Thursday, May 29, 2014

All timers are aligned "LONG" May 29th, 2014

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With the close of markets on Thursday, May 29th, all my timers have transitioned to the "Long" side.  This means that short-, medium-, and long-term timers are all indicating resumption of the uptrend that ended in March.

Whether the trend will continue into June is unknown.  Your crystal ball is as good as mine.

From a long-term stance, the brutally-simple 13d / 65d timer has transitioned to "long".  This means that the difference between the 13d EMA and the 65d EMA of my internal index (the "GGT Index") is now positive. As I've stated in previous emails, this is my last safety net.  It kept me out of the 2008-2009 mess, and any time it is negative is a time to significantly raise cash.



As I've stated in previous blog entries, the timer has signaled a move to cash or fully invested only 7 times since November 2008, so the number of signals to evaluate is low.  You can also see from above that we can whipsaw, as we did in 2012 and earlier this year.  Despite this, it's a good safety net and worthy of consideration in your arsenal.

From a timer status point of view, we're green:



From a short- and intermediate-term point of view, we've been "green" for about a week.  We're approaching what I call a "local overbought" condition which is where stocks have run up off lows and are now ready to ease back a bit, generating the "higher low" conditions.  This will be absolutely key in the next week -- we do not want to see huge pullbacks in the market that take out previous lows.

A number of stocks are looking quite attractive here.  The following list is my "greenscreen" list, and it is presently sorted in terms of the highest volume stocks to lowest volume, relative to the past 10 days of activity:


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

A description of the fields is here.

To save you the trouble of typing the symbols they are listed here.

The stocks listed at the very top of the greenfield figure are performing quite well on a number of fronts, both in the present market as well as with their fundamentals.

My strategy is simple -- buy breakouts and stocks which are signalling "New Long" conditions.  As many of you know, I buy strength, not weakness.  I have placed a BUY STOP on the following positions:

ADS above 257.13
BIIB above 320.16
BMA above 31.38
FFIN above 60.31
HURN above 67.91
MANH above 33.10
MCHX above 10.78
PAG above 46.69
SPWR above 34.15
WWWW above 35.05

I'm paying a great deal of attention to

ANIK
FANG
JASO
POZN

because these stocks are in some form of a squeeze and have great fundamentals.

As many of you know, I watch Effective Volume when I'm considering a stock.  I've developed my own ranking system, and when match with the greenfield indicator, the following stocks are attracting money in this most recent up leg:


BIIB
EOG
ANIK
SWHC
FANG
FCH
JASO
BMA
ITMN
MMP
EQM
FFIV
TRIP
BCEI
MU
XRS


This isn't to say that others are not attaching money -- it is simply another method of slicing/dicing the stocks in terms of hidden inflow of capital.  These are at the top of the list.

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There are plenty of ideas out there.  Of course, this present cycle could reverse, and all of the noise of "sell in May and go away" could be 100% true.  Again, your crystal ball is as good as mine.

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As with all my postings, it should be evident that you need to do your own diligence and that you are responsible for your own decisions.  I am not.  Please take ownership for your actions.

Regards,

pgd

Monday, May 26, 2014

May 23 2014 Intermediate Timer Transitions to the Long Side, but ...

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... we're not out of the woods yet.

With the close of markets on Friday, May 23rd, my short-term and intermediate-termed timers are now on the "Long" side, e.g., they are signaling a time to move into the markets.  My long-term timer is still in "Cash" and is not anywhere near close to confirming this move, hence my tentativeness.

Action:  I'll enter stocks that are in some form of long status from my GGT list, with updates available nightly in the GGT Public Dropbox.

(Aend me a note at pduncan [at] vt [dot] edu with the word "dropbox" in the subject line if you want to be added.  You'll also get forced added to a private, closed Yahoo site as it's the only way I can communicate with the subscribers.)

I've updated the lists this past three-day weekend.  The "Leaders" list offers a good overview of stocks that have great fundamentals but note, many are beaten down.  The "Greenfield Leaders" list are those that are holding up quite well in this declining market.  Here's a partial list of what I'm looking closely at right now:

FCH
SKX
FFIV
AAL
ITMN
MU
VIPS
CLR
EQM
MTRX
FANG

and on and on and on...  You'll have to verify that these are in some form of "long" status from the stocks file in the dropbox.

