Thursday, May 12, 2011

May 12: Very Few Choices in GGT + EV, a Few Contras Look Interesting

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We have a meeting Saturday morning at the Great Falls Public Library in Great Falls Virginia.  Doors open at 10:00 and we'll get started around 10:15.

WebEx information will be posted in the GGT group today.  The library indicates that they have a high-speed connection in the meeting room.

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Summary

  • The GGT price index fell -1.39% on volume that was -9% below the 50d MA.  This volume level is within a standard deviation so we have a solid distribution day.  In fact, we've had several over the last few weeks:

    5/11:  -1.39% on -9% 50d MA volume
    5/6: -1.93% on -4%
    5/4: -1.01% on +6%
    5/3: -1.17% on +5%
    4/29:  -1.21% on -3%
    4/18: -1.3% on +3%
    4/12: -1.11% on +1%

    7 distribution days in the last month is a wakeup call.  We need to be paying attention right now.
  • ALL of the slopes of the pricing moving averages (MAs) have turned negative again.  This is measured from the 5d to the 65d.  This is BEARISH, as it indicates on all those time scales that we are losing $/day in our portfolios.
  • ALL of the directions of the pricing slopes are pointing down, again through the 65d MA.  This means that not only are we losing money day over day (see the previous bullet), that we're doing it at an accelerating rate downward.  Protection of profits is a good place to be.
  • The Short-Term LCR Change Timer moved long Tuesday night and I entered a VTI position yesterday at the open, and was immediately stopped out in the afternoon.  The timer is now LONG-CASH (0), indicating that if today is a down day there is a high probability that it will move back to cash tonight.
  • Elder's Force Index timer is clearly negative by several days.  Stocks should not be purchased on the long side.
  • Despite the downdraft yesterday, the LCR only fell -4%.  This means that there was not a broad, deep selloff, which is actually dangerous.  Put another way, had the LCR moved down quickly, we could expect a bounce, but since it moved down only gradually, I expect to see continued bleeding.
  • ALL of the slopes of the LCR are still negative - 6th contiguous day.  ALL but the 8d slope are pointing downward.  The database is contracting day-over-day faster than it was yesterday, so stock selection abilities must improve dramatically.
Conclusions:  Cash is king.  New entries into stocks on the long side.

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GGT + EV

There are only two candidates that appear on the screen today:  NSM and MENT.  NSM is a takeover target by TXN, but volume has been quite heavy as of late and LEV on a short term scale has been moving upward.  Longer-termed LEV is poor, as we would expect, so this is not really a serious play as far as I'm concerned.

MENT held up rather well yesterday but did show a net outflow in LEV for the period.  SmEV has started to move up and in to the stock while LEV is decreasing, which is the exact opposite of what I like to see.  TEV is moving up in aggregate though, so this is good overall.    While somewhat moot, as I'm not moving long on anything, I think that there is good potential here once the market finds a base.

On the ETF front, we have three ETFs that are "New Longs":
  • UUP:  EV is not supportive of a move into this ETF, but it has flashed a buy signal in the weekly and daily charts based purely on price.
  • SMN: LEV made a real good move in terms of the short-term LEV yesterday, and longer-termed LEV is solid.
  • DUG:  mixed signals on EV, so this one gets a pass.
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Trading Plan for Thursday

I shed most of my positions over the past two days using 1% trailing stop losses on the weakest of performers, and I exited many positions at the waterline with simple market or limit orders.   The exit of the contras was premature (obviously), but there was no way of knowing what was going to transpire in the afternoon and as of yesterday morning, life wasn't all that bad for the bulls.

My wife's TSP is still fully invested and the adaptive timers on those positions are indicating to stay in the market as of the close of last night.  Her portfolio from our latest entry is down -1.38%, but overall us up over 10% over the rolling last 12 months.

My VXX positions, which were heavily underwater going into the market yesterday, have halved their losses, and with the market looking poor today, I'm expecting that they will continue upward.  These positions are worse-case down -2.9% and while very volatile, are exactly where I need to be with the portfolio.  

My CMI positions (AB = 100, LER = -62, Rating = 14) have not yet triggered to fire to CASH according to GGT, but saw some distribution yesterday which has me concerned for their longevity.  CMI looks great on the longer-termed LEV chart but is clearly experiencing distribution on the 8-day LEV chart; you can see this too in Pascal's data which shows a 2d thrust of -1.63.  From HGSI's perspective, CMI is still a hold:
  • 13d Force Index (both calculation methods) are not confirming (EMA is negative = sell, SMA is positive = hold), 
  • 13d and 34d slopes are both positive
  • all relevant EMAs are aligned properly:  8d > 13d > 21d > 34d > 55d > 140d
So, for today, CMI is a hold.

In a review of the Contra universe, I'm not seeing anything yet in the 3x leveraged contras (from Direxion), so it's too early to move into these.  If I were to purely speculate the -3x bear on Energy looks somewhat interesting, but again, LEV is poor.  SKF, the -2x on financials, is looking pretty good.  FAZ, the -3x on financials, is looking equally good in terms of LEV, but is incredibly volatile and hit my stops a few days ago when I tried to enter.  BZQ has flashed a buy signal on the daily and weekly and LEV is supportive of an entry.

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Remember, you are responsible for your actions, and I am not.  Please do your diligence, and place take ownership for your actions.

Regards,

pgd