Tuesday, August 19, 2014

August 18: Confirming the trend upward

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An update.

With the close of markets on 8/18, my indicators are confirming that the long-term trend is intact and is moving upward:



The short-term timer is actually overbought and I'm anticipating a short-term consolidation of recent gains.  The intermediate-termed timer, which uses a combination of the 13d exponential moving average (EMA) and the 34d EMA of the GGT index (an unweighted average of about 3000 stocks with price > $1 and 50d MA above 50Kshares), is being subborn and is not completely flipped to the "long" side.  No matter.  The UWM slope indicator just turned positive for the first time in a long time, and this is a canary-in-the-coal-mine for smaller-cap stocks moving upward in price.  Finally, the stalwart 13d/65d MA crossing of the GGT index into positive territory confirms that short (or contra ETF) positions should not be in my trading plan.

From a LCR (Long-Cash Ratio) perspective, we have room to grow:


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

The left column is the Long-Cash Ratio (LCR) of the 3000+ stocks and it indicates that for every 5 stocks that are in CASH, 4 are recommended LONG.  you can see we hit a value of 0.335 back on 8/7 and this ratio has been moving upward ever since.  0.335 is nearly a 3:1 CASH:LONG (or 1:3 LONG:CASH) ratio and is very oversold from a database perspective.  At the same time, on the right side of the table, all the green around and preceding 8/7 told me that the floor was most likely in and that the number of stocks getting hammered in price was abating on a day-over-day perspective.  Hence, when the 2d/3d signaled fired LONG on 8/8, I used the opportunity to tip-toe into the markets.  The action of 8/11 and 8/12, combined with a cumulative TICK indicator, told me to get my orders queued.

I manage a number of portfolios and the holdings are doing well since this latest signal:


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

I exited WRES yesterday for a slight gain (GGT CASH) and USAK just signaled NEW CASH with last night's run, so I'm out today with a 1% trailing stop loss (TSL) that will activate after 9:45 a.m. this morning.  I use the TSL ratchet to let the market right any short-term reversal upward.

Overall, portfolio values are up an average of 2.1% since the signal started on 8/7.  It took me most of last week to move into the markets, and as of last evening I'm now 79% invested.  I'm pushing to get the remaining 21% invested but I don't control the individual price action of my candidate stocks (grin).  For the curious here are the orders that I'm hoping will fill today and will take me higher in total invested percentage:



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

Remember, I only purchase on buy-stop orders, so the price must take out the buy-stop (which is a show of strength) and then it converts to a market order.  Also, the orders above, with the exception of ATHM and WUBA (which use different rules), do not become active in the market until 9:40, so the initial spike due to the book being cleared does not cause me to enter too soon.

The cumulative TICK indicator from 8/11 and 8/12 also indicated that the markets were moving to the long side:


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

After a series of down days in terms of 52 week new high/new lows (NHNL), 8/11 saw that we had more 52 week NHs compared to NLs.  This was confirmed on 8/12, but a tad weaker.  The cumulative tick value on 8/8 went above a 10-day trend line, causing the slope of the trend line (solid red in the figure above) to change slope to the positive.  This was tested on 8/12, where the slope abated somewhat but it still remained positive. This told me to keep buying.


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

The image above is from 8/13 through 8/18 and shows that the trend is intact, irrespective of the LCR indicators (which are not at all related).  You can see that the number of NHs is increasing on a day-over-day basis.  You can also see that the slope of the 10-day cumulative tick line (RED) is very positive and steady.

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As I indicated at the open, we are due for a short-term pullback, as we're a bit overbought here since the 8/7 transition.  It will be a great buying opportunity, as the medium and long-term uptrends are intact (as I write).  Of course, your crystal ball is as good as mine and things can go south quickly, but I'm not anticipating nor am I protecting myself against that.

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

Regards,

pgd

Monday, August 11, 2014

August 11th Close: Short-term Timer Signals Entry

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Summary

Long-Term Timer:  CASH
Intermediate-Term Timer:  MIXED (possible transition to LONG or CASH possible)
Short-Term Timer:  LONG (and confirmed)

Here's the graphical version:



This latest transition indicates that it's safe (safer) to go in the water than just a few days ago.  The "Mixed" status of the intermediate-termed timer is somewhat of a warning -- until it moves long we are not in a sustained uptrend on that time interval.  Hence, expectations of holding anything longer than a few days at most (with the data that we have today) is misplaced.

I intend to start buying positions that show strength.  I covered how I do this in previous writings so read backwards.  I use a BUY STOP that turns on after 9:40 a.m.

In addition to yesterday's "Greenfield Leaders" list, there are a few additional stocks that appeared today:

BX
ENPH
ENV
IDTI
LDL
PEIX
PL

I don't have a GGT recommendation for PEIX and it will be the weekend before I can stop the number crunching and insert it.  Sorry for the inconvenience.  PL, ENV, and INPH are long, with BX, IDTI, and LDL in cash.  The GGT stock file in the Dropbox folder has been updated.

