Monday, December 1, 2014

Intermediate-Term Timer Moves to Cash -- as of Dec 1st Close

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Summary:  The markets continued to sell off today, not so much in the major indexes, but certainly in the number of stocks dropping in price and triggering "New Cash" recommendations.  This has caused the Intermediate-Term timer to move to CASH, and this tells me to have no more than 50% equity in the markets.

Timer Table:




Short-term timer:  CASH
Intermediate-term timer:  NEW CASH, as of today.
Long-term timer:  LONG
Long-Cash Ratio:  1.039.  For every 1039 stocks that are rated LONG, 1000 are rated CASH.  The trend is DOWN.
Percentage Stocks that are LONG within the database:  51.0%, down 4.2% today and down 8.2% over the past two days.  This is a big move.

The table above tells me that an index position, opened at the start of 11/24, and closed on 11/28 would have resulted in a loss of 0.94%.  The longer intermediate-termed signal, which started on 10/21, saw an index gain of +2.59%.  Note that both of these numbers are with the GGT index, which is not tradeable, but is closely related to the ETF "IWM" (Russell 2000 small cap) and the ETF SPY (S&P 500).

Slope Table:



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Red on the left indicates that all the slopes of the long-cash ratios are down.  Red on the right indicates that acceleration is negative, relative to the previous day's slope.  Red on the right is bad, and it leads directly to red on the left.

Red on the left is what triggers me to get out of the markets, and today was one of those triggers.

Until we see green on the right, I'm starting to raise more cash.

Cumulative Tick



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

There are a number of things wrong on a daily time scale with the CT figure above.  First, the number of 52week New Lows is greater than the number of 52 week New Highs, at least on the NYSE.  This is bad, and I do not buy stocks when this occurs.  Hence, I've canceled all open buy orders.

Today started off with some selling, which eased a bit, then we started to run into the end of the day with another sell off.  The white instantaneous CT line finished at the daily low, and this is not good.  Furthermore, it is below the solid red line, which is a slow, multi-day CT average.  I don't buy stocks when the white is below red, ("you're dead" for you naval aviators), so again, if the 52w NHNL wasn't enough to get you to cancel your buy orders, then this should be.

Strategy:

I'm raising cash.  My target with the short-term and intermediate-term timers on the CASH side are 50%, but I'll go as low as 33%.  Hence, I'll be happy to settle between these two values.  I'm at about 41% as I write this.

I'm unloading all my leveraged ETFs.  If you look at the CT figure, at the top, you see what I'm holding.  QLD, SSO, and TQQQ are gone soon if the downtrend continues.  I unload using a 1% trailing stop loss (TSL), placed to activate at 9:45 a.m., Good-'til-canceled (GTC).

I'm unloading all my underwater positions.  Hence, XLF and XLI are to be unloaded using the same method as just described.

I still have about a 4% unrealized gain in the accounts in the other positions and will hold onto those as long as the signals show we're stabilizing.  If the long-term timer flips you'll know about it, and that will be my signal to move to the sidelines.  We're not there yet, but we could be if we have a few more ugly days.

No buying until we get a reversal that is supported by the slope table.  I'm traveling Tuesday and will be in Austin, TX for the rest of the week so it will be good to be on autopilot for the next few days.

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As always, 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