Wednesday, May 11, 2011

May 11: Some Timers Pointing Long, Others Still in CASH, Few Candidates to Choose From

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We have a meeting this Saturday at the Great Falls Public Library in Northern Virginia.  Doors open at 10 and the presentation will start around 10:15

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Summary

  • Tuesday was a good day in terms of prices, with the GGT price index jumping another +1.1%.  For the Monday-Tuesday sequence we've moved almost +2.0%, which does not erase the damage of last week, but it certainly helps.
  • The slopes of the pricing moving averages are showing some signs of life.  The 5d and 65d (only) have now crossed back into positive territory.  The 65 moved back because it has only been negative for 2 days -- shallow, and the 5d moved positive because we are seeing pricing strength in this local bounce.
  • ALL the pricing moving average slopes are pointing higher, independent of whether they are negative or positive.  This is necessary for a bull to continue, and so far, we have two consecutive days of this occurring.  The bulls are regaining control on a short term basis.
  • As stated yesterday, the Short-Term LCR Change Timer based on the LCR and tradeable with the VTI has moved LONG.  If you choose to play this (I will this morning), enter at the open this morning.
  • The Intermediate-Termed Elder Force Index timer is in CASH, but only barely.  If today is a solid day on volume and price appreciation, we could see the FI(13) signals move LONG with the close of markets today.  This would be bullish overall if we can get the change.
  • Pascal's Money Flow signal is still SHORT, although money did flow back into the markets yesterday.  Despite the fact that money flowed in, there are few GGT + EV candidates to review, so while I may frustrate some of you, I'm not going to be aggressively bullish at all in this market.
  • The Long-Cash Ratio (LCR), which is a measure of the GGT universe in terms of the number of stocks with a LONG rating compared to those with a CASH rating, has moved up +2% on Monday and +19% on Tuesday.  ALL of the LCR moving average slopes are NEGATIVE, which is bearish.  Despite this, ALL of the slopes are pointing upward from their negative levels, which is encouraging.  I simply do not move long in an aggressive manner when the LCR is negative.
Conclusions:  This is a tough market to make money.  Prices are moving upward, the database is starting to move with the prices (upward), but many of the "all clear" timers are in cash or short.   Markets get choppy as  they see-saw back and forth, and this is the best description I can provide.  I may move long on a few GGT + EV candidates; more below.

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What Say HGSI about the GGT Universe?

Take all the GGT stocks, dump them into a list, and import them into the package.  The result is the ability to look at my own index:


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

I went through this chart format recently with respect to Contra ETFs so I'll not go line-by-line here.  What is most interesting to me is that: 
  1. Elder FI(13), using both the EMA and SMA methods, have *just* moved long with yesterday's action.  This is calculated a bit differently than my personal method, so I'm inclined to tip the balance towards moving long since the past trend has been long.  It is a coin toss though...

    [For those of you wondering, my personal method adjusts for additions and deletions of stocks so not to skew the calculations (much like how the DJ30 index is calculated when a stock is added or removed), whereas the presentation above simply considers the basket held as of the date on the right side of the graph.  The history shown to the left is not the same history that actually existed, hence the difference in calculation methods]
  2. The 13d and 34d slopes are pointing upward (bullish) AND they are about to both move positive in value.  This is based on price, not volume, and I think it important that we consider moving long when these both cross into positive territory.
What gives me pause in the chart above is that:
  1. The MACD is still showing a negative histogram -- this is bearish in general
  2. %B is already "yellow", which means we're entering overbought conditions.  Any further movement upward will cause this to turn pink or red, which is not a time to purchase stocks.
Conclusions:  Using HGSI, we are clearly moving upward towards a resistance level, and with the Elder FI(13) methods now showing bullishness, as well as the 13d/34d slopes moving positive, we should consider entering longs on a shorter-termed basis.

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GGT + EV

So the question becomes which stocks to consider?


Let's look at each and see if they are further candidates:

  • EL beat guidance on May 5th and has run up nicely into that announcement.  AB is a 76, which is just on the lower threshhold of 80 (an arbitrary value I may add) that generally is my cut off.  2d thrust is barely negative, and there has been some money flow out of EL over the past day or two.  Nevertheless, this looks "ok" if it can move higher that the previous day's high and resume LEV inflow.
  • ENDP has an AB Buy Signal level that is lower than I like at 55 -- I prefer numbers close to 100.  The stock is about to clear a Darvas box level of $42.37, but the AB level suggests that caution should be advised.  This stock has been strongly accumulated by large players on both short term and long term EV scales, so give it a review.  The stock is guiding in-line.
  • MGLN looks poor from a couple of different viewpoints.  First, from a long-term view, LEV is below the SmEV levels, showing lack of institutional support over longer time frames.  On a shorter-term view, the LEV is falling, showing distribution.  The AB level is 49, and there is less than $2 upside until we hit the upper active boundary.  This one gets a pass from me.
  • MENT looks good from a LEV perspective on both short-term and longer-term scales.  Volume is steadily increasing, which I consider positive.  LEV is diverging from SmEV, which I love in overall patterns.  The AB level of 98 translates to a projected UB level of $18+, or over a 25% potential move up from here.  MENT is guiding up in earnings AND revenues, which I consider positive.  This is a buy.
  • MSTR isn't providing guidance on earnings and revenues, which I always consider suspect.  Short term LEV has been decreasing after two large-block orders on 5/5 move LEV up dramatically -- e.g., there has been some selling as of late.  This is also reflected in the slight negative value of the 2D-Thrust values.  Upside looks good according the AB signal, but the recent distribution of LEV gives me pause.  I'm passing on MSTR.
  • CA has started new LEV accumulation -- short term looks strong, longer-term is poor but improving.  Active boundary levels show that there is 10-15% upside from here with defined risk to the downside. CA is guiding inline and has earnings announcements on May 12th (tomorrow) after the market closes, so I'm going to give this a pass.
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Trading Plan for Wednesday

While I'd like to move into the markets, pickings are slim.  The LCR slope values all still being negative give me pause despite their pointing upward -- a negative slope means "loss/day" and in this case, stocks are losing ground faster than those that are moving upward in terms of volume and price.  This is relatively easy to understand -- GGT requires volume AND price to move LONG, and only requires poor prices to move to CASH.  Hence, in an environment where volume is poor, the GGT Long-Cash Ratio will always favor the bears.  This is by design.

Further to my point here, there are few GGT + EV stocks to choose from.  This is due, in part, to the lack of volume (GGT stocks are moving to CASH), but it also points to many cross currents that I'm seeing in terms of EV.

MENT looks like a good candidate, so as long as LEV continues upward as prices move up, or at least holds steady as prices drop, I plan to enter.  EL also looks interesting overall.

My Contra ETF positions are underwater, but only slightly.  Most of my longs (CMI, ORCL, SPY) are slightly above/below the waterline and are unremarkable.  My VXX positions are down hard, now nearly -6%, but I consider them a good hedge to hold if the market moving around in a sideways pattern.

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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