Also from yesterday's list -- remove BFR, as it's not performing well, despite the drop in volume which is showing loss of selling conviction.  The chart looks terrible, so I'm not sorry to see it go.  Note that it was already a GGT "Cash" stock so you should not have been playing with it in the first place.

As far as the LCR table is concerned, here's the update:

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

Of interest is that the LCR -- the Long/Cash Ratio -- has moved off the bottom of 0.335 now for two consecutive days, which is good.  A value of 0.335 means that nearly 3 stocks are in CASH for every one that is LONG -- this is really an oversold condition.  Parity is a value of 1.  3:1 to the reverse is overbought (3 LONG for every 1 CASH) and is the other extreme.  I think the bottom is in (for now) and we're going to move higher in a zig-zag fashion.

Whereas Friday saw just the 2d and 3d LCR slopes turning positive, today saw the 5d and 8d slopes also change positive.  This is what triggered the SHORT TERM BUY signal.

It could fail.  Just look back at 7/22 - 7/25 and you can see an example of this.  I don't think that it will -- the right side of the table is green AND it is stronger, so I think we're okay.  Again, zig-zag, but most likely upward.

When you buy strength on individual stocks it takes days to enter positions.  My goal is to ramp into the market all week and hopefully be around 25% "in" when the medium-termed timer moves LONG and 75% in when the long-termed timer moves LONG.  We'll see.

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

Regards,

pgd

Sunday, August 10, 2014

August 10 Weekend Update

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On the left there is a field to put your email address.  I suggest that you use it.  I do not individually notify people anymore of my blogs, so notification via email is going to be your only way to not miss an update.  I will not spam you, I will not sell your email, I won't do anything with it, actually.  Feedburner will send you a confirming email -- you MUST acknowledge the note from Feedburner if you want to receive my updates.

Summary

Long-Term Timer:  Moved to CASH on 8/1
Intermediate-Term Timer:  Moved to CASH on 7/25
Short-Term Timer:  Moved to LONG on 8/8

Graphically, here's the same information:



Discussion:

We just experienced a first test of breaking the downward movement in the markets with the transition of the short-term timer to LONG on Friday.  Whether it will continue is unknown.  To a certain extent the markets appear to have bottomed -- this is evidenced by the upward movement of the "slopes of the slopes" as shown in the table below:


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

The right side of the table shows the "slopes of the slopes", or SoS.  You can see "green" for the past 3 days, indicating that the selling in the market is moderating.  The SoS table is a measure of about 3000 stocks and whether the entire database of stocks is moving upward or downward in recommendation (Long or Cash).  This is my LCR (Long Cash Ratio) measure and it is very reliable overall -- it is adaptive so as the markets change, so does the underlying data upon which it makes decisions.

This "first test" of a thawing of the markets will be key here for a number of reasons.  If you look back at 7/22, you see essentially the same presentation on both sides of the table.  The left side had the 2d and 3d slope of the LCR turning positive, and the right side had been foreshadowing that this was going to occur.  It lasted 3 days and then on 7/25 bam!  Another nail in the coffin.  The action on 7/25 was the confirmation that things were not going well and that cash should be raised, and this is exactly what I did, starting with Monday, 7/28.


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

The figure above is an equity curve from TradeStation.  The x-axis shows the "trade number" and the y-axis shows the account equity change.  The general "drift" downward shown from trade 0 to trade 320 or so is due to normal GGT behavior -- sell stocks that move to "New Cash" and hold those stocks that are in some form of "Long" status.  What is not shown here is that equity is building during this period, but due to the way Tradestation reports, only those completed trades are logged and plotted.

Around 7/21 a few of the big winners in the portfolio triggered a sell signal and were closed, causing the equity curve to move upward a dramatic amount.  This is the cause of the major jump from -$40K to +$10K in a relatively short period.  A few more trades were executed between 7/21 and 7/25, and on 7/25, with the failure of the LCR to continue to advance, I placed a number of orders to exit the market on Monday, 7/28.

Exiting positions is done the same way, day after day.  I enter a 1% trailing stop loss (TSL) order, to be valid after 9:45 a.m. on the day that the order is placed.  This causes the first 15 minutes of the market behavior to be ignored, and allows the opening volatility to be ignored.  The TSL orders are Good 'til Canceled (GTC), so they persist until the position is unwound.  If the position moves higher it drags the TSL with it, and if it reverses, the intent is that it will hit the TSL level at a higher point than a simple market sell order would have accomplished.  In general this is the case and unless there are really good reasons I do not unwind positions using any other selling strategy.

Between 7/28 and 8/1 the positions unwound.  A large percentage were in positive territory, hence why the equity curve was growing while the markets were dropping.  With the action of 8/1 my long-term timer transitioned to CASH, causing me to unwind the last 25% of my positions.  Using the same 1% TSL GTC methodology I was able to unwind all of my positions by 8/6.

