (G-Fund).  I'll revisit reallocating upon my return.

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Please remember that you are responsible for your own trading decisions, not me.  Please do your own work and take ownership for your wins and losses.

Regards,

pgd

Monday, August 30, 2010

Short Term Timer May Move Long, Elder clearly Bearish

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I'm still in vacation mode through Labor Day.  I'll be traveling again Wed-Fri of this week, this time with my 11-year-old son Greg, as we embark on a western adventure in the Sierras.  Tomorrow (Tuesday) will be my last commentary of this week.

Let's review the GGT Dashboard:


























The week was relatively ugly through Thursday's action, but Friday reversed the sideways market.  We started Monday at $22.75 and ended Friday at $23.62, so clearly a nice jump (Thursday's price was $22.47 so this was a major jump on Friday).  Volume continues to be anemic, with 11 consecutive trading days trading below the 50d MA, which is presently 2.3M shares.  Friday's action was 10% below this at 2.1M shares.  The big boys simply are not playing in this market.

The GGT Long-Cash Ratio (LCR), which is a measure of the number of stocks in the database with some form of long status compared to those with some form of cash status, bottomed on Thursday at 0.3 and moved upward with a 43% upside change on Friday, ending the week at 0.429.  We started the week at 0.548 so I wouldn't say that this is the reversal.  Nevertheless, Friday's action was strong as far as the entire database is concerned, so it does bear watching.

Short Term LCR Change Timer

The short-term timer is waffling back and forth, and is presently giving us a cautionary sign.  It is shown in yellow in the above figure, and you see that it has three consecutive days of 0's.  This means that we are more-or-less alternating up and down days, which is the sign of a choppy market.  I AM PRESENTLY IN CASH on a short-term basis because of this timer, BUT, if MONDAY, August 30th (today) is up, it is very possible that this timer could move to the long side.

How to anticipate a move long?  Watch the main page at www.finviz.com, specifically the ADV/DEC bar in the upper left corner, and if this is clearly favoring the ADV side of the equation by 3:30 pm you have a fairly good confidence that this timer will move long.

Note that if you move long right now you are swimming up stream:

  1. The raw LCR value is below 1.0.  This means that there are far more stocks that are bearish than bullish.
  2. Volume sucks.  There are no major players driving up prices, so the market is languishing.  This means that you are at the mercy of surgical strikes by the big boys, as well as the folly of the retail market.  Don't bet the farm.
IF the market is up near the end of the day I MAY (my option) choose to move long.  If you had a gun to my head right now I'd say I'm content to sit on the side line, especially since I will be out of town starting Wednesday.  We'll see.  Today will have to be a powerful follow-through day for me to put much cash out there.

The Intermediate-Term Elder Timer

Elder continues to indicate a 13d Force Index below 0, which is my main gate for investing long on the intermediate-or-long term time frame.  While you can't see it in the graphic above, it is negative only by a slight margin. It bottomed hard Tu-Wed-Thurs of last week, and has now started to move up rather significantly.  I like the Force Index because it includes both price and volume, so we apparently have both for those stocks that are moving upward.

EVEN IF MONDAY DUPLICATES FRIDAY in strength, it is very doubtful that we will see the 13d FI move positive.  No need to get your shopping lists ready just yet.

I intend to sit pat on intermediate-term holdings, at least today.

For those of you who are curious, here is my view of Elder through the HGSI lens:






























In the graphic above, note:
  • Bull Power is terrible and flat near 0.  We want this strongly trending upward and positive.
  • Bear Power is non-zero.  We want this much smaller than Bull Power (in magnitude, and it's much larger right now)
  • The Elder 13d FI on the entire GGT database is PINK, which I have colored and changed from the default.  When pink, Elder 13d FI < 0, and this tells me to avoid intermediate-term holdings.
  • The 13d/34d EMA slope window shows that while both are trending upward:
    a) they are both below a value of 0, meaning that the 13d and 34d slopes are NEGATIVE (losing money on these time frames)
    b) the 13d slope is LESS THAN the 34d slope, which means that the 34d slope is stronger than the 13d.  This is inverse of what we need for a bull
  • Database volume is anemic, as I said above.  Remember, GGT stocks are filtered for those that have:
    a) price above $1
    b) 50d MA above 100K shares (does not include ETFs, but they are not in the graphic above)
    c) trade on the primary exchanges
Again, I intend to stay away from Elder until the 13d FI moves positive.

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Trading Plan for Monday

Easy.  Live your life, and if you can around 3:30, check www.finviz.com.  If the markets are solidly positive at  this time, as determined by the ADV/DEC bar, then I'll look carefully at QLD, DDM, UWM, MVV, etc.  These will ALL need to be up a good amount (broad participation).  If this fails then I'm sitting on the sidelines.

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Make it a great week.  I may post tomorrow, but again, do not expect a post after Tuesday until the end of Labor Day weekend.

Local Tri-State Investor's meeting on September 11th, to include HGSI.  Details have been sent by Ray; let me know if you're interested in attending by leaving a comment below.

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

Regards,

pgd


Monday, August 23, 2010

LCR Change Timer Moves to CASH

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Let's start with our dashboard:


































A sea of red ...

The GGT price index continues to fall, ending the week at $22.92, it's lowest level since July 7th.  We started at $23.83, and hit a high of $24.27 on Wednesday, but the breakout was not sustainable.    Volume has been weak and decreasing all week, with the 50d MA volume now at 2.4M shares.  Falling prices on weak volume  is not a recipe for making money in the long haul, so caution is advised.

The GGT Long-Cash Ratio (LCR) continues to drop, and it ended the week at 0.456, indicating that 908 stocks have some form of a long status and 1992 stocks have some form of cash status.  This is nearly the same level that we started last week, so we seem to be hitting some form of a bottom here.  We'll see if it holds.  Nevertheless, this is a low value, and on weaker volume it will be harder for stocks to move upward.  CASH recommendations only require an erosion in price, while LONG recommendations require price and volume.

Database strength continues to hover in the 0.3 range, on a scale of 0-1.  This isn't overly bullish (oversold), nor is it bearish (overbought).  This is an area of limbo-land that is hard to glean a trend, and with poor volume, I'm not overly optimistic for a solid bull rise.

Short-Term LCR Change Timer

I missed this because of my work obligations/travel on Thursday/Friday, so I hope you were watching www.finviz.com and making your own choices.  Of significance is that I'm still holding long ETFs, and will place a 1% TSL on each position today.  From an equity point of view this hasn't been a good series of trades, as I'm underwater in each position (QLD, UWM, and DDM).  If today is strong I will poke my head above water and will take my pennies off the table.

