Tuesday, December 9, 2014

Target Cash Level to 67% as of close of Monday, Dec 8

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Summary:  Continually eroding of the indicators show that raising cash is required.  The greatest short-term worry is the ongoing cumulative tick indicators -- we're continuing to see more transactions end with a lower price, which means the big boys and girls are selling large positions.

Timer Table: A look back 3 months for perspective:


The only "long" timer is the long-term timer, which actually is converging to also go negative if the present market trend remains down.

You can see that even though we had a entry signal Friday (12/5), it was negated with the "Avoid8d" indicator, showing that historically, the signal is prone to failure.  I had already posted about this same type of warning around the 11/21 and 11/24 timeframe so I didn't report on the change.

The bottom line is that I believe that this cycle is weak, and has been since around 11/13, so I'm not inclined to do much in the markets except cash in on profits.

LCR Slope Table:

The Long-Cash Ratio continues to fall, and is now at 1.008.  This means that for every 1008 stocks that are rated long, there are 1000 are rated in cash recommended.  The trend is down, and has been for a week.

Short-term, we're resetting.  As long as the longer-termed slopes remain green (65d, 88d, 143d) we will not be experiencing a full reset, and consequently, the ability to start a new cycle will be limited.

Cumulative Tick:



The number of 52-week new lows exceeded the number of 52-week new highs.  This is inverse of what I want when I am buying stocks.

Around mid-day the selling algos kicked in.  For over an hour we were experiencing greater then 500 stock transactions / min that were ending on a down tick, meaning that there was more supply than buyers (on the NYSE).  This is indicative of unwinding larger positions in a controlled and steady manner.

Finally, the cumulative tick line (white) is well below the cumulative tick moving average (red), and the CT ribbon has negative slopes, indicating that the trend is down in buying and selling. I don't buy stocks when white is below red, and we're failing to move higher on any measured time frame.

Strategy:

I'm raising cash.  I'm selling my weaker positions first, with a target to 33% equity and 67% cash.  My selling is simple -- a 1% trailing stop loss that activates after 9:45 a.m., good til canceled (GTC).

If the rout continues today I may unwind all my positions simply to lock in gains.  This latter statement is in conflict with my trading rules they say I should keep equity in the market, but I also want to protect my gains and not see winning positions turn into losing positions.  My remaining holdings have a high beta (AAPL, AFSI, EW, JBLU, JKHY, LKQ) and they can go down quickly.

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Remember, you are responsible for your own trading decisions and I am not.  Please do your own diligence, and please take ownership for your actions.