Wednesday, October 15, 2014

Buy Signal Continuing, Wednesday, October 15th Close

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Overview: Yesterday's initial 50%-equity buy signal was not negated with today's action. Late day rally caused across-the-board gains.
Timer Status:
Short-term timer: LONG
Intermediate-term timer: CASH
Long-term timer: CASH
Long-Cash Ratio: Increased +8% to 0.204, 3034 stocks in the database.
Slope Table

Aside from the 2d slope of the slope (SOS) turning negative, we continued the less-negative movement of the long-cash ratio (LCR) exponential moving averages (EMAs). The 5d slope, shown on the left side of the table, actually improved despite the markets today.
Continued "green" on the right, and more "green" on the left are required to confirm the initial short-term entry signal. Vigilance is key here.
Cumulative Tick Chart, SP500, R2K, NAS

This is a slightly different presentation of the Cumulative Tick chart, and it shows the cumulative tick of the individual stocks that comprise the S&P500, the Russell 2000, and the NASDAQ-100.
Key here is that at about 1:27 pm ET the buying algos kicked in full-force, and you can see this very clearly in the middle plot in the S&P500 window to the left. The trajectory upward at a steady angle shows that the S&P500 stocks were steadily bought almost to the end of the day. Only in the last few minutes did we see some selling, and you can see it clearly in the S&P500 and NASDAQ charts on the left and right respectively.
While the number of 52-week New Lows dominates across the exchanges relative to the 52-week New Highs, this behavior of the individual cumulative tick on each exchange is constructive.
Cumulative Tick, NYSE
Despite the selloff in the major indexes, the NYSE simply kept the selling pressure at a constant level (more or less) until the aforementioned 1:27 pm ET. From then on a reversal was apparent, and buying started and continued throughout the afternoon.
We are a long way from being in "full long" territory but the behavior today was not nearly as bad as suggested by the prices of the indexes. I'm encouraged by what I see.
Strategy
I was a buyer today, but I have only about 8% of my assets in equities. I buy strength, and many individual stocks that I'm interested in FELL in price today, so no entry.
I've reset the entry for tomorrow to be 0.1% higher than today's high, GTC, BUY STOP valid after 9:45 a.m. ET. Obviously, these are still rated "LONG" and I'll most likely get a better entry. A few more stocks in my dividend portfolio signaled long, and new entries will be created.
The Greenfield Bargains portfolio is growing dramatically with candidates. These stocks have solid EPS and revenue fundamentals, but have been beaten down into the ground on this latest pullback:
Many of my candidate stocks are still indicating some form of "CASH" status and will not be entered. I simply do not have enough stocks to take me to 50% equity position, which is normal in this type of pullback. I expect this will change quickly over the next week as we get a new set of leaders to emerge.
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Standard disclaimers apply. You are responsible for your own investment decisions, and I am not. Please do your own diligence, and please take ownership for your actions.
Regards,
pgd