Intermediate-Term Elder Timer

The Elder 13d Force Index is solidly negative, blocking any movement into intermediate-term long positions.  The 13d and 34d pricing slopes are NEGATIVE, which is the wrong direction for these to be pointing.  The 13d slope line is below the 34d slope line, and as the faster of the two, shows that we are going down in an intermediate-term, not up.  Bearish-bearish-bearish.  If you are holding anything on the intermediate-term you are certainly playing with fire.

Here is what HGSI has to say about the GGT Universe from Elder's perspective:





























In case there was any doubt about Elder, observe the following:

  • Bull power is presently negative.
  • The 13d Force Index is PINK (my version), indicating that it is presently less than 0.  This effectively stops any intermediate-term holdings
  • Both the 13d and the 34d MA slope lines are negative (the car is moving in reverse), and they are both pointing downward (we are accelerating in reverse).  This is completely the wrong direction for long positions.
  • Price is trading below the 13d and 34d EMAs.  This is bad.
  • Note too that volume as been vaporizing.  This indicates a lack of the big boys being present in the market.
I presently hold no intermediate-term stock holdings, and I suggest you consider this too.

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Back to the GGT dashboard....

Of the major pricing EMAs that I follow (8, 13, 21, 34, 55), only the 34d is above the 55d.  All the others are inverted (8 < 13, 13 < 21, 21 < 34), indicating that we are moving the wrong direction on those time scales.  Note that the slopes of the pricing EMAs are all pointing downward, which is bearish.

With Friday's close, the LCR EMAs ALL INVERTED, meaning that we have a wonderful setup for a bear run, as from a database point of view, every intermediate-term metric within the LCR world is pointing downward.  Note that the slopes of the LCR EMAs are all pointing downward, which is bearish.

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Trading Plan for Monday, August 23rd, 2010.

This market is relatively easy:  sit in cash.  On a short-term basis I will try to poke my head above water on my 2x long ETFs, and on a long-term basis I will sit happily in cash.

IF TODAY AND TOMORROW ARE UP STRONGLY, it is possible that we could whipsaw back to the long side with the close of the markets TUESDAY.  Watch www.finviz.com ADV/DEC lines to get a view of this.  If the ratios are close near the close on TUESDAY, then I would sit pat, as the longer-term trend is clearly downward.

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Travel Notice

I am traveling again all week, finding myself in Philly tonight (Monday) and then back to Ft. Worth Tuesday-Friday.  THERE WILL BE NO GGT UPDATE THE MORNING OF TUESDAY, AUGUST 24th, as I have a late night tonight and a very early start to my Philly meetings.  Sorry, but it's obvious that no major decisions on your portfolio have to be made today or tomorrow.

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Remember, you are responsible for your own trading decisions.  Please do your own diligence and please own your decisions to trade/invest.

Regards,

pgd


Wednesday, August 18, 2010

Short Term Timer = LONG, Intermediate Timer = CASH

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For the more aggressive of you out there, the short-term LCR Change timer moved to LONG yesterday.  This indicates that we should purchase stocks and ETFs which are moving upward, and yesterday I provided a scan that fits nicely into HGSI to allow you to do just that.  The signal came with the close of the markets, and we had a "heads up" of sorts -- http://www.finviz.com/ ADV/DEC was clearly on the side of the ADV stocks, indicating with high correlation that the LCR Change timer would move long.  We'll see if this bounce works.

The Intermediate-Timer is still in cash, and no amount of market movement today will move it long.  Although the 2d Force Index trend indicates that we are moving upward, the 13d FI is clearly negative, and by a large amount, so longer-term holdings should be considered off limits.

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Trading Plan for Wednesday

Short-term:  continue to purchase stocks and ETFs that are above their 200d and those that have a 13d and 50d EMA of the price slope that is  upward-pointing.  You must be nimble, and protect profits daily.

Intermediate-term:  sitting in cash.

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Please take ownership for your own trades.

Regards,

pgd

Tuesday, August 17, 2010

A Pending Bounce? Perhaps, but Price and LCR Diverge

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I can't do graphics today (iPad) so you will simply have to be content with reading ...

GGT price moved UP +0.38% to end the day at $23.83.  Volume was anemic -- on Friday it was down -26% from the normal 50d MA, and again on Monday it was down -30%.  These are well outside the standard deviation (22%) and suggest great uncertainty in the market in terms of both the retail players as well as the institutionals. 

Elder's 13d Force Index is NEGATIVE, which is precluding any intermediate-term investments.  After bottoming on Friday it did turn upward on Monday (less negative but still is below 0), so while the more aggressive of you may think that this is a great buying opportunity, it is dangerous to your financial health to purchase stocks for the intermediate-term at the present time.  I'm not even scanning for intermediate-term holdings using HGSI because this indicator is blocking me.  I've shown in the past that failure to acknowledge this simple gate will erode your gains, so I simply do not make intermediate-term purchases when this value is negative.

The Long-Cash Ratio FELL slightly on Monday, in contrast to the price moving upward.  This is because the  LCR requires price AND volume to get a New Long call, and it simply wasn't happening on Monday.  So while prices moved up, the LCR continued to fall, and this divergence is a flag on the pole for us.  Either:  1) prices will reverse and will fall with the LCR, or 2) the LCR will reverse and lock-step with prices.  Given the "oversold" nature of the database right now (GGT strength = 0.36 on a 0-1 scale), I would say there is greater likelihood of a short-term bounce upward than a continued knife-edge drop to the down side.  Remember though -- your crystal ball is as good as mine.

It is a rare occurance when the LCR falls but the GGT Short-Term LCR Change Timer moves upward.  It did so on Monday, simply because we've been floating around the LCR level of 0.449 for the last few days (Wed = 0.66, Thurs = 0.53, Fri = 0.45, Mon = 0.45).  This timer says to "get your short-term long ETF list ready" if the day is up.  I measure the "day is up" by looking at http://www.finviz.com/.  In the upper left corner you will see an ADV/DEC line -- if this is decisively on the ADV side by 3:30 EDT then we can assume that the ST LCR Change Timer will transition to +1 (LONG) and that we should move into long ETFs.  If you decide to do this, I strongly suggest you pick ETFs that are
  1. greater than $1 in price (most are)
  2. greater than 100K 50d MA volume
  3. are above their 50d MA in price
This is an easy filter for HGSI and you should have built it by now.  If you haven't, do so or ask questions on how to do so.   I even go a step further and require that the 13d Force Index on the ETFs be positive and/or that the 13d and 50d slope lines are postive, but many of you may find that too restrictive.

