Thursday, September 30, 2010

Short Term Timer = LONG, Intermediate Term Timer = LONG

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Continued greetings from the Dallas/Ft. Worth area.  I'm having dinner tonight with some folks who follow the Greek-God Trading space as well as High Growth Stock Investing, and am looking forward to a break from my day-time activities.

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I updated an entry in the Thrift-Savings Plan blog; if you have a Govern't-sponsored retirement account then you may want to review.  I urge you to add this blog to your automatic RSS feed or iGoogle blog reader, as it will ensure that you see the updates.  Note that you have until about 10:00 a.m. EDT this morning to reallocate your TSP funds and have it count in the month of September, not in October, and since we're restricted in what we can do in terms of the number of / types of transactions per month, you probably should make an effort to review the blog (if applicable).

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Here's the dashboard:



The GGT price index moved up just a nudge by +0.16% on average volume (relative to the 50d MA of volume).  I view this as normal behavior, neither bearish nor bullish.

The LCR moved up over 3.0 again, and now indicates that 2243 stocks are long and 730 stocks are in cash.  Historically, this is a relatively high number, and we have typically pulled back from this point.  This being said, we can easily continue higher, as there are 730 stocks to push this ratio higher.

The GGT strength index fell from 0.91 to 0.85, which is indicative of some stocks losing price, volume, or rate-of-change values that are above some optimized level (tailored to each stock).  0.85 is still very strong, and certainly, we could move downward from here.  Whether we are overbought or "normal" is subjective, but I view this level as overbought.

Overall, I'm feeling a bit toppy here, but there is no immediate catalyst to dump everything and protect profits.  I continue to remain invested on the long side.

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Short-Term LCR Change Timer

The timer is LONG, although the VTI timer (which is completely derived from the LCR Change Timer) is in CASH.  In fact, the VTI moved DOWN yesterday by -0.22%, hence the GGT price index and the VTI are out of sync.

I did purchase a position in the VTI yesterday, and as a result, this position is down -0.42% (commissions included).  Just goes to show that perhaps I should listen to my own timer on the VTI rather than listen to the GGT LCR Change Timer.   Note that the VTI has been fully tested with the GGT LCR Change Timer (results presented at our last meeting) and the Calmar Ratio (CR) with using the LCR Change Timer is 2.17 over a 2-year lookback period.  I do not consider my move into VTI as irresponsible or ignoring the past, but as I'm fond of saying, my crystal ball is as good as yours ...

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Elder Intermediate Timer

This timer continues to show LONG, as the Elder 13d Force Index is positive and the slopes of the 13d EMA and 34d EMA on price are upward-pointing. 

Furthermore, of the stocks that I'm now holding, the combined index chart looks incredibly strong.  Here's what I mean:



The chart above is constructed by taking all of my holdings and creating a new index within HGSI.  Not only can you then scan each equity and determine the health, you also get the ability to see how the portfolio health is overall.  I consider this very powerful.

With respect to my holdings, I like the above chart.  Of specific note is the strength and linearity of the 13d and 34d price EMAs, and note that the strength of the slopes of the 13d and 34d EMAs show that the portfolio is increasing in value at about $0.70 or more per day on a basis of $160.  Sure, not a knock-the-skin-off-the-ball situation, but sustained positive growth is a good thing.  We'll see if it continues.

My good friend Hsin Yen, who you may know from HGSI or Spike Trade, is independently validating my trades, so he has access to my Fidelity trade blotter and can see the positions I enter/exit, the number of shares, and can validate that this is all real. 

For the record, I added more positions yesterday.  Here are my holdings:



As you can see, some are above water, some are under water.  The net overall is about even, which is somewhat disappointing but if this market is in a present consolidation then I'm positioned to move upward.  Conversely, if the market tanks, I'm in a position to get hurt.  Gotta love investing.

There are a number of Elder candidates for Thursday:

AEZS
ARGN
HAS
JAS
JNPR
SAN
TLAB

IEF
TIP
LQD
BRF
BAB
DBV
BSV

Note that many of the ETFs are related to bonds, which could portend a market top.  Keep your eye on these.

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Trading Plan for Thursday

From a short-term perspective, I'm long in VTI and will remain so.

From an intermediate-term perspective, I'm long on the holdings list provided above and NONE of these holdings are showing individual weakness as determined by my Elder criteria.  I will continue to hold these independent of market action.

I will continue to add to my intermediate-term portfolio if prices move higher and volume is up (review my blogs the past week for my volume schedule).

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

Regards,

pgd

Wednesday, September 29, 2010

ST Timer is LONG, but...., Elder Intermediate Timer is LONG

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As my world would have it, my travel day rests on a GGT Long-Cash Ratio (LCR) timer transition.  My week finds me in Ft. Worth, TX, and those 6 a.m. flights make it hard to get my updates and post here.  Now that I'm settled the week should be fine as far as posts.

So, from the comfort of my home away from home at the Hyatt, here are some observations:

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Short-Term LCR Change Timer

The timer is now LONG.  We received a LONG signal with the close of Monday's market, which actually caused a divergence -- the LCR moved up, the average price of the database dropped. 

I note with interest that while the GGT LCR Change timer is LONG, the VTI timer, which is based on this value, is still in CASH.  Interesting.  To enter or not ... that is the question.  Prudence says NOT to enter, my emotions say to enter.

Yesterday's markets reinforced the LONG, so move into VTI, UWM, QLD as your risk profile dictates.  Note that the VTI closed at 58.27 on Monday, 58.60 on Tuesday.  Simultaneously, UWM closed at 31.17/31.75 respectively, and QLD closed at 67.17/67.27 respectively.

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Elder Intermediate-Term Timer

I added to my longs yesterday afternoon, as the Elder Intermediate-Term timer continues to show long (due to the 13d Force Index being positive).  My current holdings/performance are as follows:

VHC, +6.53%
IDCC, +1.90%
IGN, +1.50%
EWH, +0.85%
PID, +0.34%
BKF, +0.59%
EWN, +0.27%
EWO, +0.25%
PFM, +0.10%
JJG, -2.11%
INAP, -2.02%

So, not stellar, but certainly not poor.  Note that values are inclusive of commissions, and are not equal-dollar weighted, as I adjust my positions using ATR(20) when I purchase.

All of these stocks, even with the two losers, still are showing very strong Elder charts.  I'll continue to hold and add to my positions as the market permits today.  My list for Wednesday is:

EGHT
BJRI
CSUN
CTRP
ENTR
FDML
GNCMA
GMCR
ISSI
MANH
PNRA
SFSF
TWTC

RJI
RJA
FXI
EWH (already own)
GXC

Again, look for volume and price appreciation before moving in.  My older blogs talk in detail about how to do this.

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Trading Plan for Wednesday

Short-Term Timer:  My risk profile is a bit broader than some, so I'll move on entering VTI, UWM, and QLD.

Intermediate-Term Timer:  I'll watch the list above and enter any that are appreciating in price AND volume, starting at 10:15-ish, and checking on my normal schedule (see past blogs).

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

Regards,

pgd

Monday, September 27, 2010

Elder Timer LONG (barely), Short-Term LCR Timer MAY Move Long

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Obviously, this past Friday was a powerful day as far as the talking heads would want you to believe.  While I'm glad I was long on a number of stocks, as well as in my TSP portfolio, I am cautious because "things just don't seem right".  Let's see if I can quantify that.

Here's something I can't explain:




























In the figure above, the 50d MA on GGT volume has been decreasing since he peak of the previous bull leg.  While this in itself is not reason to do anything rash, as we certainly can fuel a rise with less participation across the board, falling volume off a peak, specifically a peak that corresponded to the end of a bull leg, doesn't give me a warm fuzzy feeling about the longevity of this market.  Why does volume continue to fall?  Where is the volume, relative to the markets in April/May 2010?

