Tuesday, April 10, 2012

Update for Tuesday, April 10th -- Cash is King

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I blog (almost) daily at www.effectivevolume.com; please register there to view my updates.

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Aside from positions in UVXY and AMLP, both of which are longer-termed holdings, I'm in cash.

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The Price Slope Model is losing the bullish battleground, with the 34d slope now transitioning negative. I've used this in the past as a "canary in the coal mine" and if we hold the negative value today the overall direction of the markets is most likely continued down.





Note that the GGT price index fell -1.28% on volume that was -18% below the 50d MA for volume. This was not a "nail the coffin shut" sell off. I do note too that the database strength index, which combines price, volume, and rate of change of price information, did drop to under 0.3, which historically has been a ripe area for reversals to the up side. Time will tell.

Certainly, the last 4 days have seen increasing bearishness, so we need some green on the right side of the table or we'll continue to transition negative on the left side of the table. If all the slopes turn red, this bull leg is completely dead.

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The LCR slope model has been bearish for some time and continues so:







With more stocks in the database with a "cash" recommendation than with a "long", there is plenty of fuel to go higher if Mr. Market decides to reverse.

Monday saw a -30% drop in the LCR value, which is the 52nd largest drop out of about 450 that I've registered. Notable.

There's nothing bullish about this table. It has been telling us that cash is king for some time.

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The short-term timer, which is based on a simple 4d MA and the Long-Cash Ratio (LCR) value, has been in cash for several days. Graphically, this is what it looks like:






You can see that we are heavily extended below the 4d MA and we'll need a huge rally to move the stocks from the bearish side to the bullish side. I'm not overly optimistic of any transitions today.

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The Elder Intermediate-termed timer, which uses the 13d Force Index, the slope of the 13d Force Index, a 13d Pricing Slope (GGT), the 34d Pricing Slope (GGT), and a big AND statement, is completely in CASH, and has been signalling cash since 4/4.





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The Longer-termed 13d/65d crossing timer is still long, and it is telling us that the 13d is still 6% or so above the 65d:








Of interest here that your eye can see the lower highs and lower lows (LHLL), and if you look back at the inception of this timer, the results are pretty clear.

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Correspondingly, the three timer systems that I employ are short-term cash, intermediate-term cash, and long-term still invested, BUT, I combine the long-term and the Elder intermediate-term timers to give a better result. Hence, I'm in cash.

The performance of the various timers is quite good, and they are my roadmap forward:








You can see that the long-term 13/65d is still long and is the best performer, but it also has you fully exposed with higher drawdowns than any other timer.

Right-click on the following image to open in a new browser or window:






The combination timer is at the far right and is the one that is the best performer. You can see the various statistics on the other timers. Although the 13/65d [fixed typo] cross timer is the best performer, it only has 3 total trades, so the statistics are suspect. Nevertheless, we put performance in the bank, and this one does not lie. Note that the exposure of 63% is high relative to the others.

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Overall, I'm on the sidelines. Nothing is telling me to enter the markets, and nothing is telling me that I should be preparing to enter either. I'm focusing on other things today.

Regards,

pgd