In terms of buying methodology, buy strength.  This means placing a BUY STOP, Good-til-Canceled (GTC) at about 0.1% higher than the previous day's high (multiply the high by 1.001 and round up).  I also tend to place a time restriction on the order, e.g., it has to occur after 9:40 a.m. or so, simply to miss the initial clearing of the book that occurs at the open.  If the stock passes through your BUY STOP it will convert to a market order and the next price will be be taken as your order price.   If it does not pass through your BUY STOP then the order will be valid at the end of the day, and you'll need to adjust your new entry price to 0.1% higher than the day's high.  Each day this occurs you're getting a better entry price, provided that the stock remains in some form of "long" status.  If it kicks over to "New Cash", then simply cancel the order and the reserved monies will reappear in your equity balance for investments.

I'm suspect on this signal simply because of two key elements:

1) there is no volume in the present market
2) my long-term timer, the difference between the 13d and the 65d EMA (I know, simplistic), is negative.

I feel that you need both of these conditions to move higher in a sustained manner.  We have neither, so I'm not committing much coin to the market.

Simply investing the the IWM would be a good play; it's diversified, but note, GGT indications for the Russell 2K ETFs are BEARISH-favored, not bullish, so the ETFs are not indicating any long-term upside.

Cautious indeed.

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

Regards,

pgd

Tuesday, May 13, 2014

May 12th: Constructive Action In The Markets, But ...

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With the market action of Monday, May 12th, a number of my indicators have moved long into the market. Generally I'd be quite busy setting up orders, but not so much this time. Here's why:

1) Across-the-board volume was quite low. In fact, it was -14% below average but prices jumped (on average) +1.6%. Some individual stock names did well but overall, not as well as I would like.

2) My longer-termed crossing timer, built with the 13d/65d exponential moving averages (EMAs), still has the 13d trend below the 65d trend. This is my final safety net that keeps me on the right side of the markets (or at least keeps me from being 100% invested) and until this moves up to 13d > 65d, I'm precluded from jumping in with both feet.

3) The number of stocks making new 52-week highs, while larger than the previous week or two, was still quite anemic. In fact, Monday's number was on par with last Thursday's value, and this was a (generally) flat day for the markets.

All of this being stated, my short-term timer has signaled that some positions should be entered:



The short-term 4d timer is based on the action of an indicator I have developed called the Long-Cash Ratio (LCR). I have a private database of about 3000 stocks, and each is individually ranked as "long" or "cash". A stock obtains a "long" rating when it is performing above historical bullish levels and a "cash" rating when it is below these bullish levels.

The short-term timer triggers whenever their is a transition from a broad "cash" status in the 2d, 3d, and 5d moving averages of this LCR value. As it turns out, Monday's action was fairly strong in this regard, all other macro signals ignored:



As you can see from the above table, we've whipsawed quite a bit with this timer, and hence, patience is required when you take it's signal recommendations.

In general, the win/loss record for the timer has a positive bias, but it does rack up more losses than wins:



Out of 100 trades since late 2008, 55 have been losers and 45 have been winners. The good news is that it responds quickly to missed signals, limiting the downside relative to the upside. Average losing trades only amount to -1.45% yet average winning trades are +3.49% if using a broad index (I use the ETF '[[IWM]]' as the tracking ETF).

I'll place an order to put a toe in the market his morning with IWM, with a buy-stop at $113.15, which is just above yesterday's high. I'll keep adjusting it down on a day-for-day basis if it isn't touched and if the short-term signal remains valid.

You could also do this with the [[SPY]] or the [[DIA]], as each is hitting new 52-week highs (but note that the IWM and [[QQQ]] are not). My entries for the SPY would be $190.06 and for the DIA $167.09. Same ratchet-downward approach applies (also known as an "Elder Entry").

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Stocks that are of interest to me are the following:

FNHC
LUV
TRN

as these are what I would consider to be holding up well in the present climate. Other stocks that are at the top of my watchlist are:


XRS
CXDC
FNHC
EDGW
GMCR
AKRX
PAG
PQ

In my humble opinion this is a rather short list for such a strong day.
Caution is advised until we see significant follow through.

As always, you are responsible for your own investment decisions and I am not. Please conduct your own diligence, and please take ownership for your actions.

Regards,

pgd