In the figure above I also see something in price that is easy for the eye to pick up:  lower highs in price (but not necessarily lower lows).  If this is a true bull with legs I want to see that the GGT price clears $26 and keeps moving higher -- we'll see.

This next image is interesting, as it presents a different view of Elder compared to my normal view using HGSI:



The graph above is my Elder system, with a simple moving average (SMA) (contrasting with my normal plots of exponential moving average - EMA) of the Elder13d  Force Index (solid black), and the pricing MAs (light black - 13d and red - 34d).  Note that from a simple moving average perspective, the slope of the 34d MA on price is pointing DOWNWARD -- this is the wrong direction for a sustained bull (simply look back at the price action where both the 13d and 34d were pointing upward in unison).  Also note that while the Elder 13d Force Index is positive, it is *just* barely so, and any further weakness in the markets will have us back on the intermediate-term sidelines.

Also note in the figure above the light blue trace, which is Elder's Force Index (unsmoothed).  Note that even though Friday was a banner day as far as the talking heads would have you believe, in terms of price AND volume, it was a yawner and a ho-hum day in terms of Elder.  Big moves (look back in history) have often been marked with large price AND volume, and we're not seeing that in the present data.

Remember, the graph above uses SIMPLE moving averages, not EXPONENTIAL, so the presentation will be more conservative as the data of 13 or 34 days ago is weighted equally as what happened yesterday.

I enjoy this next chart because it shows us where we are in the cycle compared to past periods:



The graph shows the states of the different assignments of GGT classifications:  #NC = New Cash, #AC = Affirmed Cash, #C = Cash, #L = Longs, #AL = Affirmed Longs, and #NL = New Longs.  The yellow area -- the number of LONGS in the database, generally sticks out.  Dark Green (NL), Light Green (AL), and Yellow (L) all comprise the longs in the database.  What we see is a very high number of these values, and historically, while we can certainly remain here, we generally ebb and flow, resulting in a pull-back.  I think we'll stay here for a week or two, but overall, I do think we need to pull-back in order to maintain upward momentum.

So now that I've given you something else to consider, let's look at the dashboard:



The Long-Cash Ratio (column 4) jumped up 19% on Friday, indicating that yes Dorothy, it was a good day in the markets. You can scan up column 5, which is the daily percent change of the LCR and see that we've had much bigger changes in recent history.

The GGT Strength index (column 6) moved upward dramatically, showing broad participation in terms of either/all price, volume, and/or rates of change relative to historical optimized levels.  This was a broad move on Friday and is a good sign for the bulls.

So overall, I think that while this bull may last for the short-term, I think that unless we see the Elder 34d SMA reverse slope and point up, and unless we see the GGT price break and hold $26, that the days are numbered. Further, the Elder 13d FI is just above 0, and unless this moves more positive, it may force me to sit on the sideline. I am riding the long trend and will continue to do so, but with a careful eye.

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Short-Term LCR Change Timer

As you can see in the dashboard view above, the timer is in CASH.  IF MONDAY IS AN UP DAY this timer will whipsaw back to the LONG side, and we should move long accordingly.  TODAY AT 3:30 or so is the time to do this!

I watch http://www.finviz.com/, specifically the ADV/DEC of stocks in the upper left corner.  If this is decidedly in favor of the ADV side of the equation, then you have a better-than-50:50 chance that the LCR Change Timer will transition to LONG.  If this is the case I then will open a position in the VTI (because it is presently above the 150d EMA), UWM (it needs to be above the 200d -- see last month's presentation). QLD (again, it needs to be above the 200d and it is), but I will avoid the UYG, as it is below the 185d.

Conversely, if the ADV/DEC line favors the DEC side of the equation, then I will do nothing, as I am in cash and the timer will remain in the present limbo-state of CASH-LONG (0).

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Elder Intermediate Timer

The above discussion about Elder notwithstanding, my daily Elder timer view, and the one I've been discussing with each of you on a daily basis, is long and telling us to continue on that path.  To that end I will look at stocks and ETFs that meet my normal filter, which I published last week.  Here are my candidates for today:

BBD
DTG

It makes sense that the list is short (why?), so today will be an easy day to trace these two.  I intend to use price above Friday's high and my normal volume requirements (listed at the bottom of the entry here).

My Elder gains are mediocre at this point:

VHC, +1.98%
IDCC, +1.62%
JJG, +1.47%
IGN, +1.43%
EWH, +1.08%
BKF, +0.03%
IWD, -0.35%
INAP, -0.81%

Given the weakness in the Elder 13d FI (just above 0) I may prune the losers if they slip more today.

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Trading Plan for Monday

With respect to the LCR Short Term Timer, I'm only interested in the action around 3:30 pm EDT.  My plan is outline above.

With respect to the Elder Timer, I'm only interested in BBD and DTG and will enter those if price and volume are appreciating.  I may prune my Elder losers if it appears the day is moving against me.

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

Regards,

pgd

Friday, September 24, 2010

Short Term Timer Moves to CASH, Intermediate Elder Timer LONG

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I'm sorry for the tardiness of this posting.  Yahoo! has been giving Joe and I fits concerning updating of stocks and ETFs, and I just finally was able to update everything after the open of the market on Friday.

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As advised yesterday (Thursday), with the close of the markets we have a transition from LONG-CASH (0) to CASH (-1) on the short-term timer.  If your time horizon is on the order of days then trading securities LONG overnight is a risky business.

Here's the dashboard:




The GGT price index fell again on average volume, and considering where we've been with overall volume, we can count both Wednesday and Thursday as distribution days.  Correspondingly, the Long-Cash Ratio (LCR -- column 4) fell again, which has triggered the short-term timer to move to CASH.  The actual strength of the database (column 6) has fallen yet again to 0.5029, and indicates that we are weakening across the board.  On a short-term basis, many long-positions are weak and should be exited.

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Short Term LCR Change Timer

As indicated above, the short-term LCR Change Timer has transitioned to CASH.  As I write this stocks are up sharply.  If we end like this today the timer will transition back to CASH-LONG (0), and it will take Monday to be an up day before we can move back to a long call.  This timer does whipsaw, but overall, it does keep you on the right side of the wave.

The GGT equity index is at $1.602.  The VTI equity index is at $1.556, which has been adjusted downward because I was using the incorrect data field from Yahoo! in the calculation of prices.  Thank you Thomas for pointing out the discrepancy -- I like people who are following how I do what I do.

Of particular importance here is that the short-term timer and intermediate timer are out of sync.  Nevertheless, I intend to stay the course, and this could be a wonderful buying opportunity on the intermediate-term time line.

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Intermediate-Term Elder Timer

The Elder 13d Force Index is positive, which is a go for being long in stocks (column 12).  Note that we have the 3rd day of a downward-pointing Force Index (slope is negative), and although you cannot see the raw value of the Elder 13d FI, I can, and it's only 27K above 0.  This is on the border for transitioning to being negative.  While today is up in price, we need volume to be heavy to take this upward any significant level, and lack of volume today will portend increased possibility that the Elder 13d FI will move negative with any subsequent down days in the broad market.  We must watch this level carefully!

As I write this I am holding the following stocks under this timer, with their gains/losses as of 10:30 Friday morning:

VHC (+2.83%)
IGN (+1.16%)
EWH (+0.85%)
BKF (+0.49%)
IDCC (+0.12%)
IWD (-0.55%)
JJG (-0.98%)
INAP (-0.61%)

All percentages are inclusive of commisions.