With Monday's action, the intermediate-term does not look promising.  The 13d price EMA has dropped now below the 21d price EMA, and this is the wrong direction.  The 8d LCR EMA is below the 13d LCR EMA, and this too is problematic. ALL of the major slopes of the pricing EMAs are downward (8/13/21/34/55), and this is simply bad for a bull.    ALL of the major slopes of the LCR EMAs are also pointing downward, and again, this is very bad for the intermediate term.

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Trading Plan for Tuesday

Short-term:  I intend to watch http://www.finviz.com/ at the end of the trading day and if this is moving decisively in the ADV favor, I will purchase strong ETFs that meet the 1-2-3 criteria above.  I prefer leveraged ETFs.

Intermediate-term:  I intend to sit pat.  The Elder 13d Force index is negative.

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Please, do your own diligence and take ownership of your decisions.  I cannot be held responsible for what YOU decide to do.

Regards,

pgd

Monday, August 16, 2010

Intermediate-Term = Cash, Short-Term Oversold?

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I think that the following graphic let's you know how I feel about the market overall:


A number of indicators in the graphic above, which is the summary of the 2700+ stocks of the GGT universe, should be giving you a pause at the present time:
  • GGT bull power is below 0
  • GGT bear power is moving more positive
  • Elder's 13d Force Index is PINK, which means that it is below 0.  This is our primary gate for staying away from stocks at the present moment.
  • The slopes of both the 13d EMA and 34d EMA are negative (in dollars per day, they are losing money on this time frame)
  • The 13d EMA slope is below the 34d EMA, which means we haven't yet turned up.  This means that it could get uglier.
**** Tipping your toes into the market at this time may work for a short period, but on the 13/34 intermediate time frames that Elder plays, the market is quite dangerous.

As many of you know, I liquidated my intermediate-term portfolio this past week, and I'm happy to have missed the collapse of the markets on Wed/Thurs/Fri.

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Short Term LCR Change Timer

The short-term LCR change timer is clearly in cash, and there is nothing on Monday's docket that will change that.  The Long-Cash-Ratio, which is a measure of how many stocks in the GGT database have a LONG recommendation to those with some form of CASH recommendation, fell sharply on Wed/Thurs/Fri, having ended the week at 0.456.  This means that we've dropped from over 1678 stocks long on 8/4 to 851 on 8/13, almost a complete inversion of cash/long recommendations. 

By itsself, the LCR Change Timer is saying avoid stocks on a short-term basis.  There is somthing thought that is possibly challenging that:

An internal measure of strength within the database is possible using the GGT strength indicator.  This indicator is an oscillator, moving from 0 (completely oversold) to 1 (completely overbought).  Right now we have had three consecutive days of strengths hanging tightly in the 0.27-0.34 range, which gives me reason to believe that for the more aggressive of you, you may want to consider looking at some opportunities on the long side.

This timer is normally traded with long ETFs, and there are a long list of 2x ETFs that look relatively good.  I'll leave it to you and HGSI to work on the filter details and identify the candidates.  As a hint, keep an eye on leveraged ETFs that
  • are above 200d MA
  • have short-term slopes in an up-trend
  • have long-term slopes (65d) in an up trend
  • have been oversold hard the last few days (significantly below their 7d but above the 17 or 21d)
====================

I will be traveling for the next three weeks but will do everything I can to have timely posts in the morning.  Note that starting September 1st, through the end of labor-day weekend, I will not be posting, as I will be climbing Mt. Whitney (look it up) with my 11-year-old son.  I doubt seriously if they have internet coverage there ...

There will be a combined GGT / HGSI meeting on September 11th.  Details pending, so check back.

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

Regards,

pgd

Thursday, August 12, 2010

Elder Intermediate-Term Timer --> Cash????

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As predicted yesterday, the Elder intermediate timer, when using an exponential moving average on the 13d Force Index, has signaled a move to cash.  It was expected, as all we needed was average volume and a 1% decline in the GGT price to take the timer into cash.  The impact on the intermeidate portfolio was significant and deep, with the intermediate-term portfolio now down -2.3%, or a loss of -4% in a day.  In accordance with my standard liquidation rules I have placed a 1% TSL on the stocks before the open and will let the winds take them where they go.

Before any of you get critical on the Elder timer, I remind you of the following periods where it signaled long and the GGT index prices:
  • 7/14/10 to 8/11/10:  $24.94-$24.82, loss of $0.12
  • 6/24/10 to 6/29/10:  $23.85-$23.10, loss of $0.75
  • 6/11/10 to 6/22/10:  $24.35-$24.30, loss of $0.05
  • 2/16/10 to 4/28/10:  $22.83-$26.30, gain of $3.47
  • 1/25/10 to 1/29/10:  $21.94-$21.53, loss of $0.41
  • 11/13/09 to 1/22/10:  $19.16-$21.74, gain of $2.58
  • 10/13/09 to 10/26/09: $19.36-$18.97, loss of $0.39
  • ...
You get the idea.  I have data back to 9/11/08.

Point here is that we have to play to win, and over the longer term, this timer does keep us on the right side of the market when the stars are aligned.  I'm not taking a -2.3% loss in this portfolio as any indication of a problem, nor should you.

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HGSI Elder view of the GGT Universe



The graphic above shows my Elder view of the GGT database.  The Elder signal has moved to cash, as evidenced by the "pink" area in the ribbon bar (Elder 13d Force Index < 0).  This signal whipsaws, but overall, it is a great indicator to see if we should be long or short. 

Money management 101 -- live to fight another day.

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Trading Plan for Thursday

With the Short-Term Timer in Cash, I'm happy that I pulled up a chair on Friday and was able to watch the carnage from the sidelines.  I will continue in cash.

With the Intermediate-Term Elder Timer signalling a move to the sidelines, I have placed a 1% TSL on my positions and will let fate take them where they go.

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Remember, you are responsible for your own trading decisions, not me.  Please take ownership of your decisions.

Regards,

pgd

Wednesday, August 11, 2010

GGT Contra ETFs Signal Long, ST Timer in CASH, Elder Intermediate (barely) Long

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I tend to dislike openings such as the one we are about to experience.  Futures are sharply negative, yet all of my intermediate-term indicators are still long.  What to do, what to do...?

In preparing for triathlon, there is a saying:  "train like you race, race like you train".  The correlary is simple with applicability to trading -- stay the course if you believe in your indicators.  I've backtested this Elder system every-which-way that I can and I need to believe the indicators.  A one-day-pending-drop does not a market make, so time to test my beliefs .... and test the efficacy of backtesting.

