Sunday, January 9, 2011

1/7/11 Weekend Update

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Summary

  • There are no changes to the GGT Top 25 STOCK portfolio.
  • There are 2 changes to the GGT Top 25 ETF portfolio:  sell MVV and RFG.
  • UFS is a new entry to the GGT, LLC portfolio.  It is an Elder stock.  There are some Connors trades but it is far too late for any form of entry in these if you're even thinking about following me (buy ETF Bandit from Chris White as a solution).
  • The LCR System continues to drop, showing that the database is contracting, and that the number of stocks that are above their historical bullish norms is getting smaller and smaller.  This means your skills at picking stocks has to be getting better and better, because the reward/risk ratio is getting poorer.
  • The Pricing System is bullish, but very weak.  Indicators show waning momentum.  This is a dangerous time to move long into stocks.
  • The Timing System, in terms of the short-term timer, is in CASH, and has been since mid-December except for a brief whipsaw.  It is at least two-trading days away from moving long, and both Monday and Tuesday would have to be up days for this to happen.  The intermediate-termed Elder Timer is long, but it is weak and near cross-over to a sell signal.  We need this to turn up this week to stay long in stocks and ETFs.
  • Contra ETFs are early, but are getting more attractive.

  • I'm on-site with my client all week in Spokane, WA, so my intra-day availability will be limited.  Postings may be limited too, so if there is something that you absolutely want followed, subscribe to my Yahoo! group by sending an email to GreekGodTrading-subscribe@yahoogroups.com, and once subscribed, you can send a note directly to GreekGodTrading@yahoogroups.com.  No promises, but it will help me to focus what time I do have available.
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GGT Top 25 ETF Strategy Changes

With the close of markets on Friday, 1/7, GGT is signalling the close of MVV (+11.51%) and RFG (+0.04%).  These will be sold shortly after 9:45 a.m. on Monday.

NOTE:  This portfolio is a TEST portfolio, and we are presently forward-testing.  If you follow any of these trades you do so with no specific obligations that I will provide timely or accurate information.  Your continued following of the Top 25 strategies is subject to acceptance of the Disclaimer that is posted to the left within this blog!

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GGT, LLC Position Changes

I added a new Elder position on Friday -- I wasn't going to, but I couldn't find a compelling reason of why NOT to enter this new stock.  The setup looked solid:























This is the setup from THURSDAY NIGHT, 1/6 (not Friday's close).  Note the following:
  • Bull Power is positive
  • Bear Power is positive
  • Elder 13d Force Index (EMA method) is newly positive
  • Elder 13d Force Index (SMA method) is newly positive and confirming EMA method
  • Elder 2d Force Index is GREEN, which means it is NEGATIVE (I've inverted the color scheme from the default HGSI visualization because when FI(2) < 0, we are "cocking the hammer" on a possible entry.
  • MACD Histogram is newly positive (2 days), which is newly bullish
  • The MACD lines are starting their upward movement from the lower half of the window, and combined with the crossing of the MACD and MACD signal line, this too is bullish
  • %B is "Yellow", which is neutral, but certainly not bearish in this context.  It indicates "fuel in the tank" for this equity.
  • Both slopes (13d, 34d) are positive (bullish), and are pointing upward (bullish because of momentum to the upside).
  • The price is trading above all EMAs (bullish)
  • All of the relevant EMAs (40 and below) are above the 160d, which means that this is in a long-term uptrend.
  • Volume has come back to normal (there's a market for the security)
Everything here meets/exceeds our required entry under Elder's rules.  Taking this one step further, I evaluate effective volume (EV) on these Elder stocks, although there is not a hardfast rule in the GGT Strategy Document that I do so.  Here's the 8d EV chart for UFS, according to my TradeStation plug-in:





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

For initial screening purposes, I've modified Pascal Willain's 40 period of EV, simply because I use a small laptop window when I'm traveling and it's easier to look at the numbers on the right hand side of the scale than see the entire EV trend.  If large effective volume (LEV) is seriously negative over the last 8 days, I don't consider the stock, as it is in distribution.

Above, we see that LEV on the 6th was relatively flat, and we had a break away on the 5th due to LEV which caused a good amount of price appreciation.  THIS is the pattern I look for on the 8d EV chart -- positive LEV, LEV diverging positively from SEV, and prices moving up relative to the left side of the graph (top trace).

For those of you curious, LEV << SEV and both are negative on the 40-day chart, so this stock has been in distribution.  Will it break out?  Who knows....?  It may be doing so now.  There was serious buying mid-day on Friday of UFS.

Sooooooooooo, the problem entering Friday morning was simple:  there was nothing blocking me EXCEPT the fact that the price was well outside of the buy zone that Hsin and I have agreed to:  purchase only if the price is less than 40% of the ATR(20) + EMA(8).  Note that with Elder's strategies this presents a bit of a problem:  Elder's methods explicitly state to buy ABOVE THE HIGH OF THE PREVIOUS DAY if the FI(2) is negative.  This would cause us to move further into overbought territory.  What I did was simply place a limit order at EMA(8) + 0.4*ATR(20) and went about my business -- and it filled.  UFS pulled back and then resumed an upward movement, ending the day positive with respect to my entry.  Here's the EV chart and the trade, as of the close of Friday's action:




















As you can see, just after 2:30 pm, someone stepped in with a order that was attributed purely to LEV, and from there, LEV kept building.  Note how SEV is clueless and is still trending horizontal.  We'll see....

