Tuesday, August 19, 2014

August 18: Confirming the trend upward

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An update.

With the close of markets on 8/18, my indicators are confirming that the long-term trend is intact and is moving upward:



The short-term timer is actually overbought and I'm anticipating a short-term consolidation of recent gains.  The intermediate-termed timer, which uses a combination of the 13d exponential moving average (EMA) and the 34d EMA of the GGT index (an unweighted average of about 3000 stocks with price > $1 and 50d MA above 50Kshares), is being subborn and is not completely flipped to the "long" side.  No matter.  The UWM slope indicator just turned positive for the first time in a long time, and this is a canary-in-the-coal-mine for smaller-cap stocks moving upward in price.  Finally, the stalwart 13d/65d MA crossing of the GGT index into positive territory confirms that short (or contra ETF) positions should not be in my trading plan.

From a LCR (Long-Cash Ratio) perspective, we have room to grow:


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The left column is the Long-Cash Ratio (LCR) of the 3000+ stocks and it indicates that for every 5 stocks that are in CASH, 4 are recommended LONG.  you can see we hit a value of 0.335 back on 8/7 and this ratio has been moving upward ever since.  0.335 is nearly a 3:1 CASH:LONG (or 1:3 LONG:CASH) ratio and is very oversold from a database perspective.  At the same time, on the right side of the table, all the green around and preceding 8/7 told me that the floor was most likely in and that the number of stocks getting hammered in price was abating on a day-over-day perspective.  Hence, when the 2d/3d signaled fired LONG on 8/8, I used the opportunity to tip-toe into the markets.  The action of 8/11 and 8/12, combined with a cumulative TICK indicator, told me to get my orders queued.

I manage a number of portfolios and the holdings are doing well since this latest signal:


Right click on the image to open in a new tab or window.

I exited WRES yesterday for a slight gain (GGT CASH) and USAK just signaled NEW CASH with last night's run, so I'm out today with a 1% trailing stop loss (TSL) that will activate after 9:45 a.m. this morning.  I use the TSL ratchet to let the market right any short-term reversal upward.

Overall, portfolio values are up an average of 2.1% since the signal started on 8/7.  It took me most of last week to move into the markets, and as of last evening I'm now 79% invested.  I'm pushing to get the remaining 21% invested but I don't control the individual price action of my candidate stocks (grin).  For the curious here are the orders that I'm hoping will fill today and will take me higher in total invested percentage:



Right click on the image to open in a new tab or window.

Remember, I only purchase on buy-stop orders, so the price must take out the buy-stop (which is a show of strength) and then it converts to a market order.  Also, the orders above, with the exception of ATHM and WUBA (which use different rules), do not become active in the market until 9:40, so the initial spike due to the book being cleared does not cause me to enter too soon.

The cumulative TICK indicator from 8/11 and 8/12 also indicated that the markets were moving to the long side:


Right click on the image to open in a new tab or window.

After a series of down days in terms of 52 week new high/new lows (NHNL), 8/11 saw that we had more 52 week NHs compared to NLs.  This was confirmed on 8/12, but a tad weaker.  The cumulative tick value on 8/8 went above a 10-day trend line, causing the slope of the trend line (solid red in the figure above) to change slope to the positive.  This was tested on 8/12, where the slope abated somewhat but it still remained positive. This told me to keep buying.


Right click on the image to open in a new tab or window.

The image above is from 8/13 through 8/18 and shows that the trend is intact, irrespective of the LCR indicators (which are not at all related).  You can see that the number of NHs is increasing on a day-over-day basis.  You can also see that the slope of the 10-day cumulative tick line (RED) is very positive and steady.

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As I indicated at the open, we are due for a short-term pullback, as we're a bit overbought here since the 8/7 transition.  It will be a great buying opportunity, as the medium and long-term uptrends are intact (as I write).  Of course, your crystal ball is as good as mine and things can go south quickly, but I'm not anticipating nor am I protecting myself against that.

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As with all my postings, you are responsible for your investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd