Monday, May 2, 2011

All Signals Long, Watch for Profit Taking, which Could be a Good Entry Point

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There is a GGT meeting Saturday, May 14, at the Great Falls Public Library, 10 a.m.  I will work to see if it can be broadcast via WebEx or equivalent.  Stay tuned.


There will be no blog entry early for Tuesday, May 3rd, as I will be traveling late Monday to the west coast (Washington).


Summary

  • Despite the markets advancing (somewhat) on Friday, the GGT price index fell on average volume, indicating that filtered, higher-quality stocks (above $1, above $1Msh dollar-volume, three primary exchanges) actually saw some profit taking.  In the present climate this is healthy, but we need to watch for any sustained pullback.
  • The 5d and 8d slopes of the pricing moving averages have dived negative, while everything longer than the 8d is still very positive.  This in general is bullish.
  • My price accumulator change oscillator, which tells me if due to price changes the market has moved too fast, is indicating that we have favorable reward/risk characteristics for Monday, May 2nd.  The value is -14, the lowest it can go.
  • The GGT strength indicator is contrasting with the oscillator, and is at a value of 0.812.  This is slightly overbought (anything over ~ 0.8) and indicates we could see a pullback in the next few days.
  • Both short-term timers, the LCR Change Timer and the LCR VTI timer, are LONG, and have been since 4/20 and 4/21 respectively. 
  • The Elder intermediate-termed Force Index timer is LONG, and has been since 4/27 close.
  •  Despite prices dropping on Friday, the Long-Cash Ratio, which is a measure of price-volume participation of all stocks in the database, rose another 12%.  This is bullish and says we should be long in the market.
  • The slope of the LCR moving averages are all positive, which is extremely bullish.
Conclusions:  We should be long in the market, and the bullishness of the LCR says the risk of reversal, baring any bad news, is relatively low.  We are nearing profit-taking levels, so entry after a slight pullback into strong Effective Volume + GGT stocks is the most prudent approach.

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Slope Analysis

The following table shows the relative behavior of the GGT pricing system.  When the slopes are positive across multiple time frames we have a price-appreciating market, which is good for our bank accounts:



The table above shows that on Friday, April 29th, that the 5d and 8d pricing slopes moved negative, which is BEARISH, and if you look on the right side of the table, you see that on both Thursday and Friday we had the "slopes of the slopes" -- e.g., the direction that the end of the slope was pointing -- pointing down on these time frames.  You also see that ALL slopes of slopes were pointing down, which shows some profit taking occuring on Friday that was significant enough to affect the moving averages through the 65d.  A one-day pullback like this is normal (simply look above), and offers us a good entry point if the upward trend resumes.

Conclusion:  watch for stocks to pullback, then make a high that clears the pull-back day.  Enter once the stock clears the pullback high.

LCR Slope

The LCR slopes differ from pricing moving average slopes in that we're looking at a ratio of the number of stocks with LONG/CASH recommendations with the LCR moving average slopes.  This gives us a trend of the market, and more importantly, when the LCR slopes or the LCR "slope of the slopes" are negative, we know that we need to protect profits.

As you can see below, we are "smooth sailing" as of the close of business Friday:



The table here shows that we had a slight consolidation day on Thursday (see the slope of the slopes on the right), but as far as we are concerned, we are expanding in terms of this bull leg and playing the long side is prudent.

Conclusion:  The LCR is at a high level compared to recent times, but everything is looking good as far as internals to the GGT universe.  

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GGT Momentum

Always watchful for a shift in momentum, the graph below is an indicator that I use to keep track of the GGT universe in terms of it's upward march in prices.




What we see in the graph above is that we may be entering a period of decreasing momentum, which historically has been associated with pullbacks in prices.  A one-day-downtick does not make a trend, but keep an eye on the overall market, and if it rockets hard upward from here over the next day or two, I would expect this indicator to not stay in the "yellow zone" too long, e.g., I would anticipate a pullback, as these levels that we are at have historically resulted in profit taking.

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GGT + Effective Volume

I you are not a member of the Effective Volume site, you need to be.  Many positive changes are coming and this is a very powerful indicator.  If you join because of my promptings, please tell Pascal at the site.  In full disclosure I don't get anything for it, but it's nice for all of us to know where he is deriving business.

Note that at the present time your EV membership monies go mostly to charity.  

Here's my watchlist of GGT + EV stocks for Monday, May 2nd:



The top 10 strongest GGT industries, as of the Friday 4/29 close are:



The top 10 greatest 1-day delta in strength of GGT industries on Friday are:



I note with some interest that selected stocks in the GGT + EV group are not included in the strongest industries as determined above, which simply indicates that you need to look more for sector overlaps, and not necessarily industry overlaps (e.g., Retail, Electrical/Electronic, Energy, Health are all sectors that are in favor between the strongest industry groups as well as the individual GGT + EV stock lists).

A list of the stocks in each industry group can be found in the Yahoo! GGT group Files section, which you need to be a member to view.

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Trading Plan for Monday

I plan to enter stocks early on the long side if they are showing strength.

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

Regards,

pgd