No ETFs pass my Elder screen today -- I am requiring that the slopes of the 13d EMA and 34d EMA on prices be upward-pointing, with 13d slope > 34d slope > 0.  There are dozens where the slopes are downward-pointing yet 13d > 34d > 0, but these are showing loss of momentum.

Of all the stocks that I scan using my Elder filter, only MGLN and GOLD pass the same criteria that I applied to the ETFs.  As I write this, MGLN is up on extremely low volume, so it does not pass my volume tests, and GOLD is a go for entry.

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Trading Plan for Friday

With respect to the short-term timer, it is in cash and I will do nothing.

With respect to the intermediate-term timer, it is LONG and I will purchase an ATR-adjusted position in GOLD.

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

Regards,

pgd

Thursday, September 23, 2010

Short-Term Timer has moved to LONG-CASH; Elder Intermediate Timer is LONG.

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A crack in the ice?  We'll see.

Here's the dashboard:



Price and volume both dipped yesterday by -0.72% and -4% respectively, which shouldn't be much of a surprise to any of you.  This is stronger volume than we have been seeing (column 3) so I'm paying a bit more attention to the price-volume relationship.  The psychology of the market when we see higher than normal volume is that more people are playing, and falling prices indicate that we're distributing more than we're buying.  I would not fault anybody for locking in gains at this point.

The LCR fell 16%, and has set us up for a change in the short-term LCR Change Timer.  More on that below. 

As far as the strength index is concerned, we've dropped a large amount, indicating that as a whole, the database is much weaker -- many stocks are lacking in price, volume, and/or rate-of-change of prices, causing the strength index to drop to 0.662.  NOTE:  we hovered at this strength index at the beginning of this bull leg, so this may be enough of a reset to resume an upward march -- or not.  Again, your crystal ball is as good as mine.

Based on these indicators alone, I would not be surprised at a reset in prices today (Thursday).  The drop-in-prices-on-average-volume is a significant signal, and the divergence we saw yesterday suggests that this leg needs a reset.

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Short-Term LCR Change Timer

The LCR Change Timer has a fast response time -- about 0.8 days -- so as the LCR goes, so does this timer.  This is an adaptive value and has been moving upward as this leg has been getting longer.  What is significant is that the drop in the LCR yesterday was enough to cause it to transition from LONG (+1) to LONG-CASH (0), which is a direct signal for those following this timer to:
  1. protect profits
  2. get ready to close short-term LONG trades
The best way to trade this timer is to plop your rear in front of the PC around 3:30.  Go to http://www.finviz.com/.  On the home page, in the upper left corner, you'll see the following:



If you see the number of Advancing issues LESS THAN the number of Declining issues, then there is a very high probability that the LCR will continue the transition and move to CASH (-1).  If this is the case then you should close your short-term LONG trades.

Conversely, if we have ADV > DEC, then the ST LCR Change Timer will remain in the LONG-CASH (0) state.  Do nothing except protect your longs if so desired.

I am presently not trading this timer, as I was on vacation when it signaled long on 9/1.  I've been patiently waiting for it to reset and resume a long march to the upside.

The GGT equity index fell (column 9) as did the VTI equity index (column 11), for those of you keeping track.  These have had a nice run (it may not be over).

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Intermediate-Term Elder Timer

Column 12 is the 13d Elder Force Index.  It is green, which means that it is positive --> it is okay to purchase stocks on the LONG side.  Next to it (column 13) is the slope of the 13d Elder FI, and it is RED.  This means that the slope is falling, which is CAUTIONARY.  I like to buy stocks when the market, as a whole, is moving upward with these two showing green.  They are not both green.  Nevertheless, I purchased some stocks yesterday, and I have my list ready for today.

Note that the slope of the 13d EMA on price, and the slope of the 34d EMA on price are both GREEN, which means they are positive.  The database is appreciating in price on these time scales.

If this is only a pause, then these securities, IF THEY MOVE HIGHER ON HIGHER VOLUME, should be good vehicles:

ADRE
DVY
IYT
IYE
IEZ
ACWX
EFA
EWP
IXC
IGE
RSX
PXH
PID
PSP
DIA
XLE
SDY
XHB
XES

AIMC
AXL
BUD
IGTE
INAP
KKD
NTCT
QSFT
LUV
TWTC
UAUA
VHC
WRLD

See my blog from yesterday to see the filter I used for these equities.  Note that the ETFs do not have the ERG > 240 scan line.

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Trading Plan for Thursday

Short-term:  watch for the LCR to reset (or not).

Intermediate-term:  I'll pick up the equities above IF:
  1. they move higher than yesterday's high
  2. they do so on higher volume.  I listed my volume requirements earlier this week.
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Remember, you are responsible for your own investment decisions, not me.  Please do your own work.

Regards,

pgd

Wednesday, September 22, 2010

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Let's jump right in with the dashboard:



The price index fell -0.4% on Tuesday on average volume.  Contrasting, the Long-Cash Ratio (LCR) moved upward 4%, so we have a divergence.  This type of divergence cannot be sustained:  either price must reverse to align with the LCR movement, or the LCR movement must reverse and drop, aligning with price.  This fact results because the LCR is based partly on price, so the two are linked.

Another divergence is related to the strength of the underlying database.  It fell from 0.983 to 0.884, indicating that many stocks are weakening in terms of ROC, volume, and/or price, and certainly, strength MUST eventually align with LCR because the LCR is based (in part) on price and volume. 

The fact that price and strength fell tells me that we've experienced a shot across the bow, never-minding that the LCR is moving upward.  No one would fault you to take 75% of your profitable positions off the table, as well as closing your losers, as the waters certainly are getting more uncertain.  If you're wrong then you can always purchase back into the positions, perhaps even at a lower price.

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Short Term LCR Change Timer

This timer is in columns 7 & 8 in the dashboard figure.  We are still LONG, and weakness is not indicated because the LCR continued upward (note divergence prose above).  I am not trading this timer at the moment because it signaled long when I was away on vacation.

If today is a down day in terms of the LCR this timer will transition from LONG to LONG-CASH (0) with the close of the markets.  If tomorrow is also down this timer will then transition to CASH, so start paying attention if you are interested in a short-term method to move in and out of the markets.

The GGT equity index fell from $1.633 to $1.627.  The VTI equity index fell from $1.833 to $1.829.

Watch http://www.finviz.com/, specifically the ADV/DEC line in the upper left area of the home page, to get an idea on what the LCR will do today.

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Intermediate-Term Elder Timer

Columns 12 and higher deal with the Elder timer.  The 13d Force Index is positive, so our macro gate on whether we can invest in long positions is intact -- the answer is yes.  The 13d and 34d pricing slopes are positive, which is bullish.  Overall, the Elder signal is LONG.

My Elder list of stocks this morning includes the following:

TRS
APKT
CTXS
GRA

I'm looking for volume above the schedule I posted yesterday in my blog, and prices moving higher than yesterday's high before entry.

My Elder list of ETFs is long, and does not include leveraged or contra ETFs:

FDN
JJG
ICF
DVY
IYF
IYR
ACWX
BKF
EWH
EWJ
IWB
IWD
IVE
IJH
IGN
IJS
PDP
PGF
RSP
XLY
RWR
XBI
SDY
VFH
VO
VOE
VPL
VNQ
VB
VTI

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Trading Plan for Wednesday

With respect to my short-term timer, I'm in cash because I refuse to chase the signal.

With respect to the Elder intermediate timer, I'm looking at the 4 stocks listed above, and I want to see price and volume appreciation (e.g., demand) before I enter.

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

Regards,

pgd


Tuesday, September 21, 2010

Bulls are firmly in control; possible topping indicated in the LCR RoC values

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A powerful market day indeed...

Here's the dashboard:






























As with all my images in this blog, you can right-click on it and open the image in a new window/tab.

Starting from the left ...