Onward to the dashboard:



Our stock index fell -1.16% on Tuesday, ending the day at $25.66.  This is the lowest day that we've seen since the end of July and obviously shows that volatility is entering back into the market.

Volume was "normal", if there is such a thing in the summer months, with the number of shares traded only -3% down from the 50 MA value of 2.47M shares.  Volume increasing on down days but light on up days is not necessarily a good indicator of a robust bull leg, to say the least. 

The Long-Cash Ratio fell again, landing at 1.36.  It now indicates that 1481 stocks have some form of long status and 1089 stocks have some form of cash status.  Of greater importance is that this indicator has dropped from 1.879 on 8/4 to this value last night, a change in over -27%.  Put another way, over 1/4 of the database has gone from LONG to CASH in just 5 trading days.  THIS is a clear warning shot.

Database strength fell again, ending right in the middle of our 0 to 1 range at 0.529.  I'm looking for a reset value below 0.2 to signal a new leg upward -- we're a bit away from that today.

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Short-Term LCR Change Timer

Our Short-Term LCR Change Timer signaled a move at the end of Friday to cash; Monday was an up day and one of you out there (you know who you are) questioned the efficacy of this timer, as it has been moving out of sync with the market.  Well, yes, (pause) and no (another pause). 

For you scientifically-minded folks, the LCR change timer has a dynamic time constant applied to the LCR value.  Right now, because the markets have been so choppy and trendless, the time constant has dropped from a normal value of just over 4 days to less than 1 day.  Yes, it needs time to catch up.  No, it doesn't stay out of sync for long.  I suppose the skeptics who want 100% accuracy in a trading signal will use days like Monday to point to the signal not being 100% spot-on, and they are correct.  No timer is 100% accurate -- but we must live to fight another day.  I remind you that in general, this one timer has turned a 1x, non-leveraged index using just the long side of the trades into a 30% internal rate of return since 9/11/08, or put another way, $1 on 9/11/08 is now worth $1.634.  You can trade the Vanguard ETF VTI (Total Index) on the signal and probably to pretty well.

I note with interest that NON of my contra ETFs are trading above their 200d MA, so while today looks like a train wreck about to happen, today is not the day to enter the contra ETF market.

I'm content to sit in cash on the short-term portfolio and watch the train wreck.  Pull up a chair.

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Intermediate-Term Elder Timer

Elder doesn't forecast, he looks backward at price and volume action.  The primary indicator, the 13d Force Index, is still positive.  The slope of the 13d MA in price is still positive.  The slope of the 34d MA in price is still positive.  The 13d MA price is above the 34d MA in price.  THESE ARE ALL INTERMEDIATE-TERM indicators, not short term, and they say "stay the course".

What YOU can't see but I can is that we are just above the zero-line in this 13d FI value.  I put a 1% decline in GGT price in the equation FOR TOMORROW, along with normal volume (2.5M shares), and IF THIS HAPPENS TODAY, Elder's timer will move below 0 with the close of the markets tonight, indicating that we should close our intermediate-term portfolio TOMORROW.  Should we anticipate and do it today?  Therein lies the 2.3% question, because that is how much this portfolio is up (and note that it is down -1% from yesterday's value of 3.3%).

To be mechanical, the answer of course is "no".  Do not sell anything.  This will be a one-day bounce south, the buyers will swoop in, and prices will lift tomorrow.  To be prudent, the answer is "yes", trim the weakest.

Ford (F), is having a hard time in my portfolio.  My position is presently down -2.18%, and the pre-market trading is another nearly -1% below yesterday's close.  Here's what HGSI has to say about Ford:




Here's what I don't like above Ford:
  • The slope of the 13d EMA in price (red) is positive (the car is driving forward) but the direction of the line is down (the car is moving forward but slowing).
  • The slope of the 34d EMA in price (yellow) is positive but is pointing down.
  • The 13d slope line has crossed the 34d slope line from above, this is bearish.
  • Both slope line values are barely positive (13d = $0.044 / day, 34d = $0.0512 / day).
  • Ford price is under the dotted industry group price in the price window -- it is performing worse than it's group at the present moment
Given that I'm losing money in this position, and given that the stock is losing steam and not moving upward, I am going to sell it for a loss.

NLC falls in exactly the same boat as Ford.  My position is down -3.04%.  There is no pre-market trading on this one so I'm stuck with holding until the market opens.  Shoot.



This is almost the same picture as Ford.  I'm unloading this at the open.

As amazing as this sounds, I'm looking to pick up strength today on the intermediate term ("Buy when others are fearful" -- Warren Buffett).  Here are stocks that fit my screen:



These are all relatively mature stocks in that their Elder 13d Force Index has been long for some time.  If we change the filter to only return those Elder stocks that have transitioned in the last 5 trading days, we have:



While these three are a very small subset of the Elder picture, it does show that there are new candidate worthy of consideration.  Use your own discretion.

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

GGT ETFs

I normally do not comment on GGT ETFs, but what I'm seeing today is remarkable.  Take a look at the following image:



Specifically, these are CONTRA ETFs.  Ignore the Rydex contras, as they are not being traded.  What this shows is that we have had a significant number of contra ETFs that are appreciating in price, volume, and rate of change, enough so that we have the first new wave of CONTRA ETF positions.  I especially like the high-volume, lower-price contra ETFs, so IF YOU ARE AGGRESSIVE, you may want to look at these a bit closer. 

DISCLAMER:  My testing has shown that purchasing contra ETFs in a long/intermediate-term bull market is hazardous to your financial health.  These are NOT candidates for my short-term timer, and every one of these contra ETFs fails the Elder screen.  I provide the list here because as a whole, these are early break outs to the down side.  Tread carefully.

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

Trading Plan for Wednesday

With respect to my short-term timer, I plan to continue to sit in cash.

With respect to my intermediate term Elder timer, I'm unloading Ford & Nalco.  I intend to watch for Elder candidate strength and will purchase accordingly.

I'm watching the GGT contra ETFs, but I will not open positions today.

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

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

Regards,

pgd

Tuesday, August 10, 2010

ST Timer = CASH, Elder Timer = LONG, Buying Opportunity?

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GGT Price increased +0.78% to $25.96; we've not been above $26 since 7/26.  Volume is vaporizing into nothingness -- we were down -22% compared to the average of 2.4M shares, this is OUTSIDE a standard deviation and indicates people are keeping their powder dry.  Rising prices on abnormally low volume is not a buying opportunity, so my cautiousness is peaked.