I would like to say that this was planned, and obviously, since I placed the limit in the first place, I thought there was a chance.  In reality, most of these types of entries NEVER work for me, so I wasn't optimistic.  This is the importance of being mechanical though -- it is important to have a system that you know has worked in the past.  In this case it was more luck than skill, but it worked.  Let's see if UFS can continue upward.

It's also important to understand that UFS, despite all the positive indicators, UFS could fail easily if the market tanks.  This is because in general, we are at market tops, so long purchases right now are more risky than normal.  My stop for UFS is at $75.64, which seems to be a good (visual) support level.

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Long-Cash Ratio (LCR) System Status

Here's the most recent image of the LCR dashboard:





In general, the LCR has not been that healthy.  Since 12/23 the LCR has only risen on 3 of those days, spending most of the days giving up further ground.  Clearly a case of 1 step forward and 2 steps back...

The "health" of the LCR system, which tells us as far as the database is concerned what is the overall trend of the markets, is getting sicker.  Note on the left side of the graph the two "bearish" red blocks -- the 5d EMA is less than the 8d, and both of these are less than the 13d.  This is an inverted situation, and overall, tells us that on the 5d and 8d time frames we are having a greater difficulty picking stocks, because the number of available stocks (e.g., those that are GGT "LONG") is getting smaller and smaller.  If the "red" trend on the left continues (13d < 21d is next) the bears will be grinning ...

The middle of the figure is where I spend most of my observation time.  This is the slope area, e.g., here I measure the "slopes of the EMAs".  This is an incredibly powerful concept and if you've not grasped it then you've not optimized your ability to enter stocks.

As you can see in the figure, all the lines have just turned red/Bearish.  This is bad.  This tells me that the slopes of every EMA, from 5 to 65 days in length, is pointing downward.  This means that on every measurement scale that I think is relevant that the database is contracting, which is bearish.  Choose your stocks carefully, as the tide is flowing out, not in.

The right side of the figure is the "Slope of the Slope".  Here, we too see that every measured time frame, from 5d to 65d, is red/Bearish.  This means that not only are the aforementioned slopes negative, but they are accelerating to the downside faster day-over-day.  Put another way, if today there were 50 more stocks that moved to New Cash than yesterday, then tomorrow there will be MORE New Cash stocks, averaged across these time periods.  Until we get some sustained green, say of 3-4 days continuous, it's not a good time to buy stocks long.

LCR Conclusion:  stocks are dropping in prices relative to their optimized bullish levels, causing the LCR to drop.  Yes, there are still good stocks out there, but the numbers of stocks to chose from (if you limit yourself to the GGT universe) is getting smaller and smaller.  Be careful, and tighten your stops.

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Pricing System Status

The pricing system is overall bullish; here's the chart:



As you can see by the third column from the left, volume has returned, as we're significantly above the 50d MA of volume for the database.  This is good overall -- there are buyers and sellers in the market.

The layout of the pricing system is exactly like the LCR system indicator -- the left is the status of various EMAs, relative to the next longest, and here, the 5d > 8d > 13d > 21d > 34d > 55d.  This is bullish.

The middle of the figure shows the status of the EMA slopes of the pricing EMAs of the database, and since they are all green, the SLOPES are pointing upward across the board.  This is due somewhat to the appreciation that we saw in the low-volume days of late December, as well as the movement of this week.  I do caution you though -- these indicators are binary -- they are either red or green, and they give you NO information concerning how close to converting to red they are.  This next graph helps us there:





What bothers me about this figure is that GGT database prices are trending sideways (blue trace) while the pricing EMAs drift less positive.  At their present rate of change they'll start crossing into the pink zone later this week or early the week of the 17th.  We'll see, as a sharp drop in the markets in any one day will move these lower faster.

Pricing System Conclusion:  Despite the fact we're showing bullish status, the EMAs are losing momentum.  I like to invest when these are gaining momentum, not losing, so caution is advised.

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Timing System 

Here is a snapshot of the GGT Timing Systems that are followed:





As can be seen from the figure, the Short-Term LCR Change Timer has been in CASH since 12/27, having experienced a short whipsaw in the low-volume days of the December drift.  Ditto the same thing for the VTI timer, which is closely related to the LCR Change Timer.  Both of these timers are stating that Monday is not the time to enter positions long.

On the right side of the figure is the Intermediate-Term Elder timer.  Green-green-green-green-green means green, as in bullish.  I note with interest though that the raw value of the Elder FI(13) on the GGT database is very close to signaling negative, which would be a broadcast to sell ALL Elder positions, and possibly enter contra ETF positions.  Nevertheless, the Elder system states that it is okay to enter the waters and swim with the sharks using long positions.  We simply must be very careful overall.