The GGT price index moved upward 1.86% yesterday, ending the day at $25.23.  The last time we were above this level was early August.  Volume has resumed to being below average, and was -10% lower than the 50d MA on Monday.  I know I've been beating this drum for a long time -- here's a picture to go with my music:



Note carefully that during the bull leg of 2009 we saw a significant decrease in average volume but yet we continued higher and higher in price, so we do not need higher volume to sustain an up trend.  What you should clue on here is that once average volume peaked and started downward, confidence was already waning in the markets, and hence we have a self-fulfilling situation.

My point to the price-volume relationship, or more accurately, the lack of a relationship, is simple:  it's all relative.  We're at historically high volume right now, and while it's not as high as May-June 2010, it's much higher than the levels of 2009.  One could easily argue (without counterpoint I may add) that we're seeing broad participation in the markets, and that this leg could continue.

Back to the dashboard, which I'll place here again so you don't have to scroll back and forth:






Note the huge jump in the long-cash ratio (LCR).  It moved upward another 26%, and is now indicating that out of 2880 stocks, 2150 are in some form of LONG recommendation and 730 are in some form of CASH recommendation.  If you want to get an idea of how the LCR ties in with prices and major moves, take a look at the following:



The graph above plots the GGT price index against the LCR.  We've certainly been higher, suggesting that there is room to move upward.  Specifically, the July 2009 time frame started low and moved up over 3.5, and in January 2010 at these same levels and moved up over 3.5 also.  We may or may not see that in the future -- your crystal ball is as good as mine.  What is significant though is that we are not plowing new ground -- we've been here before.

An interesting graph, which may help give some insight about where we are going, is the following:



This is a graph of the Rate of Change, on a daily basis, of the LCR, plotted with the GGT Price Index.  We see that we are approaching the highest ROC levels that we've seen in nearly a year (Feb/Mar 2010 was higher), and although we continued higher, the rate at which we did so was less, and eventually, we backed off in price and everything moved lower.

The LCR ROC graph above suggests to me that we are most likely going to see a bit of a pullback in the next couple of weeks, simply because we cannot sustain this ROC.  I note with a cautious eye that we had this same condition in Feb/Mar 2010, and we continued higher through the end of April ...  Given the state of the economy, and that we're moving into an election period, we could march upward very slowly, such as three steps forward and two steps backward ...

This next graph shows me the underlying strength in the GGT signals within the database:



Of relevance here is that every time we get to these levels -- and they are lofty -- we have pulled back and consolidated.  Not a severe pullback, but enough to shake out the weakest and then resume the march upward.

Note that we now have a strength reading of nearly 1.0 -- 0.983 to be exact, and when you're at the top, there's only one direction to go ....

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Short Term LCR Change Timer

Columns 7 & 8 on the dashboard tell us what this timer is doing.  Right now it is LONG, and has been since 9/1.  This is a 13-day streak, and if you recall my presentation last week at our monthly meeting, this is longer than we normally run on a long streak by about 3-4 days.  Note we have had much longer runs, so this certainly could continue.  Note you need to be a member of the group where the file is located in order to view it (to become a member, send an email here).

Alas, I was on vacation when this leg started, and I don't chase this timer.  Hence, the funds I allocate to this timer are in cash, and will remain so until the timer resets back to cash.  The time frame simply is too short to jump in at this point.

Had you moved on this timer you'd be quite happy.  The GGT equity index has moved from $1.552 to $1.633 and the VTI equity index has moved from $1.745 to $1.833, the former within 13 trading days and the latter within 12 trading days.  This is a 5% move for the GGT equity index and VTI equity index.  They don't all work out like this, but it is nice when they do.

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

Intermediate-Term Elder Timer

This timer has nothing to do with GGT, but it's such a powerful method that I use it as one of my primary timers to stay on the right side of the market.

The Elder 13d Force Index has been positive since 9/1, telling us that it is okay to enter stock positions LONG.  This can be seen in column 12 of the dashboard.  If you have HGSI, you can also create the following screen or view one of the many Elder screens:



Note in the image above how the 2 & 13 DMA, Force Index ribbon bar is GREEN -- this is telling us that the 13d MA on Force Index is positive.

Another key point in the HGSI image above is that the 13d and 34d MA on price are
  1. 1) both positive in magnitude -- units are $/day so we are appreciating at the rate shown in $/day
  2. 2) that the 13d MA is above the 34d MA -- a necessary condition for sustained momentum
  3. 3) that both are pointing upward -- another sign of acceleration of price to the upside.
As a whole, the GGT universe of 2800 stocks is moving upward nicely in price.

A number of stocks are candidates for entry today if they move higher than yesterday's high:

AKRX
AMLN -- more risky, as the 13d slope is below the 34d slope
AZK -- ditto AMLN
EXK -- two days of sell-off with bearish engulfing pattern; need a significant reversal to enter
GRS -- ditto EXK
GBG

There are more; the filter I used is this:



You can do your own work if you have HGSI and build this filter, scanning "All Securities" (if you haven't downloaded the GGT universe from this weekend).

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

Trading Plan for Tuesday, September 21st

With respect to the short-term LCR Change Timer, I'm sitting pat as I choose not to chase this timer.

With respect to the Elder Intermediate Timer, the stocks above are candidates if they continue higher than yesterday's highs, and do so on higher volume.  My volume entry thresholds are unchanged and you should memorize them:

Enter a stock if and only if price is higher than the previous day's high AND volume exceeds the percentage levels of the 10d MA of volume by the following times and amounts:
  • 10:00, 12.5%
  • 10:30, 25%
  • 11:15, 33%
  • 12:15, 50%
  • 1:15, 60%
  • 2:15, 70%
  • 3:15, 90%
All times East-Coast, New York time.

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

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

Regards,

pgd

Sunday, September 19, 2010

Using HGSI and GGT

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I acknowledge that the majority of you who read this do not have the High Growth Stock Investing package available here.   Despite this, I *do* own the package, and in lieu of other options, or lack there of, HGSI provides some very good capabilities. 

Given this, I want to explore some charts of the GGT system using HGSI.  We can use other packages, but HGSI makes this relatively easy.  I'm all for easy.

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A GGT Refresher

Methodology:  GGT looks at a given stock in terms of price an volume.  The lookback period is presently 1 year, although I've been known to go back 2 and 3 years.  1 year seems to work fine.  Using this lookback period, two pricing exponential moving averages (EMAs) are generated, as well as a volume EMA.  Furthermore, three different rates of change (ROCs) are generated.  These six variables are mixed and matched to provide the optimum equity curve for the chosen equity over the lookback period.  Once the values of these 6 variables are known, these are used in the daily walk-forward calculations, and based upon the price and volume action TODAY, a classification of 6 different types is assigned:
  1. New Long
  2. Affirmed Long
  3. Long
  4. Cash
  5. Affirmed Cash
  6. New Cash

  • New Longs are only generated if 1) yesterday was some form of cash (Cash, Affirmed Cash, New Cash), and 2) if price AND volume are above historical EMA and ROC values that provide an optimum equity curve.  These are the riskiest new movers, because they have been in the dirt prior to this assignment but have broken out for some reason.
  • Affirmed Longs are generated if 1) yesterday was some form of long (Long, New Long, Affirmed Long), and 2) if price AND volume are above historical EMA and ROC values that provide an optimum equity curve.
  • Longs are generated if the price and volume are above historical EMAs/ROCs, and the previous day was some form of long status.
  • New Cash stocks are only generated if 1) yesterday was some form of long (Long, Affirmed Long, New Long), and 2) price is BELOW historical EMA levels.  Note that ROC and volume do NOT play a role in New Cash assignments -- a simple drop of price is all that is required to kick us out of a long status.  It's a good idea to sell an equity that has a New Cash recommendation.
  • Affirmed Cash equities are generated yesterday was some form of cash (Cash, New Cash, Affirmed Cash) and price is below historical EMA values.  If you have a stock that is flashing Affirmed Cash, and you're holding it, you're not a happy camper, as the price is falling.
  • Cash recommendations are generated if two conditions exist, which tend to confuse folks:
    1) price is ABOVE historical optimized EMA levels, but volume is BELOW historical optimized EMA levels (e.g., the equity is breaking out on low volume)
    2) price is below historical optimized EMA levels.  In this case we don't care what volume is doing, as it is ignored.
The key is to invest in stocks that are appreciating.  How can we use GGT and HGS to identify those stocks?