The GGT long-cash ratio moved upward +2% and ended the day at 1.614.  For such a strong move in price, we're not seeing the corresponding moves across the database, so again, my cautiousness is peaked.  Remember, volume is not required to move the LCR downward -- only a drop in price -- so if we start to see an avalance of CASH recommendations the foundation may be in jeopardy.

GGT strength moved upward on Monday, ending the day at 0.65 on a 1.0 scale.  This indicator is drifting between 0.59 and 0.78, indicating neither a strong market nor a faltering one.  I want to see either a major move upward (the bull has legs) or a drop south (the bears have awaken).  Until this occurs, I'm anticipating more of the same market.

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

Short Term LCR Change Timer

This timer moved to CASH with the close on Friday so we missed yesterday's gains.  Futures are very weak this morning as I bang this out, so we appear to be on the correct side of the market.  I will remain in cash for now since none of my contra ETFs with volume are above their 200d MA.

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

Intermediate Term Elder Timer

This timer is indicating LONG, primarily due to the 13d Force Index being positive.  See yesterday's post for a more detailed rationale. 

I purchased BTN (up +3.83%) and EZCH (down -0.45%) yesterday due to these two hitting price and volume targets intraday.  The Intermediate-Term Elder Portfolio is up +3.5% on this leg.  

The boat anchor in this portfolio is LSCC, who lost their CEO yesterday to KLIC.  My position is down -8.3%, and although Elder is still long on the 13d FI for this one, the EMA slopes are going negative and this spells doom in the short-term.

A number of stocks have recently seen their 13d slope drop below the 34d slope:
  • KWR, presently up +11.41%
  • NLC, presently down -1.52%
  • LSCC, presently down -8.3%
  • IDT, presently up +10.31%
  • F, presently down -1.20%
  • CCE, presently up +1.14%
  • ARUN, presently up +5.48%
All are still positive in absolute slope values, but are not moving upward (prices are not accelerating to the upside). 

Based on the above, I will prune LSCC today, placing a 1% TSL on the position.  I will continue to hold the others, but NLC and F are the next candidates if they continue lower. 

I'm not able to clip images but there are Elder candidates for consideration, both on the ETF as well as stock front.  Identification of these is left to you.  Look for:
  • price above 200d MA
  • price above $1
  • 50d MA volume > 100K shares
  • Elder 13d Force Index > 0
  • Elder 2d Force Index < 0
  • 13d price slope > 0
  • 50d price slope > 0
You want price action to be higher than yesterday's high to ensure you're clearing resistance.  Ensure that there is volume present (see earlier posts for prorated volume levels as a function of time of day).

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

Trading Plan for Tuesday

Short-Term LCR Change Timer:  sitting pat in cash.

Intermediate-Term Elder Timer:  Selling LSCC with a 1% TSL; sitting pat on other positions, will pick up Elder candidates if they show strength in price and volume.

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

Please, take ownership for your own investment decisions.  I am not responsible for your actions.

Regards,

pgd

Monday, August 9, 2010

The end of the trend? ST Timer --> Cash, ST LCR slopes move negative

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Despite futures being up as I bang this out, Friday's action started to nail the LONG coffin shut on a number of fronts.  First, the LCR dropped -10% to 1.589, causing the ST LCR Change Timer to officially move to cash and signalling that we should close our ST long ETFs, and next, the 5d and 8d slopes of the LCR just started to move downward, something that they have not done since 7/21.  Finally, GGT price fell again to end the week at $25.76, and it is below its two-week-ago price. 

This will either be a great buying opportunity OR we are setting up to fall across the board.  Your crystal ball is as good as mine.

Here's the dashboard:



GGT Price fell Friday by -0.39%, ending the day at $25.76.  We started the week at $25.92 and were largely rangebound.  We may continue this -- it's hard to tell.  Volume continues to be light and fall, with volume down -11% from the 50d MA level of 2.5M shares.  We now have had 6 consecutive days of dropping volume, so the big boys are not playing (much) as we we would like to see.

FinViz (http://www.finviz.com/) helped us to make a decision on Friday:



it accurately showed that the LCR would fall (2586 ADV, 3553 DEC), which helped make some decisions right up to the last few minutes of the trading day.  While the strength in the down (and across the board) after 2:30 was impressive, and although we hit 257 new highs and only saw 88 new lows (e.g., the market is still biased upward), we're in the range-bound zone and there isn't a tremendous amount of money to be made until the trend resumes.

I hope that you all are watching FinViz.  It's a great site.

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

Short Term LCR Change Timer

Based on the drop in LCR from Friday's action, we have a decisive indicator to move to cash for now.  If you placed a 1% trailing stop loss you are still holding DDM, QLD, and UWM, and I would unload those today on Monday.  I said this past week ago Monday that the week was going to be tough and yes, it was -- we are rangebound.  My QLD position exited up only 0.28%, my DDM position was down -0.35%, and my UWM position dropped the most at -3.4%.  Total loss was only -0.7% because these were not equal-weighted, but still, a loss is a loss.  Frustrating.

Our ST equity curve has dropped to $1.634, losing -0.8% off Tuesday's high.  This is normalized for 9/11/08 = $1, so the IRR using this timer is just under 30%/ year.

From my perspective, since none of the contra ETFs are above their 200d MA, this portfolio will sit in cash until it reverses back to long.

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

Intermediate-Term Elder Timer

Elder continues to indicate that on an intermediate-term scale, we can be long in equities.  There is a crack in the ice though, as we're seeing more and more consecutive days with the slope of the Elder 13d Force Index heading downward than we are upward.  Unless the up moves are dramatic, we cannot sustain this long call, as we will keep eroding the positive 13d FI value.  Once it crosses 0 and goes negative we will have our sell signal.

Until that time, we have a buying opportunity because the 2d FI has moved negative.  This indicates we should purchase stocks which are exhibiting strength.  Here is what HGSI has to say about the GGT universe as a whole, from Elder's perspective:



Here is why we are positive for the intermediate-term:
  • Bull power continues to stay on the positive side
  • Bear power continues to be very weak compared to bull power
  • 13d Force Index is clearly positive.  This is a major gate for being long
  • 2d Force Index is negative, which indicates we may be at a good buying opportunity
  • the slopes of the 13d and 34d price EMAs are still well above 0 -- we are in an uptrend
  • the 13d EMA slope > 34d EMA slope -- we are still accelerating upward
  • The 13d price EMA > 34d price EMA -- we are confirmed for an uptrend.
Based on this, for ETFs, the list that "makes the cut" from HGSI's perspective is the following.  Note you will have to create the filter, but it is easy:
  • price must be above 200d MA
  • price > $1
  • 50d MA volume > 100K shares
  • 13d Force Index > 0
  • 2d Force Index < 0
  • 13d price slope > 0
  • 50d price slope > 0


Note that any ETF with "Direxion" in the name is a 3x leveraged ETF.  Be careful with those...

