Wednesday, January 19, 2011

Possibly a good day for entry ...

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Summary

  • The GGT Price index rose on higher volume, which is bullish
  • The GGT Strength oscillator FELL, indicating that the underlying strength of the stocks in the database is out-of-sync with the rising prices.  This could be a warning shot.
  • The GGT Long-Cash Ratio (LCR) rose on higher prices and volume, which is bullish
  • The Short-Term LCR Change Timer is LONG.
  • The Intermediate-Term Elder Force Index Timer is LONG
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The LCR System

The Long-Cash Ratio continues to march upward, reaching it's highest level since 1/3/11.  This is the 5th successive day of gains for the LCR and indicates that the database is expanding.  Note that we've rarely seen 6 days of successive gains in the LCR, with the last occurrence being 8/13/10 to 9/15/10.  Based on this alone I would not be surprised at some form of pullback.

All of the slopes of the LCR EMAs are positive and are pointing upward.   This is bullish, and buying stocks here, unless they meet a Elder FI(2) < 0 entry criteria, could be very risky.

My comments of yesterday still apply: I consider that the LCR EMAs are indicating being range bound.  The implications of this are straightforward:  with no directional increase or decrease in the number of stocks in the GGT universe that are achieving LONG or CASH status, the ability for us to make money rests solely on our ability to choose those stocks which are rotating in and have appreciating prices.  I have no illusions of a sustained bull leg from here, and certainly, I think that we'll bounce around here during earnings season, which obviously can be challenging for portfolio gains.

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The Pricing System

The GGT Price index rose to another new high on Tuesday, ending the day at $30.54.  Volume was heavier than normal, about 33% above the 50d MA.  The only way to consider this is bullish.

All of the slopes of the pricing EMAs, through the 65d, are positive.  A potential crack in the ice is that the 5d, 8d, and 13d "slopes of the slopes" are pointing downward, which is the first step at falling through the ice. Sustained downward directions here could be problematic, but one day does not make a sell signal.  We need sustained downward pressure to give us a bail signal, and for now, this is to be considered healthy market action.

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The Timers

The Short-Term LCR Change Timer is LONG, and I have a new position in VTI.  I purchased a 20% position in VTI for my personal account yesterday and of course, I'm now down -0.3%.  I warned yesterday about chasing this signal, but Large Effective Volume was increasing, so I perceived it as a drop in risk.  This may still be the case, but I'll need a confluence of indicators to add to the losing position.  

The Intermediate-Termed Elder Force Index timer is LONG, and in general, indicates that we should be only considering long positions.  Shorting anything here is most likely not prudent.

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Elder Candidates

IM is a relatively strong Elder Candidate with increasing short-term LEV and steady SmEV.  The weekly and daily charts look good.  My buy point is $19.37 once it clears yesterday's high of $19.49.

IFF is experiencing short-term LEV appreciation and steady SmEV accumulation.  The weekly/daily charts look good.  The price just cleared the 160d MA last week, and now the 8d and 13d EMAs have cleared the 160d from below, which is bullish.  Momentum, according to the slopes of the 13d and 34d appear to be waning, so I'll add this to my watch list but wait until the momentum resumes.

PLD looks good for entry, although it has had a mature run so I'm not going to commit any more than 50% total position to this.  There is a price/LEV divergence, where price has fallen today yet LEV keeps continue to climb.  It is presently -1.1% below my buy point and looks to be continuing lower, but with a solid LEV, I'm putting this on my short list.

GLW was added to the GGT, LLC portfolio yesterday, and again, appears on the Elder candidate list for today.  LEV is in a tight range, and SmEV is diverging lower, which typically is bullish.  This one has had a good run so again, I would not commit any more than 50% of a position to this one, and I think dollar-cost-averaging into the position on key Elder buy signals would be prudent.  Momentum, according to the 13d and 34d slopes, is upward, so any pullback could be a good entry.

JAH was added to the GGT, LLC portfolio yesterday, and again, it appears on the Elder candidate list for today.  LEV accumulation has been steady but slow over the last 8 days, and SmEV is flat and horizontal, indicating the lack of retail buyers.  JAH pulled back just below the 10w MA in November and has recently broke back above the 10w MA, which is a bullish signal.  Momentum appears to be changing from upward to sideways, so watch this one for continued strength.  All the EMAs look wonderful.

TEVA was added to the GGT, LLC portfolio yesterday and like GLW and JAH, it appears on the Elder candidate list for today.  LEV accumulation has been explosive while SmEV has been in distribution, always a sign of good things.  TEVA is -0.6% below my buy threshold of $54.62, and I plan to add this to my personal portfolio when/if it moves upward.  Momentum, according to the slopes of the 13d and 34d, are slightly upward-pointing.

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Contra Watch

The number of contra ETFs that have improving chart patterns continues to grow.  Out of a list of 82 ETFs that I track, I have 17 that I would consider "candidates for further exploration".  Despite this, CONTRAS ARE TOO EARLY at this point, so I won't consider them as a major portion of my portfolio.

I do note a divergence in LEV between DZZ, which is a double-short ETN in gold, and GLL , which is a double short ETF in gold.  GLL is increasing in LEV while SmEV decreases, and DZZ is simply being distributed.  Not sure if this has anything to do with one being an ETN and the other an ETF, but it bears watching.

ZSL, a double short in silver, is experiencing a very short-term accumulation that ties nicely to price.  Too risky for me, but for those of you looking at precious metals, it may be worth watching.

I note with some interest that SmEV on SDS, is moving upward dramatically, while LEV is in a clear, 2-day distribution.  This is the double-short of the SP500, so you can easily see where the "more risky" big money is thinking in terms of the market.  Be careful of this though, because the SH, which is the -1x of the SP500, is starting to see some accumulation on any SP500 (SPY) strength.

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Trading Plan for Wednesday, January 19th

Short-Term Timer:  I plan to add to VTI if and only if I see strength on the 39m chart, e.g., my momentum indicators turn up and this momentum bleeds over into the daily chart.  Momentum for me is a positive slope on the slope of the 13d and 34d EMAs.

Intermediate-Term Timer:  I plan to add to positions or add new positions if they meet Elder screening as well as my own momentum/effective volume criteria.

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Remember, you are responsible for your own trading decisions, and I am not.  Please do your own diligence, and please be accountable for your actions.

Regards,

pgd

Position Disclosures:  I presently own or influence positions in AAPL, BPOP, CAT, COG, DIG, ERX, FTNT, GLW, IEZ, IYR, JAH, PALL, TEVA, TMV, UWM, XLE, XME, and XOP.