Generally every weekend, a full accounting of the stocks and their recommendations are posted in the Yahoo! group for GGT.  Simply ask below in the comments are if you are not familiar.  ETFs are posted NIGHTLY by my colleague, Joe.  Between the two you should be able to get a good view of what the market is doing on a day-day or week-week basis.

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

New Long Recommendations

I can take the 6 recommendations as shown above and plot in HGSI.  Let's start on the bullish side with New Longs:



As with all my images in this blog, you can right-click on the image and open it in a new window or tab.

In the image above I've taken Dr. Jeffrey Scott's 2ac Daily view and added another frame with various slopes of the pricing EMAs.  This information can tell us a considerable amount about what the stocks are doing and where they are going. 

A key point to understand is that I have modified the 2d Force Index ribbon (4th from top) to BE RED WHEN (+) and GREEN WHEN (-).  This is reversed of how Jeffrey has normally configured this view.  If you understand Elder's methods you'll understand why I've made this change.

Another key point to understand is that because the recommendations for the stocks comprising a given set of recommendations changes daily (there are 112 securities that are New Longs as of the close of 10SEP17 that were NOT in this index on 10SEP16) the chart data prior to the day of the index capture has to be taken with a cautious eye.  While the *performance* of the stocks on 10SEP16 is close to that of 10SEP17, these stocks were members of other groups on 10SEP16.

Most charting packages do not plot slope.  HGSI does, and it is very useful, but seldomly used because most people do not know how to interpret what you are seeing.  In the case of the figure above, I do the following:
  • Take the 65d EMA of price.  65d is 1 quarter/13 weeks of trading, and is a good, intermediate-term indicator.
  • Take the slope of the 65d EMA of price.  If the slope is upward, then we know that the stock is appreciating.  I take multiple slopes --2, 8, 13, 21, and 34 are plotted.
  • YOUR EYE can see the "slope of the slope", or SoS.  If all the slope of the slopes is upward, then we have a strong set of stocks.  The converse is true too.
Here is how I evaluate each of these groups (refer to the New Long  figure above):
  • My eye goes directly to the price performance of the group, which is clearly trending upward. 
  • In the slope pane, we are looking at various EMAs of slopes on the slope (SoS) of the 65d EMA of price.
  • The MAGNITUDE of the SoS is important.  Here, we see that only the 2d SoS above 0; all others are TRENDING positive, but the actual value is still below 0.  We expect this for New Longs, as they are newly emerging securities within this group.
  • We expect both volume AND price to be jumping for this group, as this is a new recommendation status.  Hence we see volume AND price jumping upard dramatically.
Key to this chart is that:
  1. the 2d SoS is trading well above all the other SoS EMAs,
  2. all but the 34d SoS EMA is pointing upward -- this is necssary for a sustained bull,
  3. 13d Force Index is green, which means it's positive.  These stocks are appreciating in price AND they have volume increasing, hence the 13d FI --> (+).
You can download the zip file, located in the Files section of the GGT Yahoo! site, to get a complete list of New Longs.  Once you have done so go to the "By Recommendation" page and you'll have what you need for all 6 classifications.

Picking stocks in this group is risky, but it does represent the new breakouts and can be lucrative if you choose correctly.

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

Affirmed Long Recommendations

Affirmed Long recommendations arise because the equity is experiencing both volume AND price appreciation above historical optimized levels.  These stocks are in demand, and chances are, they have been in demand for some time.  Let's have a look:



Make sure you take the time to compare the ribbon bars above (Bongo Weekly, Bongo Daily, Accumulation/Distribution, Force Index 2d & 13d, and Bollinger).  What you see is that we have very good indicators on the Bongos, the stocks are being accumulated, and that the 13d Force Index has been positive (+) for some time, which means that volume and price have been moving up for these stocks for some time.

Take a look at the SoS window.  First, every SoS is inan up-trend, which is powerful.  Hence, each of the stocks in this group are accelerating upward in price.  Next, note that each SoS has a magnitude well above 0 -- each is positive.  Ensure that you contrast this with the New Longs, and you can see the power in this methodology.  Note that stocks in this group have been moving upward for some time.

In the pricing window, these stocks are well above the 17d, and are continuing upward.  These are quality stocks.  Note that the dark blue line (50d) and red line (200d) are in up trends.  This is good.

Finally, take a look at the bottom volume numbers -- we have spike in volume, and when combined with price appreciating, show why we have "Affirmed Longs". 

I like picking stocks in this group, as they have demonstrated an ability to move upward.

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

Long Recommendations

Here are the stocks that are ranked LONG:
































Long recommendations are much like Affirmed Longs, in that they are stock that are trading above historical optimized levels, but price and/or volume could be lacking on the day of the recommendation. 

Note above that we have the third ribbon from above, the accumulation/distribution of the stocks in the index, actually going from dark green (maximum accumulation) to a lighter green (less accumulation).  Note that in the SoS window we have the 2d SoS pointing DOWNWARD -- we're losing momentum on a 2-day basis.

Note in the pricing window the doji on 10SEP16 and the down price on 10SEP17 -- these stocks are not moving upward.  They could, but as you can see, they have not been moving up.  I would avoid picking stocks in this group.

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

New Cash Recommendations



New Cash recommendations are just beginning to break down.  We see further evidence of distribution of the stocks (note the transition from green to yellow in the 3rd ribbon bar), and we see a breakdown in the Elder 13d Force Index, which is a major cannon shot across our bow.  The 2d SoS value is dropping, and has been for several days, and more importantly, many of the SoS values are below 0, which means these stocks have failed.

If I haven't already sold a stock with a New Cash recommendation, I certainly do so when it pops up on my radar.  These stocks are in trouble.

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

Affirmed Cash Recommendation


 Affirmed Cash recommendations have been in a down trend for at least 2 days, and usually much longer.  Their prices are falling hard, and if you look carefully above, you see a sea of red in the ribbons, and more importantly, you see nothing but negative SoS values, AND you see SOS values that are pointing downward.  Note that in the pricing window that the solid blue line (50d MA) is moving downward, so these stocks are losing value on a longer-term basis.  Avoid, avoid, avoid.

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

Cash Recommendation



Cash recommended stocks are poised to breakout, or not.  Note that in the SoS window how the slopes are all trending up, but everything is below 0.  This is bullish.  Note in the pricing window how stocks are moving upward slightly, and how the 50d MA is starting to move up.  This too is bullish.  Investing in stocks in this group, in an up market, is generally safe.  Conversely, if the stocks as a whole are moving down, investing in this group is a money loser. 

Chose stocks in this group with caution, but there are early breakouts.  Remember, many stocks will move to this area in a new bull leg but will hold here if volume isn't present -- prices may still be moving upward.  Hence, there are goood candidates.

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

I hope that the above helps you to understand HGS and GGT, and how you can use one to evaluate the other.

Let me know if you have any questions.

