Friday, March 9, 2012

Update for Friday, March 9th

Yesterday at the EV site (www.effectivevolume.com) I showed a chart from EdgeRater of Ian Woodward's %B * BW for the US Markets. I like continuity so here's the updated chart:




The obvious visual queue is that this sell off may be "all there is" and it's time to go long again. Well, history isn't as clean cut as you may like to infer:



This is the same application of the template back into the Sept/Oct 2011 time frame. Note that we kept high on the NASDAQ but the other markets flashed negative for a few days, we recovered with a terrific day on 9/27, only to retest bottoms a few days later. 

I intend to let the market dictate my actions but be aware, dropping again would not be unprecedented.

There are other events in the past that behave just like the above, so while it may be prudent to put some long positions on, I would not do full positions. Note that GGT is indicating to remain in CASH or on the short side until a clear signal is derived.

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The GGT price slope model has resumed a bullish stance with all of the slopes and all of the slopes of the slopes positive for the price series. We put prices in the bank and nothing else, so we have resumed our uptrend on multiple time frames. Here is the price slope graph:






Note that we've achieved higher levels of short-term price slopes relative to the past two weeks -- I'm looking for continued behavior of higher highs and higher lows with respect to the price slopes as a confirmation that the short-term trend is intact. If you're holding longer-termed holdings with gains I would continue to hold them.






The Long-Cash Ratio had it's first up day in 9 trading days, which isn't a record but it's enough to be notable. While the gain was only +6%, we're near the balance in the database where the number of LONG recommended stocks is nearly par with those rated CASH. A snapshot in time, but historically, this could easily set the stage for a move up from here, as there is plenty of fuel to move higher now.

Of interest to you should be the solid 2 days of the LCR slopes of the slopes all being positive. This has caused the significant drop in the LCR to reverse and start moving upward, which is bullish. The Slopes of the Slopes precede any positive action on the LCR slopes (make sure you understand why), so we are setting up with the proper conditions to move long in the market.

Here are the slopes of the LCR:






My timers are unchanged. The short-term timer is in cash, the intermediate-termed timer is in cash, and the long term timer is long. I'm waiting for the LCR 2d, 3d, and 5d slopes to transition positive before I re-enter the markets on the long side with any passion.








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As an aside, I watch the action of the 5d and 8d LCRs, as this has indicated (in previous times) what "could be". Of course your crystal ball is as good as mine. Take a gander at the following chart and I'd be interested in your thoughts -- the chart seems to portend some further weakness for a short duration, then perhaps it's off to the races again. You decide.




You can see where we are at with the orange horizontal line; you can also see that during periods of strong bull markets we're nearly an area where the probability of reversal increases.

Regards,

pgd