Tuesday, May 10, 2011

May 10: Sitting Pat, Trial Balloons on a Few Contra ETFs, Holding My Longs

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There is a meeting this weekend at the Great Falls Public Library in ... Great Falls, VA.  Doors open at 10:00 and the meeting will start after I get set up, around 10:15.  We will broadcast the meeting if a web connection is fast enough.

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Summary

  • The GGT price index rose nearly +1% on volume that was 30% below average.  No, this is not due to C and their reverse split -- I do a simple average so C only gets a 1/2400 piece of the volume pie.  Volume was simply very, very low, as in "outside of 1 standard deviation low".  This is abnormal and indicates tremendous uncertainty in the markets.  
  • The pricing slopes moving averages are all negative, especially the 65d MA, which now has notched a 2-day negative value.  This has not occurred since last August and is bearish for the intermediate term (65d = 13w = 1 Qtr).
  • We did get a bit of a bounce in the DIRECTION of the slopes of the pricing moving averages -- they all turned upward with yesterday's action, just the slightest amount.  This is a necessary condition for the bull to live -- all I can say is that it's on life support.  We need more sustained up days of the DIRECTION of the slopes (which are all negative but now are pointing upward). If this is confusing look at yesterday's blog, specifically the first chart.
  • My price accumulator tool, which tells me on a short-term basis whether I should buy stocks, actually moved from an extreme "oversold" level of -14 to +10 with yesterday's action, indicating that even if you were convinced of the market uptrend, that you would NOT move into the market today.  The risk of tomorrow being a down day is better than 70%...
  • The Short-Term LCR Change Timer, which uses the VTI to move in and out of the market, is ready to move LONG today if the markets are up.  We've not made a lot of progress since February with this timer -- on 2/1 the equity curve was at $1.465, and the close of yesterday was $1.473.  In that time frame it's moved as high as $1.529 and as low as $1.416.  Sometimes timers work, sometimes they do not.  It's a given that if you are out of the market you'll miss the best performance of any timer....  :)
  • The Intermediate-Termed Elder Force Index timer is clearly negative, and will remain so for the foreseeable future.   It will take a huge price/volume day to move this long.
  •  The LCR moving averages are all negative through the 65d MA, which is bearish.  The database is contracting, meaning the number of stocks that are moving to a CASH recommendation is outpacing those that are moving to a LONG recommendation ON ALL MEASURED TIME SCALES.  The implications of this are important -- your stock picking ability must improve dramatically if the pool of available outperforming stocks is getting smaller and smaller.  We want the reverse, so we ride the tide upward, not invest when the currents are flowing outward.  Sit pat.
Conclusions:  although futures are up this morning, there is nothing suggesting that this price movement can be sustained.  The biggest issue I see is the lack of even the shortest moving averages - 5d is my inside - to budge off of their negative values (price MA and LCR MA), suggesting that nothing is powerful (yet) in this climate to reverse the slide.  I intend to hold my positions today, and not initiate any new ones.

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Momentum

I'm a big momentum guy.  Correspondingly, I have a tool that helps me gauge momentum in the GGT universe:



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

The chart shows the GGT price index (red) with momentum (blue).  Momentum is measured as the daily accumulation of CHANGE in the LCR, on multiple time scales.  The slight blue uptick that we see on the right of the chart is normal after coming off a peak -- simply look back at other peaks and you'll see the same behavior.  What is crucial here is whether this new uptick starts a new trend upward, or if we continue downward.  I simply don't know, and as my colleague David Steckler states, this is "something we'll know in the fullness of time".  What I DO know is that I will not attempt to anticipate this turning point -- I'm happy to wait and see what the market provides.

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GGT + Effective Volume Candidates

Slim Pickins.  No, not the tycoon -- the number of stocks in the union of the two universes.  It really is ugly when we only have a few to choose from:



ENDP and MSTR have negative 2d thrust, so even though they are being acquired on a longer time frame, they are being SOLD on a 2d time frame.  CA is netural.  NONE of the candidates have a 2d thrust that is remarkable, and this is also confirmed by the GGT "Long" recommendations -- none are "new long" or "aff. long", which means they are jumping up and down waving their arms for you to review.  

Simply put, a "yawner".  I see nothing here that is compelling to purchase, even on a internal EV review of the basket.  Yes, they are being bought on the longer term scale.  Yes, they are GGT ranked "Long".  Yes, they have a rating above 80, which is favorable.

If you decide to move on these (the price accumulator tool is saying that there is a greater chance that tomorrow will be down than up, the LCR moving averages are all negative so you would clearly be swimming up stream), stick with the ones that have a positive thrust with a good AB rating (above 80 or so).  That only leaves one or two to review.

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Trading Plan for Tuesday

I'm sitting pat.  I moved into a short position in IWM in my two trading accounts and a long position in RWM in my IRA (I can't short in the IRA).  I have set stops and if they trigger, they trigger.  I unloaded a number of my long positions with poor LEV patterns on the longer-termed basis using a 1% trailing stop loss yesterday and lost about -0.2% overall in my combined holdings, all accounts.  C'est la vie.

I also moved into a couple contra positions with initial 100-share block orders, just as a trial balloon.  I'll potentially add to them today  if I see that contra positions are gaining momentum after the "futures are indicated higher" dust settles.  Specifically, I'm in FAZ (LEV down just slightly on the day but overall looks solid), FXP (LEV gained throughout the day and upticked at the end, always a positive sign), SDS (bought 2 100 share blocks and will add, down slightly on the day in terms of LEV, but overall, LEV looks good on multiple time scales), 

ORCL has a 1% TSL on it that never fired yesterday, but as a GGT CASH recommended stock, I'm not looking to hold it longer than it will produce a gain.  CMI looks good across the board and I intend to hold.  SPY is gaining me out of a hole and I'll continue to hold unless it looks like it will reverse (it's presently hedged with SDS position, but the SPY position is much larger as I scale into the SDS position).  VXX is way underwater and I'll most likely add another 100 shares in both my accounts as it drops (total holdings in both accounts is only 500 shares).

My wife's TSP (ggt-tsp.blogspot.com) is 100% invested, with 97% of it sitting in the equivalent of the S&P500.  An adaptive timer system is used there (as volatility drops the thresholds drop too), and as of last night, it's saying to stay in the market, damned the low volume or not.

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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