Regards,

pgd

Friday, September 17, 2010

ST LCR Timer moves to LONG-CASH, Elder candidates are few

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Somehow the markets climbed out of the hole they fell into during the day, started by the open, and by 4 pm the Dow and the NASDAQ had finished in positive territory (S&P was only down -0.04%).  Nevertheless, the underlying secuirities fired a bow shot that we have to acknowledge -- the Long-Cash Ratio of stocks in the database fell a significant amount, so the window-dressing of the primary markets simply isn't going to hold water.

Here's the dashboard:


The GGT price index, which is made up of 2900 liquid stocks, fell -0.24%.  Volume continues to be light at -16% below the 50d moving average, and as far as I'm concerned, dropping prices on lighter volume is no reason to panic.

Of interest to me is that the LCR dropped -11% to 2.241, a significant drop when we saw stocks on the Dow and NASDAQ claw their way back.  There is clearly a disconnect in the markets.

Confirming the drop in the LCR is the strength index (6th column), which has continued to fall all week and indicates that the market is losing steam.

In general, we have falling prices and a falling LCR.  Whether this is a breather to a newer high or something more ominous is beyond the abilities of my crystal ball.

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

Short Term LCR Change Timer

The ST LCR Change Timer has moved to LONG-CASH (0), and indicates that the ice has cracks in it.  Continued weakness today will cause this to move to CASH.  Since I do not update this value until after the markets close, use http://www.finviz.com/, specifically the ADV/DEC line in the upper left corner, to get an idea on what the LCR will do today.   If this value at http://www.finviz.com/ favors declining issues, then we know that this run is over.  Contrasting, if the LCR moves upward today, we'll be in limbo-land across the weekend, which simply means that Monday will be an interesting day ... :)

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

Intermediate-Term Elder Timer

Our intermediate-term Elder Timer continues to indicate that it is okay for us to buy stocks long.  Unfortunately, only one stock -- KWR -- has positive slopes on the 13d MA and 34d MA (out of 60 candidates with positive 13d Force Index and negative 2d FI), so pickings are VERY slim.  When this has happened in the past we have been at a fork in the road -- either prices will plateau for a few days (consolidation) before they continue a run upward or they will start falling faster.

Again, while we may continue higher from here, there simply are no candidates that are available.  Given this, I'm placing trailing stop losses on my holdings that were acquired this week (MIPS, up 4.26%/4 days, NNI, dn -2.59%/4 days, and SIRI, up 3.55%/4 days) so that the exits are above 1% net gain for the two that are in the money and a 1% TSL for NNI.  If the TSLs fire on MIPS and SIRI I'll lock in small gains but on an annualized basis they will be over 100% each.

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


Trading Plan for Friday, September 17th

I do not intend to purchase stocks today, as there is only one Elder candidate (KWR) that is worthy of consideration.  I've placed a 3% TSL on MIPS and a 2% TSL on SIRI, as well as a 1% TSL on NNI.  Time to let the markets do what they do.

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

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

Regards,

pgd

Thursday, September 16, 2010

Mid-day comments on Elder List

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Here at 2 pm, the only stock on the list from this morning that is up is SLH, but volume is terrible, at 127K shares, where 324k shares is the 10d MA.  At 2 pm I should be at 70%, or 226K shares, but demand just isn't there.  Hence I am choosing to pass.

Note that I sold my position in BIN, purchased Monday at $23.7299, for a slight gain at $23.99.  My other positions in MIPS, NNI, and SIRI from Monday are still active, but NNI is underwater and I may dump it.

Regards,

pgd

Short-Term Timer LONG (but long-in-the-tooth), Elder Intermediate Timer LONG

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Let's jump right into the dashboard view:


The fourth column over from the left is the Long-Cash Ratio (LCR).  The LCR continues to show great strength, rising daily and indicating that we are certainly in a bull leg.  Neysayers notwithstanding, this has been a good run (although I missed the majority of it because of my vacation when it launched).  The LCR moved upward a modest 4% to end the day at 2.529, and indicates that we now have over 2.5 : 1 LONG:CASH ranked stocks within the database.  From the LCR data alone we are continuing to move upward, but this sustained run of 10 continuous days of increase is getting old and I would not be surprised at some form of pullback.  Nevertheless, this is a great rally.

The sixth column from the left is the database strength, and it bears watching.  The present value of 0.718 is on the no-man's threshhold of 0.7-ish, which when we are below this, the market is ranging or indeterminant.  After Monday's spike upward we've been sliding backwards each day, and if this downward-slope in trend continues, we certainly could be in trouble from the long side.

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

Short-Term LCR Change Timer

The LCR Change Timer continues on the LONG side, and the earliest we could see a move to CASH would be with the close of markets on Friday (expiration day).  To have this type of signal we need both Thursday to trade lower in terms of the LCR, as well as Friday.  Since the LCR Change Timer went long on 9/1 the GGT Price Index Equity Curve has moved from $1.552 to $1.63, or a change of over +5% (column 9).  As I presented at our meeting this past weekend, tying this with the VTI (Vanguard Total Index) ETF can be profitable, as this equity curve has moved from $1.745 to $1.803, a change of +3.3% (columns 10 and 11) .

This is all hindsight, as I was on vacation on 9/1 and did not participate in this bull leg.  Correspondingly, I do NOT chase this signal, as the duration is too short to do so and at the end of the day, chasing ususally means losses.  I am sitting on the sidelines with respect to this timer, and given that we have just completed our 10th day of gains, I think that we are long in the tooth on this leg and are due for a pull back.  Please review my blog of July 16th, where I talk about the average length of the short-term LCR change timer signals.

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

Intermediate-Term Elder Timer

The Elder timer system continues to be LONG.  This is evidenced by our primary gate signal, which is a 13d EMA placed on the Elder Force Index (FI -- column 12).  This tells me it is okay to purchase equities on the LONG side.

The Elder FI(13) has a positive slope -- column 13.  This is bullish and indicates that through Wednesday's action, the market was growing stronger in terms of upward momentum.   Although you can't see it with the data I've presented, within the GGT system the FI(13) is at a value of +459K, it's highest level since 7/23.  We would literally need a market crash to move this value negative in the next day or two, so our intermediate-term timer position of LONG is most likely assured for the rest of the week and into next week, independent of Friday being an expiration day.

Note that the slopes of the 13d EMA and 34d EMA on GGT Price are positive (columns 14 and 15).  This is a necessary condition for a sustained bull and gives us confidence at this leg. 

Based upon the above, I will continue to hunt for equities that are good entry candidates.

The following stocks are not recommendations, but are on my watchlist for possible entry if they continue above yesterday's highs:

PCLN
AXTI
NBIX
LDSH
SLH
OPLK

My entry criteria on the above list is as per usual for intermediate-term holdings:
  1. entry price must be a few pennies above the previous day high
  2. volume must be up, relative to the 10d volume.  My minimum threshhold for volume is:

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

    To answer a private question that came in (please don't send me private questions, use the GGT or Tri-State Financial Investor's forum), the LCR value has NO IMPACT on this investment timer, as it is done purely as a function of Elder's Force Index.
=================

Trading plan for Thursday, September 16th

I'm watching the Elder stocks above and will enter under the conditions I stipulated.

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

Please, remember that you are responsible for your own investment decisions, not me.  Please take ownership for your decisions.

Regards,

pgd

Monday, September 13, 2010

Elder Intermediate Timer LONG, Too Late for Short Term LCR Timer

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For those of you who were able to attend, I want to thank you for your time Saturday.  As always, I left feeling energyized and focused, a feeling that had escaped me for several months while we got our act together.  I enjoy our meetings and time together, as it forces me to think on my feet in front of all of you, as well as ensure that I'm properly prepared and disciplined, which I always need to focus upon.  I also enjoy the fellowship and respect that we have for each of us, which is very unique for a diverse group of people such as ours. 

