Wednesday, February 20, 2013

Short-Term Buy Signal w/ Close of 2/19 Markets

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With the close of markets on Tuesday, 2/19, my GGT LCR model is signalling a short-term entry opportunity on the long side. Both the intermediate-term and long-term timers are still long, and by a fairly good amount, so we have green lights across the board:


I note with some caution that we have whipsawed the short-term timer 2x the past 4 trading days, and this shows we are at thresholds. Being at a threshold simply means that like a sail on a sailboat, when the winds are weak the mainsail will move around to any breeze that arises. Same condition here --- bad news could cause us to reverse the short-term signal, no news or good news could cause us to move higher.

On a positive note, we are definitely strengthening in terms of stocks "resetting" and beginning to move higher. If you look at a table view of the Long-Cash Ratio moving averages, which is a view of the aggregate behavior of over 3000 stocks, we see higher highs and higher lows over the past two weeks, although the LCR slopes *just* started to move positive:


Note specifically the emergence of the "green" on the right side of the table -- this is acceleration, and it shows that over the past 5 trading days that more stocks are starting to flip to their long side than to their cash side. The right side of the table LEADS the left side (why? bonus points to whomever can answer this), so seeing green on the right side of the table is a positive development.

On the left side of the table, the strength of the move yesterday caused all the LCR moving averages through the 8d EMA to turn positive. Historically, coming out of a solid "red" area like is shown, has been a constructive SHORT TERM buy signal.

For those of you who have trouble visualizing table values, here is another presentation of the LCR slopes -- the left side of the table:



Again, note the higher lows and the transition above the "red" line to positive territory.

This pattern is not without precedence. We did the same thing back in late 2009/early 2010:



Of significance here is that after the turn, where the % Longs in the database stopped dropping then moved positive, we continued higher in the GGT index for some time, and the % Long value was a good indicator. In fact, as long as the % Long indicator remains above present levels I think we can maintain our positions, although I will be the first to state that any % Long value over about 0.63 has a greater statistical chance of failing over the next 4 weeks than values below this level. Hence, we simply must be careful.

The question then becomes "which stocks are good entry candidates?". Depends on your approach. If you like my quality GGT stocks with favorable effective volume setups, then the list here should give you a good idea of candidates. The list is sorted most favorable at the top descending.

Alternatively, the following stocks are showing really good localized behavior as measured by firing pocket pivots yesterday:

MDAS
CXW
WDR
CTB
SMP
HTZ
DORM

Many of these have fired pocket pivots over the last few days consecutively, so are worthy of watching.

Finally, if you like Elder's methods at setups/entries (enter on renewed strength off of a short-term pull-back in a long-term uptrend), then this list will interest you:



Here is the symbol list to save you time:

BLC
BOFI
CAMP
CPTS
DK
DXPE
FBRC
HTZ
MOV
MTZ
NTE
OCN
PJC
PRAA
VMED

For the Elder table shown above, RT13 and RT34 are the price slopes (13d and 34d) for the respective equity. FI2 and FI13 are the 2d and 13d Force Index values for the equity, and note, I DIFFER SIGNIFICANTLY in signalling the setup -- YOU WANT THE 2D TO BE NEGATIVE on the day of the setup and THEN ENTER IF AND ONLY IF the price takes out the previous day's high plus a few pennies. I typically will do this only if we have good volume at the time the alert goes off, e.g., it appears that we are going to be at 150% the 20d volume level by the end of the day.

So, good luck and happy hunting.

Remember, you are responsible for your own investment decisions, and I am not. Do your own diligence, and take ownership for your actions.

Regards,

pgd