Timer Conclusion:  

The short-term LCR change timer is in cash.  You should be too, in my opinion.  The intermediate-termed Elder timer is long, but Elder's timer does not consider where in the FI(13) wave we are, and the FI(13) wave is dropping in value.  I'm not moving wildly long at this time, but will play Elder candidates if they setup nicely.

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The Contra World

With the normal long-world looking so wishy-washy and top heavy, is this the time to jump into contra positions?  Time for another chart:




This is my standard view in HGSI.  The data was constructed by taking 82 contra ETFs and creating my own index, and voila'!  THIS is the power of HGSI, and is one of the primary methods on how I use the program.

Of particular interest is that:
  1. Bull Power just moved positive on Friday.  This means that the high of the bar on Friday was above the 13d by a good amount, and this is considered bullish.
  2. Elder's FI(13), EMA method, just turned positive on Friday.  This means that we have an "early thawing of the ice" as far as contras are concerned.  I'll want to see this continue for 3-4 days to ensure that it sticks, and I'd like to see the next line, the FI(13) SMA method, also turn positive.
  3. MACD Histogram is newly positive for 2 days.  This is exciting, isn't it?  
  4. The MACD and MACD signal lines have a bullish crossing (obviously, since the histogram is positive), and are in the lower half of the window.  This is a great setup if it continues.
  5. The slopes, while NEGATIVE (bearish) in their absolute value on a $/day basis, are both pointing upward, and the 13d slope will cross the zero line this week if this continues.  This tells me that we're in a good position for entry if the other indicators start flipping long.
  6. Let me say that the price trading above the 8d EMA is exciting, and if we can get an EMA crossing from below (8x13 will be first, obviously), we could be in a great position for an early entry in selected contra ETFs.
Tempering my enthusiasm is the following:
  1. BEAR Power is negative, and equal in magnitude to Bull Power.  This means that the low of the bar on Friday was below the 13d EMA by the same amount as the high was above, which basically is neutral. We want BOTH Bull and Bear Power to be POSITIVE for the contra index before we seriously enter long positions.
  2. As stated, we don't have confirmation from Elder FI(13) SMA method -- it is still negative.  We want this to be positive (Green) and confirming the EMA method to have confidence to move into these equities.
  3. The slopes are negative in absolute value.  This means, with respect to the 13d slope, that we are still losing money on a $/day basis, but because it is pointing upward, we are losing less each day.  
Contras simply are too early.

THIS BEING SAID, let's look at the GGT contras that have already flipped to some form of long status,

Every night my colleague Joe tediously and reliably calculates and posts the ETF files in our GreekGodTrading group at Yahoo!.  If you are not a member, join using the information in the summary at the top.  Contained in that file posting is a HTML file called "ETFs by Industry", and it allows you to see in a moments notice what contra ETFs are long.  Here's the view:












I've shown only those that have a GGT "Long" ranking.  As you can see, we had a number of ETFs move long on Friday, most notably TWM, which is the -2x contra position of the Russell 2000.  Pay attention to this -- it is a whale.

The $-Volume of DGZ, EPV, MZZ, and DPK is too low for me to consider using Pascal's EV methods.  Contrasting, the others are of good size, so let me run down the 8d EV view of these ETFs, in order of $-Vol descending:

TBT:  Clear distribution
TMV:  Neutral, no opinion
TWM: SOLID ACCUMULATION, and clear divergence from SEV (Small Effective Volume)
EUO:  steady, but small accumulation
TBF:  solid DIStribution -- LEV is dropping like a rock and SEV doesn't have a clue ....
RWM:  neutral, no opinion
GLL: neutral, no opinion
PST:  same as TBF -- solid LEV sell-off on Thurs/Friday but SEV doesn't have a clue ...

Based upon this, TWM looks interesting.  VERY interesting.  Let's look at the chart:






















  • Bull/Bear Power are still straddling the 0-line so this gives me pause.
  • Elder's FI(13) is newly POSITIVE for both methods (EMA and SMA).  Since this was confirmed with a GGT New Long, I'm excited and my tail is waggin'.
  • MACD looks wonderful on all counts (by now, if you've read this far, you should know what that means).
  • %B is improving...  I like the upward trend from light green (which is inverse of the default in HGSI)
  • LOOK AT THE SLOPES.  WOW.  Both are in a steady uptrend.  While they are both negative, they will be crossing zero soon.  If all of this continues TWM will be a buy very shortly.

Contra-World Conclusions:  We're early, but through GGT stocks and ETFs, specifically the New Long recommendations, we can get a good view on what looks good, what is setting up, and what we need to watch.  The contras are improving, but we're early.

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Remember, YOU are responsible for your own investment decisions, and I am not.  Please do your diligence, and take ownership for your actions.

Read the full disclaimer located on the left side of this blog.  Continued following of my ramblings indicates your acceptance of the conditions stipulated in that disclaimer.

Regards,

pgd

Positions Disclaimer:  I own or influence positions in EWA, EWL, and UFS.