Thursday, March 22, 2012

Update for Thursday, March 22nd (belated) -- Short Term Timer Moved to CASH

With the close of markets on March 21st, the GGT 4d LCR timer has transitioned to CASH:

This timer is the shortest of timers in my arsenal, and as you can see, it fires quickly. This is a long-only timer -- contra trends are not signaled using this method. 

This last signal, which was from 3/13/2012 to the close last evening, was -0.13% if using the GGT index (0% if using the SPY, +1.2% if using the QQQ, and -0.16% if using IWM). Compare this to a historical average of +3.75% average wins and -1.81% average losses per trade.

Cumulative performance since 11/25/2008 is 73.3% or 18.1% compounded. The rest of the stats for this timer are below:

These numbers are slightly different than what I've posted in the past and reflect my best estimates of past behavior with this signal as of my latest calculations and rules. 

The timer is constructed from the performance of the Long-Cash Ratio (LCR), which is unique to the GGT universe. If the 4d Simple Moving Average (SMA) is crossed from above by the LCR, we have a sell signal such as today. The signals since the beginning of 2011 are shown below:

On a short-term basis the timer is good at getting you into the markets, but because of the short MA duration, does pull you out too soon if the trend continues. Shorter-termed timers also whipsaw, and if you get frustrated by this, you need to lengthen your timer duration (e.g., this isn't the timer for you).

When this timer fires to CASH it is a wakeup call that either:

1) a buying opportunity for any pullback is developing
2) a change in overall trend (short, intermediate, long) could develop.

Your crystal ball is as good as mine at predicting which one of these cases is actually in the works. Pascal's Real-Time Money Flow gives us some insight -- here is the chart over the last 5 days:

Overall, we've returned to the levels of 5 days ago, and since the sell-off mid morning this morning, we've stabilized and money flow is balanced. Unless we see a major influx of money into the markets in the remaining time today, I do not think the 4d signal will whipsaw.

I will not enter a position under this timer until the 4d LCR average is crossed from below.

Remember, you are responsible for your own investing/trading decisions, and I am not. Please take ownership for your individual actions.