Again, thanks to each of you who could attend.

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

I presented something new to all -- how to use the Short-Term LCR Change Timer with various ETFs, starting with the Vanguard Total Index (VTI).  The graph I presented is below (as with all my graphs, please right-click on it to view in another tab, window, or to save to disk):




Note that the data in this graph is slightly different than what I presented at our meeting:  In preparing this blog entry for daily consumption/macro updating I found an error in the timer calculation so the VTI/LCR calculator was not updating with adaptive values.  The result above is a larger equity curve than what I presented Saturday, with relatively the same amount of drawdown.

Here are the various traces:
  • The top two traces are the VTI daily closing price and a 150d EMA on the VTI.  If you look closely, you'll see that the VTI is trading just above the 150d EMA.
  • The bottom trace is the VTI timed with the short-term LCR Change Timer signal.  You can see that even though this timer does move you to cash (the flat periods), if the market is drawing down, this equity curve also draws down.  We see that the period of September 2008 to March 2009 saw nearly a 30% loss in this method, which would cause most people (including me) to abandon the approach.
  • The red trace is adapted from Larry Connor's work and simply gates the short-term LCR Change Timer, the VTI, and the 150d EMA on the VTI, so that we only trade the VTI when the price of the VTI is above the 150d EMA AND we get a long signal from the short-term LCR change timer.
In reviewing the video tape I note that I did NOT make two items explicitly clear this past Saturday: 
  1. if the price trades below the 150d EMA yet the LCR Change timer is LONG, this is a SELL signal.  No exceptions.  
  2. if the price is below the 150d EMA and the LCR Change timer moves LONG, THEN in subsequent days the price moves above the 150d EMA, it is okay to go LONG as the price moves above the 150d EMA.
Correspondingly, I've added the VTI status and equity curve to the dashboard under the "Short Term Timer" area:




As you review the above Short Term Timer columns, note that the LCR Change Timer has been long since 9/1 (7 trading days) and that the VTI signal has been long the past 5 trading days.  This is because the VTI is bouncing above and below the 150d EMA line.  At the present time do NOT chase this signal, as it is nearing it's historical average and could move south at any time.

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

Intermediate-Term Elder Timer

Under the column "13d Elder Force Index" you will find that we have been LONG since 9/1, indicating the the Elder 13d Force Index is positive.  This is our primary gate to enter stocks long on an intermediate-term basis.

The column to the immediate right of this one is the slope of the 13d Force Index (FI).  The 13d FI is trending upward from a positive value, which is bullish.  This gives me confidence that this leg is a real bull leg.

The next column is the 13d pricing slope is bullish, which means that it is positive in absolute value.  This means that day-over-day, the 13d EMA of price of the entire GGT database is moving upward.  A rising tide lifts all boats and all of that ...

The next column is the 34d pricing slope and it too is bullish, which means that it is also positive in value.

Having both the 13d price slope and the 34d price slope, with the 13d Force Index all being positive means that the entire database is in an uptrend and that we should be paying attention to the long side of the market.  Although somewhat risky at this point, the Elder Intermediate-Term Timer is indicating it is okay to enter stocks on the LONG side.

The question of course is "what stocks?"

The list is growing thin -- most of the candidates are losing momentum, as measured by the "slope of the slope of the 13d and 34d lines".  Here is the list, and I'll follow by an example of loss of momentum:



This is a list of stocks from the GGT Universe that have a positive 13d Force Index and a negative 2d Force Index, that have a Earnings-RelativeStrength-Growth (ERG) above 270, and that have volume > 50K shares.   The list above is sorted ERG descending.  Of somewhat of a concern is the column all the way to the right -- this is the Accumulation/Distribution index for the individual stock and reflects money flow in and out of the security.  Only three of these have money flowing in:  TSL, FFIV, and EGO.  Let's look at TSL:



Although the 13d FI > 0 and 2d FI < 0 for TSL, we can see that the slopes of the 13d and 34d EMAs on price, while > 0 (bullish), actually have a negative slope -- e.g., they are becoming less positive.  I interpret this as a lack of momentum in the stock and this gives me great pause for any long entry.  We can see this in the price action -- we've apparently hit a resistance right around $28.28, so Friday's action not withstanding, this is probably a poor candidate for an Elder entry.

Hence, I am modifying Elder's rules a bit -- we want momentum to be increasing, not decreasing, as measured by the "slope of the slopes" of a short EMA (13d) and a long EMA (34d).

If we expand the Elder criteria and scan rapidly through the stocks, looking for those with positive slopes on their 13d slope and 34d slope, I get the following downselected list:

BIN
BUCY
CIGX
JOYG
MIPS
NNI
NTGR
SIRI

Let's look at Sirius/XM (SIRI), as this has a compelling chart:


Despite the Doji on Friday (indicision), the slope of the slope lines are positive-trending.  This is a good sign, and any strength on Monday can be considered a bullish indication.

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

Trading plan for Monday, September 13th

Short-term LCR Change Timer System:  the timer is LONG, and we've missed entry on the VTI signal.  Hence I am continue to be patient and sit in cash.

Intermediate-Term Elder Timer:  the stocks above look compelling -- if they move upward past their Friday's highs on significant volume (see below) I will enter a position.  My schedule for volume is as follows:

by 10:00 12.5% of the 10d MA Volume
10:30 -- 25%
11:15 -- 33%
12:15 -- 50%
1:15 -- 60%
2:15 -- 70%
3:15 -- 90%

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

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

Regards,

pgd

Thursday, September 9, 2010

ST Timer Long-Cash (0); IT Timer Long if Aggressive, Cash if Conservative

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I'm in Denver on my way to Sacramento so this will be brief and no graphics.

The GGT Price Index moved up on Wednesday +0.62%, ending the day at $24.37.  Volume continues to be very light, with the traded value -24% below the 50d MA.  Hardly a resounding bull but an increase is an increase, so I'll take it.

The GGT LCR inched upward Wednesday only +3%, so it has increased only +5% over the past two trading days.  Again, not a resounding bull but worthy of noting. 

Everything is in sync, e.g., price, LCR, and the strength index moved up, so the universe is whole.  I would consider this a very weak bull though, so I'm not yet betting the ranch.

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

Short Term LCR Change Timer

The ST LCR Change Timer is presently LONG, and has been for the past 5 days.  The equity curve associated with this timer has only changed from $1.547 to $1.573, so this isn't a huge gain over this period of time.  Again, I think that this is a very weak bull.

I am not chasing this signal, and I am in cash.  I was on vacation when the signal changed and I do not play catch-up on a short-term timer.

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Intermediate-Term Elder Timer

The IT Elder Timer is signalling long for aggressive investors, but is still in cash for conservative investors.  I fall into the latter category, hence I am presently sitting on the side lines.  NONE of my watch list was up in volume AND price as of the close yesterday, hence I am not yet on the intermediate-term bandwagon.

As I am traveling today, with meetings this afternoon, I will not be participating in the market today.  If you are aggressive, please review yesterday's blog in terms of how to construct an Elder watch list of candidate stocks.  If you are conservative, there is nothing wrong with sitting on the side lines at the present time.

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Remember, you are responsible for your own trading decisions.  Please take ownership for your investment decisions.

Regards,

pgd

Wednesday, September 8, 2010

Mixed Signals

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Let's dive right in to the dashboard:


GGT price fell more than the average markets, which I take as a shot across the bow.  Recall that the GGT stocks are:
  1. liquid, in that they trade at least 100K shares average volume
  2. are above $1 in price
  3. are on the three major exchanges
Higher volatility on what I would consider 3000 benchmark stocks is not what I want to see in a bull leg.