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The obvious question is "what now?"

We're not out of the woods yet, but we're looking better.

As justification for this example, aside from the LCR SoS table shown above, there is evidence that the markets are buying stocks:


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

The second panel from the top in the figure shows an indicator that only moves up or down if 100 stocks trade in a minute.  It is based on the NYSE TICK indicator, and it simply tells me if algorithms ("algos") are buying or selling stocks.  You can see that on Friday, 8/8, the indicator moved to the positive after 11:00 a.m. and essentially kept moving positive.  This tells me "who is winning the battle on the Street", and the bulls clearly won.

The top panel of the figure says "not so fast".  This is a plot of stocks making 52-week highs (green) vs. 52-week lows (red), and the difference (high-low, yellow).  It indicates that although there was strong buying on the markets, 168 stocks still hit new 52-week lows -- this is not a good sign.  Until the number of stocks hitting new 52-week highs exceeds those that are hitting new 52-week lows caution is advised.

The primary indicator from the figure is in the lower panel.  This is the Cumulative Tick Ribbon, and it basically shows on a minute-by-minute basis (raw, white) what the market is doing in terms of the battle of the bulls and the bears.  The white line moving upward is bullish, and it moving downward is bearish.  You can see that it bottomed near the end of markets on 8/5 and has more/less been climbing since.  It just climbed above the solid long-term average (approximate 10-day, red), and this means that we're changing stance in the broad market.

Of course, the LCR SoS indicator in my chart told you this too, but now we have confirmation from multiple sources.

So, we could be in for another "test" to see if we can continue higher.  The cumulative tick indicators need to keep climbing, the NH/NL indicators need to dominate in terms of New Highs, and of course, the LCR table that I track has to show improvement.

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The next item is to get your shopping list ready.  My shopping list is simple -- it's my published "Greenfield Stocks" list that I post nightly in the GGT Stock file in the shared Dropbox folder.  Here is the table:


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

To save you the trouble of typing the symbols, here they are:

AFSI
ARII
ASM
BABY
BFR
BIDU
BIIB
CGNX
CMG
CP
CW
FB
FCH
GILD
HBI
HEES
HTLD
IG
LAD
LUV
MAR
NEO
NFLX
OTEX
PJC
RFMD
SAVE
SHPG
SKX
URI
USAK
VIPS
WRES
XCRA

Not all of these stocks are GGT "Long"; some are being stubborn and have lacked volume to make them transition to a long status:



Again, all of these stocks are solid stocks, but the ones in "Cash" or "Aff. Cash" status should be carefully reviewed before you enter.  In fact, anything with "Aff. Cash" should be avoided, as it is in some form of a pricing free-fall.

From an Effective Volume (www.effectivevolume.com) perspective, I'm watching the following stocks:

HEES
AFSI
LAD
BABY
IG
SHPG

Each of these stocks is seeing a large amount of volume that is of the "big order" type, meaning, money flow is picking up for these stocks.  Note that LAD and SHPG are GGT-avoid stocks right now, so we could see these move upward in time.  Again, SHPG is a GGT-avoid stock, so be careful with this one.

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I don't have any orders placed for Monday.  With my long-term signal in CASH, and my intermediate term signal in CASH, I'm in CASH.  If Monday is a solid up day I'll know by the end of Monday whether I should place orders for Tuesday.  You will see this in the GGT Stock file that is in the Dropbox folder:  on the "Portfolio" tab, you'll see yellow where you presently see white for the allocation matrix: 


So, for example, if I get a short-term entry signal with the market's close on Monday, you'll see MAR above appear yellow in the right-four columns -- this is my internal signal that I've entered a trade into TradeStation for the specific line item.  Obviously, red means I'm not entering, and white means that I've figured out what the position sizes for the entire portfolio should be but have not designated the number of shares or the BUY STOP price.

Another thing -- I only buy strength.  Under MAR you see that the BUY STOP is $65.03.  IF I place an order, it will become valid at 9:40 a.m. -- after the opening volatility slows down -- and the price will have to move up and touch $65.03 before the order will trigger.  I enter at the market price after the trigger since they are generally one and the same.  If the price does not get touched then that evening I will adjust the BUY STOP downward to 0.1% above the day's high and the process starts all over again.  This ensures you get the best price commensurate with strength.

At any rate, this is all in the Dropbox file that I post nightly or early in the morning.  If you are not a subscriber, then send me a note to pduncan [{at] v t (dot} e d u   (clean it up, you know how) with the word "Dropbox" in the subject line and I'll add you.

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As with all my postings, take all of this with a grain of salt.  You are responsible for your own investment decisions, and I am not.  Do your own diligence, and please take ownership for your actions.

Regards,

pgd