Candidate Elder stocks but with a ERG > 240 line in the filter return:



Some new names have appeared on the list, as well as some that we've been tracking all week.  I intend to purchase if these names move higher than Friday's high and volume is present (see Friday's blog for the volume requirements).

As far as the Elder portfolio is concerned, it is up 3.3%.  Here is what HGSI has to say about the group as a whole:



A bit troubling is that the 13d EMA slope is approaching the 34d EMA slope from above, and if these cross, we know that we have to pay strict attention to the portfolio.  Note though that we are WELL ABOVE 0 for the slope EMAs, so we are still in an uptrend on the intermediate-term scale.

Note too that volume has all but vaporized.  Not a sell signal, but simply, these stocks are not in play in the general market.  Here's the gains(losses) of each since purchase:
  • KWR, up +12.73%
  • IDT, up +11.60%
  • NBIX, up +10.12%
  • AXTI, up +6.85%
  • ARUN, up +4.13%
  • GMCR, up +1.98%
  • ROVI, up +1.51%
  • CCE, up +0.38%
  • F, down -1.28%
  • LSCC, down -2.19%
  • NLC, down -2.32%
These are not equal weighted, as position size was adjusted using the ATR(20) method at the time of purchase.

None of these stocks are individually sell candidates, so I will continue to hold.

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

Trading Plan for Monday

As far as my short-term LCR Change Timer is concerned, I am in CASH and will remain here.  I don't care what the market does.

As far as my intermediate-term Elder Timer is concerned, there are ETF as well as stock candidates that, if they move higher than Friday on good 10-day volume (prorated to the time of the day), then they are worthy of consideration.

For those of you who want you can follow me on Twitter (grems8544) if you are so inclined -- I typically broadcast my buy/sells when they occur using that channel.

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

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

Regards,

pgd

Friday, August 6, 2010

ST Timer Could Move to CASH, Elder still LONG

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Let's start with the dashboard:



I'll combine the last two days in the discussion since I could not post yesterday.

GGT price hasn't moved much over the last two days, ending this past Tuesday at $25.74 and ending Thursday at $25.86.  We are somewhat rangebound, with the lower end of the box somewhere around $25.25 and the upper end of the box just shy of $25.95 or so (not an exact science).  Volume has been progressively weaker all week, and was down -18% with Thursday's action.  I actually like periods such as this -- higher volume on rangebound prices is a historically bad turning point in the market, as it indicates churning -- we're not seeing that phenom at the present moment, so I think that there is hope.  A volume number that is -18% lower is at the bottom threshold of "normal" and certainly indicates that people simply are not being aggressive either way in the market at the present time.

The Long-Cash Ratio peaked on Wednesday at 1.879 and dropped on Thursday to 1.769.  1642 stocks are presently in some form of long status and 928 are in some form of cash status.  IF FRIDAY IS DOWN a significant amount I would expect that we have signaled a top to the short term bull and that we should protect profits.  We'll see.

The strength index continues to weaken, and is sitting at 0.62.  Again, we're in no-man's land with this value, as we peaked at 0.78 on Monday and have been sliding downward in a staircase fashion since then.  Values above 0.7 are indications of being overbought; values below 0.2 are indications of being oversold.  When we're in the middle it's hard to figure out where we are using the index in a vacuum.  I will say that since we've been drifting most of the week that we can essentially ignore this 0.62 value for now.

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

Short Term LCR Change Timer

The short-term LCR Change Timer is presently sitting in a LONG-CASH (0) status, and has been here since Tuesday.  This is because we've been waffling back and forth between up/down days, causing this timer to sit on the fence.  Since we had a clear LONG signal on Monday we are biased long, but for the week our equity curve using this timer has been horizontal, with a Monday close of $1.645 and a Thursday close of $1.641, barely a change in 4 days.

This timer is certainly affected by short-term news events, and the data today at 8:30 (Nonfarm Payrolls, Unemployment Rate, Hourly Earnings, Average Workweek, and Consumer Credit) will all influence what happens with this timer today.

Watch http://www.finviz.com/ near the end of the day; if the ADV/DEC bar is decisively favoring ADV we'll continue in the LONG-CASH (0) state, but if we devisively favor DEC this timer will flip to CASH, indicating that I should sell my positions in DDM (literally at 0.00% gain), QLD (up +0.62%), and UWM (down -2.23%).

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

Intermediate-Term Elder Timer

Our Elder system continues to march forward on the long side.  As you can see in the table above, the 13d Force Index continues to be positive, which is bullish for the intermediate-term.  We've been bouncing back and forth on the slope of the 13d Force Index all week, so consider this neutral to slightly bearish (lack of trend).  The Elder 2d Force Index is postive, which states that stocks are actually overbought here and that we need to be very selective in our entry.  The good news is that the 13d and 34d slopes are positive, which is bullish for stocks in general, and that the 13d > 34d price EMA, which means we are continuing to see price appreciation on the intermediate-term scale.

My Elder intermediate portfolio is up 3.6%, and I have the following holdings:

KWR, up +13.92%
NBIX, up +13.27%
IDT, up +12.73%
AXTI, up +6.67%
ARUN, up +4.84%
GMCR, up +2.31%
ROVI, up +0.98%
CCE, up +0.28%
F, down -1.73%
NLC, down -1.76%
LSCC, down -3.98%

These are not equal weighted, as they were adjusted in sizing at the time of purchase using the ATR(20) value.

Many of the same stocks continually make it to the top of my Elder scan for the day.  Here's the list, according to Relative Strength.  Again, I leave the Velocity and Acceleration screens to you to determine:



I will move on these if they show higher-than-yesterday's high price action on volume that is pro-rated off of the 10d MA of Volume.   For reference, here is my purchase rule:

1) IF the instantaneous price is higher than yesterday's high AND
2) IF the instantaneous volume is higher than X% of the 10d MA Volume at the present time by the following amounts, then purchase a single position in the equity. 