Volume was incredibly low, -29% below the 50d MA.  Declining prices on lower volume typically is a good sign, but I like the decline to be slight, not -1.49%.  My mental bear meter is increasing in value, unfortunately.

As part of a divergence we have the Long-Cash Ratio (LCR) moving upward 2%, causing another mixed signal to be thrown in the bag.  The LCR requires price, volume, AND rate of change of price to all be advancing, so when applied to 3000 stocks, and when they move up in a fundamental (albeit slight) manner, I take note.  We cannot sustain a price/LCR divergence for any length of time.  Either:
  1. Price will resume an upward march, matching the direction of the LCR, or
  2. The LCR will reverse and move down, matching the direction of the price index.
Your crystal ball is as good as mine as to what will occur.  Mixed signals like this are dangerous for new entries into positions, so caution is certainly advised.

While the LCR inched upward ever-so-slightly, the strength of the database fell from 0.7 to 0.6.  Sustained values above 0.7 typically portend a pullback of some degree, hence this could be what we are seeing.  I like bull legs to start when the strength value (presently 0.601) is below 0.3 or lower; we haven't been there since 8/13/10.

Based on these indicators alone, I think caution is advised.  I think a bull from here, absent of any major news from the White House or Fed, is a long shot.  I see more downside potential than I do upside at this point in the cycle, futures being up as I type this not withstanding.

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Short Term LCR Change Timer Status

The LCR Change Timer move to LONG-CASH (0) from LONG (+1), based partly on the lack of strength in the LCR movement.  A down day today (Wednesday), as measured from the ADV/DEC line at http://www.finviz.com/, will certainly drive this indicator to CASH.  Alternatively, if we have an up day, we will hold this status.

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Intermediate-Term Elder Timer

The Elder system continues to indicate that the 13d Force Index is positive, opening further consideration of other Elder variables.  Both the 13d price slope and the 34d price slopes are positive, which is bullish.  The 13d price EMA is still BELOW the 34d price EMA, which is bearish for our conservative/confirmation stance.  So while we are in day 3 of the aggressive Elder system saying we are long, the conservative approach is still holding us in cash, indicating we should wait.  I intend to do so, as NONE of my Elder candidates from yesterday cleared their Friday highs.  Hence, I'm still 100% in cash at the present moment.

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Trading Plan for Wednesday

On a short-term basis, I am in cash.  I missed the signal last Wednesday due to my vacation, and I do not chase signals.

On the intermediate-term basis, I will continue to watch for Elder candidates, but I'm skeptical.  In case you're interested, here is my watchlist:




Remember the rules for entry:  today's entry must be above yesterday's high (buy on rising strength), the 13d Force Index MUST be positive, the slopes of the 13d and 34d price EMAs MUST be positive.  You can't search on 34d price slope, so I use the 50d in my HGSI scan.

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

I will be traveling to Sacramento on Thursday on the 6 a.m. flight out of Dulles Airport so there is a high likelihood that I will not blog in the morning.  If the update is done tonight at a reasonable hour I will post a short note about today's action.  I return late Friday night.

Note that there is a HGSI/GGT meeting this Saturday at 10:00 a.m. in Alexandria.  Leave me a note below if you have not yet received information (log into our GGT Yahoo! site for details).

Regards,

pgd

Tuesday, September 7, 2010

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Perhaps I should go on vacation more often ... the market seems to be on a tear and I missed the past 3 days of action.  Well, lest you think I've been lollygagging around, here's proof that I've been working hard:



That's me, blue coat, 2nd from left, and my son Greg, age 11, is in the front row, red coat.

If you think that this was a cake walk simply google "Mount Whitney Mountaineer's Route"; elevation change of 6,300' in less than 6.3 miles horizontal distance is nearly a 19% average grade up (and down, which is actually more difficult on the knees....)

Sooooooooo, back to reality........

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Here's our dashboard view:


As luck would have it, the last three trading days have seen a significant increase in the GGT price index.  The value going into this morning's open (Tuesday, 9/7) is $24.57, a full $1.35 gain since last Tuesday.  Volume tapered off on Friday compared to Thursday, with Thursday less than Wednesday's action.  I'm somewhat concerned to see rising prices on lower volume, but we bank increases in price, not volume.  Nevertheless, if/when we have a pullback, we'd want to see lower volume on the declining prices, indicating that everybody is sitting pat.

Of particular relevance is that the Long-Cash Ratio (LCR) has jumped significantly, and has closed over 1.0.  This is an internal metric, and whether the value is 0.9 or 1.1 is largely irrelevant.  What is significant about this zone is that we now have a balance of stocks with a LONG recommendation, as well as those with a CASH recommendation.  Bottom line is that this is a necessary step to a bull leg, and we need to watch it.

The 5th data column from the left is the database strength, which is normalized between 0 and 1.  What is significant here is that we're holding strong over my less-than-scientific level of 0.7, which actually indicates that we are due for a bit of a short-term pull-back.  This doesn't mean that it will happen today, but it certainly suggests that the likelihood of dropping prices is greater as time marches forward.

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Short-Term LCR Change Timer

The short-term time signaled a move LONG with Wednesday's action, and has been solidly positive since then.  I WILL NOT CHASE THIS SIGNAL, e.g., it's too short and we're long in the tooth on this one to do us any good.  If you played it based on other signals/instinct, good for you.  I'd protect profits, especially since as I type this the futures are lower by a significant amount.

If today is another up day the timer will remain long.  If the day is a strong down day the timer could transition to LONG-CASH (0), which means you should consider locking in profits.

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Intermediate-Term Elder Timer

I divide the Elder universe into two parts:
  1. Aggressive:  move LONG if the 13d Force Index is positive, the slope of the 13d EMA of price is positive, and the slope of the 34d EMA of price is positive, or
  2. Conservative:  all of #1 above, plus I require that the 13d EMA of price be above the 34d EMA of price.
Hence, if you look at the graphic above, you see that:
  1. the 13d Elder Force Index (FI) has been positive for 3 days (bullish)
  2. the slope of the Elder FI is positive (bearish if too strong of a slope)
  3. both the 13d and 34d pricing slopes are positive (bullish)
Note that these three things qualify the Elder system to give an aggresive LONG signal.  Aggressive means that it could be early, hence, it could fail.  It also means that if it sticks we may have more gain than the conservative approach.

To get a conservative LONG signal, I need condition #2 above to be met.  Here's HGSI's view of Elder to help in the visualization:


 This is a pretty important image, and it's one we need to look at closely.

At the top, Bull Power is very positive, much so than Bear Power.  This is BULLISH.  Under Bull/Bear Power we have the Elder FI, and we see that it has been green for 3 days, just like the GGT dashboard picture above.  This is BULLISH.  Under this we have the 2d Force Index as RED, which means that it is POSITIVE.  REMEMBER -- Elder advocates buying on a pullback, so this is effectively blocking us from entering the GGT index (we can search on stocks that have positive 13d yet negative 2d FI).  Of HUGE value is that the 13d EMA slope is very much above the 34d EMA slope, which I consider very bullish.  Finally, we see that the 13d EMA PRICE and the 34d EMA of PRICE are just crossing from below, and if today is an up day (it has not been so far), then we could have a confirmation of this bull leg.

Bottom line, I think it just a wee bit early to say that we need to jump in, but the market has my attention.

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Trading Plan for Tuesday, September 7th

If the markets are up today I plan to enter longer-term Elder positions that have a
  • positive 13d Force Index
  • negative 2d Force Index
  • are moving higher than Friday's high value (e.g., my entry will be higher than Friday's high)
  • has a 13d pricing slope that is positive
  • has a 50d pricing slope that is positive (HGSI cannot search on 34d, hence 50d slope will be used)
Good luck hunting!

Regards,

pgd