Wednesday, November 16, 2011

Update for Wednesday, November 16th

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If you don't find a daily entry here please check http://www.effectivevolume.com, specifically in the GGT forum.

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Summary:
  • The GGT price index rose +0.79% on volume that was -24% below the 50d MA of volume. One standard deviation is 22%, so we're outside of the range and it simply tells me that there is a considerable amount of waiting on the sidelines right now. Initiating new positions is more risky when volume is not confirming price movement.
  • Price slopes all turned positive on Tuesday, which is a good first step. We need this to be sustained, and I remind you that 1 day is not a trend.
  • Like the slopes, the slopes of the slopes are all pointing up, Day #1. Again, 1 day is not a trend.
  • The day-over-day acceleration of the price slope model has a relative level of 41, which is the same level as yesterday. There is no acceleration or deceleration, which shows that this is a weak market. Extreme caution at entering new positions is advised.
  • The strength index rose back to 0.54, right in the middle of the range where it could go higher or lower.
  • The LCR slope model continues to show bearishness across the board, but we did get some improvement in the LCR slopes of the slopes. With the 2d, 3d, 5d, and 8d slopes all bearish/negative, initiating new positions is ill advised.
  • The EV 20d MF indicator fell back into negative territory again by a thin margin and is again telling us money is not doing much right now. Note that the 20d MF average is well above the indicator AND it has a negative slope -- not a great situation for new long positions.
  • The 5d/65d MA intermediate-termed timer is still long by a thin margin.
  • The Elder Intermediate-Termed Force Index timer is maintaining a MIXED mode. MIXED indicates internal conflict in the indicators (some long, some cash), so simply stay away for now.
  • The cumulative $TICK indicator is just beginning to show some bullishness, but we're quite early. We need sustained upward movement in the markets in order for this to confirm bullishness.

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Stocks that I'm watching are the following; I may take a very small position in some of these today if they appear that they are breaking out:




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


Note that overall money flow, as measured by Pascal's 20d MF indicator at http://www.effectivevolume.com, is not confirming this, so we're obviously quite early. 


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The Price Slope Model is on day 1 of showing improvement across the table:






Note on the far right about the Sigma-column showing no change -- this is a weighted relative metric of the slopes of the slopes for all indicated time frames and while the SoS' all moved positive (slopes pointing upward), the change in the SoS' was negligible. Not much going on here, and moving long at this time is far more riskier than a large jump in this Sigma value.

The LCR Slope Model is quite bearish:




While the right side does show some improvement in the slopes of the slopes (all are positive by 1 day and the "Sigma" column advanced, which is positive), the left side still shows that we are in a funk and it will take sustained action to get a rise in the number of stocks in the database who are outperforming historical levels. Until the left side of this table (2d, 3d, 5d, 8d, ....) starts to turn Bullish/positive your money is best protected sitting on the sidelines.

Giving great confirmation to the statement that "1-day does not make a trend" is the following cumulative tick chart:






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

This chart shows the ETF TNA on the top, and a small, limited position that I took yesterday. The middle trace shows a filtered response -- in this case 500 stocks per minute -- which are required to move one way or another before the line moves up or down. It's easy to see what the markets did in terms of reversal as this middle chart filters out the noise of the $TICK indicator. The bottom is the cumulative $TICK indicator, and it shows clearly that we had a reversal (white line) right around noon and for the most part, the markets never looked back. The crossing of the moving averages of each other from below has only occurred with the shortest MA, so we are quite early and it is not prudent to jump into the markets with both feet here.

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My trading plan is to participate in the markets on a very small-scale percentage per position level. My goal is to have 4-8 positions, and @ 8 positions this would be 12.5% of my capital /position. I'm looking to break that full position into quarters and 8th's, so my position number and size will be quite limited. Unless something appears on my radar that is opportunistic I will stick to the stocks provided above.

Regards,

pgd