Here is the time scale for volume -- I suggest that you print it out and paste it by your monitor, as it really does seem to work:

10:00, 12.5%
10:30, 25%
11:15, 33%
12:15, 50%
1:15, 60%
2:15, 70%
3:15, 90%

I have a spreadsheet that I can send to you if you are interested that will help you do this.  Takes a bit of work on your part every day, as you have to look up the 10d MA AND the high of the previous day for a list of stocks, but it uses an Excel macro to update the prices/volume and colors blocks accordingly.  Simply leave a note in the comments field and if there are enough of them, I'll post it in the files section on the Yahoo! GGT site.

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

Trading Plan for Friday

We have a mixed bag of results coming out of the 8:30 report and futures are down nearly -0.7%. at 9 a.m.  So, we have the start of a down day. 

From a short-term timer perspective, if the markets sell off through the day, especially after 2 pm, I'll unload my ST positions.  Keep an eye on http://www.finviz.com/ in the ADV/DEC department.  This generally ties well with the LCR when there is decisive movement, but less so when the ADV ~= DEC.

From an intermediate-term perspective, I will continue to purchase Elder stocks that meet the criteria above.  Use these pullbacks to get good prices on strong stocks.

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

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

Regards,

pgd

Wednesday, August 4, 2010

Short Term Timer could Flip, Elder Strong on Intermediate-Term

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The price index fell on Tuesday by -0.69%, ending the day at $25.74.  Volume was -12% lower than the 50d MA, with 2.2M shares trading.  Down prices on lower volume, as long as it does not occur for long periods, does not worry me.

The LCR dropped -5% to 1.701.  Database strength dropped too, so along with price, we're all in alignment.  It's hard to make money in this type of market.  As indicated on Monday, we're in this range and I thought that this week would be tough, hence here we are.  The LCR is oscillating back and forth every couple of days.

==========

Short-Term LCR Change Timer

If today (Wednesday) is down, then this timer will revert back to CASH (-1).  The time constant on this timer is very short ... less than 1 day ... so daily changes in the LCR in a trendless market will cause it to move back and forth. This will require that I close my positions in DDM (presently down -0.89%), QLD (-0.91%), and UWM (-1.94%).  Sometimes we win, sometimes we lose.  Choppy markets do not make good markets for trend-following systems.

I've added a column above -- an equity column -- where 9/11/08 = $1.  You can see that as of yesterday we finished the day at $1.633, or an IRR of ~30%.  MDD since that time has not exceeded 10.1%.  The equity will update daily going forward so you can see the efficacy of this timer.

==========

Intermediate-Term Elder Timer

Elder continues to indicate that it is okay to purchase equities on an intermediate-term basis.  Here's HGSI's view of the GGT Universe:



Supporting this statement we have:
  • Bull power is very positive
  • Bear power is slightly negative
  • 13d Force Index is green, indicating that it is positive
  • slope of 13d EMA on price is positive
  • slope of 34d EMA on price is positive
  • slope of 13d price EMA > slope of 34d price EMA
  • 13d price EMA > 34d price EMA
Although we could certainly pull back, I view it as an opportunity to add to or create new positions.

Here are some candidates that I am going to watch:



I'll leave the VEL and ACC screen to those of you who have HGSI.  Note that the filter above requires that
  • Last > $1
  • 50d SMA Volume > 100K shares
  • 13d Force Index > 0
  • 2d Force Index < 0
  • 13d Slope > 0
  • 34d Slope > 0
  • ERG > 240
=====================

Trading Plan for Wednesday

From a short-term perspective, I'll close my long positions in DDM, UWM, and QLD if the ADV/DEC line at http://www.finviz.com/ is clearly favoring the DEC side of the equation.

From an Elder perspective, I'll continue to add single Elder positions, from the list above, if they move above yesterday's high AND have volume greater than their 10d levels.  I posted the volume scale vs. time last week.

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

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

Regards,

pgd

Tuesday, August 3, 2010

Signal Change: LCR Change Timer is now LONG

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Here's the dashboard:



Our price index increased +1.9% on Monday, ending the day at $25.92.  Volume was within range of average, with 2.4M shares indicated, or -8% below average.  I would have liked to see above-average volume on a day where prices jumped so strongly, so I'm somewhat cautious of this.

The Long-Cash Ratio moved upward strongly, jumping +17% to 1.789.  1649 stocks are in some form of long status and 922 stocks are in some form of cash status.  All of the LCR EMAs are pointing upward, and are properly aligned (13d > 21d > 34d > 55d), so the intermediate term trend is confirmed upward (this occurred with Friday's close but I failed to mention it yesterday.  You can see it in the figure above under "LCR EMAs", the grouping of 4 indicators closer to the right).

Strength moved upward impressively from 0.618 to 0.781.  We are now above the not-so-scientific level of 0.7, and when we are above this level, the chances of a pullback increase.

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

Short-term LCR Change Timer

With the jump in LCR the LCR Change Timer transitioned from CASH-LONG (0) to LONG (+1).  Correspondingly, I picked up single positions in DDM, QID, and UWM just prior to the close.  MANY of the ultra ETFs are not above their 200d MA, so pickings are slim.  Here is the latest list to choose from:



The ones in green and yellow are good candidates if they continue higher; I would not pick them up unless the market shows movement upward across the board.  Remember, as the signal becomes older these become more risky, so be careful if you move on these later this week.

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

Intermediate-Term Elder Timer

Due to a clerical error on my part I jumped on some stocks yesterday that are suspect.  Specifically, I had entered the close of the prices in my worksheet, not the previous day's highs, so when these errant stocks move higher above their close, my triggers indicated I should pick up these stocks.  Oh well.  Glad I caught it before the damage became too great.

Overall, the intermediate-term portfolio is above water, up 2.7%.  Four positions were added yesterday:
  • ARUN, up +1.14%
  • CCE, down -0.24%
  • F, down -0.37%
  • NLC, down -0.69%
These are not equal weighted, as the position sizes were adjusted using ATR(20).

GMCR, another one of my holdings, is looking attractive for adding to the position, as the Elder 13d FI is up, the 2d FI is down, yet all the EMA lines, including slope, are in proper alignment.

Here are my Elder candidates for today:





I will add positions that are "in the green", or pehaps "yellow", if they show individual strength in today's action.

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

Trading Plan for Tuesday

As I bang this out, futures are falling, so today looks to be a day of consolidation.  I'll add to my short-term timer ETF candidates as long as they are not falling at the time of entry.

On an intermediate scale, my Elder list is above. 

60% of my powder is dry right now, so I have lots to fuel opportunity, should it arise.

