Monday, December 1, 2014

Targeting 25 Percent Cash, November 28 Close

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Summary:  The short-term timer has reverted back to CASH, indicating that I need to target 25% cash and 75% equity.  I'm well below this level, so I'm cancelling pending buy orders so that my overall invested amount does not exceed 75%.

Timer Status:

Short-Term Timer:  New Cash status as of close of November 28
Intermediate-Term Timer:  Long
Long-Term Timer:  Long
Long-Cash Ratio:  Fell -20% on 11/28 to close at 1.233.  For every 1000 stocks recommended as CASH, 1233 are recommended LONG, but the trend is downward.
Percentage of Stocks with a LONG recommendation:  55.2%, fell -4.7% on 11/28.

If you scroll back a few blogs, I indicated that I was not overly confident in this signal.  Historically, only 1 in 5 signals at this point in the cycle have succeeded.  This does not appear to be one of the success stories.

Slope Table:


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Independent of Friday being a short trading day, it is clear to me that there was considerable profit taking.  The LCR drop of over -20% in one day was significant, and the reversion of the 2d, 3d, 5d, 8d, 13d, and 21d LCR slopes to a negative (downward) trend is troublesome for bulls.

I do not buy stocks en masse when the LCR is falling, so I'm taking orders off the table.  The first to come off are my stock orders, as they tend to have a higher beta.  Next are the higher beta ETFs.

Cumulative Tick


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This is the standard cumulative tick window.  Noteable is simply that the end of the trading day on Friday was characterized by significant selling as the bell time approached.  I think most traders did not want to hold across the weekend.  If the white line drops below the red line I'll remove all pending buy orders in all accounts.

Strategy

I have updated the Dropbox stock and ETF files for the most attractive stocks, as well as many of the portfolios that I'm running.  If you are not reviewing these files then you probably should be.  If you do not have access to these files send me a private email to p d u n c a n [ a T } v t  {dot] e d u  (fix the address, of course) with the word "DROPBOX" in the subject and I'll send you an invite.

The reversion of the system from all timers "long" to the short-term timer now indicating "cash" moves my equity target to 25% on a short term basis. Note that this is a SHORT TERM target.  I was originally at 50%, and was driving to 100% equity, but the signal turned south with a number of orders pending.

To get to the 75% level I'm removing all my stock orders.  Most have a beta much higher than 1.0 and are not worth holding at this level.

After I do this my orders, if all were executed, are at about 66% equity.  If I were above 75% I'd start killing the pending orders for ETFs that have a higher volatility and beta than the market, e.g. 2x and 3x leveraged ETFs.  I'm not in that situation right now, but in general, that's how the rules work.

Updated Greenfield Leaders, Greenfield Bargains, Greenfield Dividends, and Dividend Champion lists are in the Dropbox.  I'm not buying any of these positions, but with a market potentially on the rise in December, I'll jump back in as soon as the short-term timer moves long.

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I'll be in Austin, TX this week and the week of the 15th -- let me know if you want to get together.

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

Regards,

pgd