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

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

Regards,

pgd

Monday, August 2, 2010

LCR / Price Divergence Starts the New Week

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Let's start with the dashboard:



GGT Price fell on Friday by -0.7%, ending the day at $25.44.  For the week the price was down from the previous Friday's value of $25.75 but was up from the two-week-ago value of $24.45, so we have a mixed signal.  Volume has been dropping ever-so-slightly (July / August vacations?) and was down on Friday -7% from average, which is within "normal" range.  For the week we saw a cumulative drop of -19% in volume compared to the week prior, but only a -4% cumulative drop over the past two weeks, so I largely think that this is unremarkable.  Taken together, downward pricing on less-than-remarkable downward volume is not worrisome to me.

The Long-Cash Ratio drifted upward slightly on Friday; we had 1556/1015 stocks that were LONG/CASH.  This is an increase of just over 1% from the previous day and is out-of-sync with dropping prices.  I've said it before:  we cannot sustain a divergence between the LCR and Price -- either Price must reverse to match an increasing LCR or the LCR must reverse to match a falling Price.  This LCR movement upward is not nearly of the same magnitude as the price change, so my intuition tells me we may be in for a rough ride this week.

I grabbed the screen capture above before the GGT strength values had updated.  The closing value on Friday was NOT the same as Thursday -- the real value is 0.618 and you'll see this tomorrow.  The important thing to note is that it went UP, and when LCR moves up but price moves down, the strength index becomes the price breaker, and it shows that we have momentum TO THE UP SIDE.  A value of 0.618 is still in limbo-land though, so we need to see some large moves upward or downward to get an idea if the trend will continue.

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

Short-Term LCR Change Timer

IF MONDAY IS UP, the short-term LCR Change Timer will transition to LONG with the close.  This is because on Friday it went from CASH (-1) to CASH-LONG (0), due to the slight increase in raw LCR value.  IF MONDAY IS UP this will be a signal to purchase short-term instruments on the long side prior to the close.  I typically wait between 3 and 3:45 pm, then I look at the 2x leveraged ETFs.  My favorites are UYM, UGE, UCC, UYG, UXI, DIG, URE, USD, UPW, DDM, EFO, DGP, QLD, UWM, MVV, SSO, and SAA.  Watch for volume to be higher in the last hour than the 10d MA on volume ...  if it is not, I usually do not place the trade.  Make sure that of these ETFs that they are above their 200d MA before you place the trade (left to you to verify).

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

Intermediate-Term Elder Timer

The Elder Timer continues to indicate LONG with the 13d Force Index > 0.  It transitioned long on 7/13 and so far, the signal has been mixed.  Here's a better view from my HGSI perspective:



What I like in the above Elder graphic:
  • Elder Bull Power is positive
  • Elder Bear Power is negative
  • Elder Bear Power is moving more negative
  • Elder 13d Force Index ribbon is green, which means that it is positive
  • slope of 13d price EMA is greater than 0
  • slope of 34d price EMA is greater than 0
  • 13d price EMA > 34d price EMA
  • 13d price EMA has a positive (upward) slope
  • 34d price EMA has a positive (upward) slope
What gives me reason to be cautious in the above Elder graphic:
  • Elder 2d Force Index ribbon is red, which means that it is positive.  Friday's bounce could have been too much overall for a Monday entry into stocks (makes entry on Monday more risky)
  • slope of 13d price EMA is negative (downward), meaning we're losing momentum
  • slope of 34d price EMA is negative (downward)
If the slopes of the 13d/34d price EMAs drop below 0 we will have a significant warning sign that this bull leg is over.  If the 13d price EMA slope drops below the 34d EMA slope, then the markets are in serious trouble.

In general, while the Elder intermediate system is telling us it's okay to be long in equities, there are some storm clouds on the horizon.  Nevertheless, stay the course for now.

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Another Intermediate-Term/Long-Term View

I'm not a big line drawer; in fact, I think any chart can be interpreted however we want to interpret it.  Despite this, I think that the traing world DOES believe in line drawing, so I do pay attention.

One of the more popular signals is to watch the 150d MA on a price sequence.  If the slope of the 150d is upward, we're in a long-term up trend.  Conversely, if it is downward-pointing, we're in a long-term down trend.  If it is waffling back and forth in a horizontal fashion, then we are locked in a trading range.  Here's a chart for you to review:



In the bottom pane you have the GGT stock index plotted with a 150d EMA.  Note that since 5/19 we have been in a trading range, as evidenced by the horizontal nature of the 150d line.  Note that we're just above the line now, but historically, we certainly can go below.  Taken by itself we would say that we are a bit overbought and that a pullback could be around the corner. 

Take a look at the upper pane.  This is a composite of a number of EMAs of slope lines on the 65d EMA.  So, take the 65d EMA of price, calculate the slope, then take EMAs of this slope, ranging from 2d (red) to 34d (pink).  I tend to like the pink one (34d) and black one (21d) when looking at intermediate-term trends.  The data suggests that we are nearing the end of this horizontal nature of pricing, and that the longer-term trend is upward.  I draw this conclusion because the slope of the 21d and 34d lines is upward, and although they are below 0, they are becoming less negative, which means that the prices in the database are inching higher day-over-day.  The 2d, 8d, and 13d lines have broken into positive territory, which is bullish.  So, what I'm looking for here is continued positive slope on these slope lines, and I am optimistic that we will continue to move higher (although of course there will be some resets on a shorter-term scale).

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Elder Candidates for Monday

Given that the Elder system is telling us that it's okay to go long (even with the aforementioned storm clouds on the horizon), here are some stocks for consideration IF they move above Friday's high by a few pennies on greater than 10d volume:



I'll leave the Velocity and Acceleration lists to you.

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Trading Plan for Monday, August 2nd

With respect to my short-term LCR Change Timer, I am presently in cash and am looking to move long into 2x ETFs that have solid volume, as measured in the 3-4 pm time frame.  I'm looking for NO ambiguity in the ADV/DEC line as shown at http://www.finviz.com/ on their home page.  My volume requirements are stated above in the text.

With respect to my intermediate-term Elder timer, I am up only 2.4% since July 13th, but will continue to add Elder positions if they show strength.  I am presently holding:
  • KWR, up 13.54%
  • IDT, up 10.05%
  • AXTI, up 6.67%
  • ROVI, up 2.66%
  • GMCR, up 2.18%
  • LSCC, down -0.03%
  • NBIX, down -0.56%
  • CMCSA, down -1.24%
These are not equal weighted -- the position sizes were adjusted at the time of purchase according to the ATR(20) value.

I will purchase from the RS list above (as well as the VEL/ACC lists) if the stocks show strength relative to Friday's price and historical 10d volume, as well as if they meet the Elder filter in the HGSI scan.

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

Regards,

pgd