Thursday, April 16, 2015

Risk Model Moves Into Higher Short-Term Risk Area

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Summary:  The GGT model is fully invested.  The short-term indications are that we have entered a higher probably of a short-term pullback from here, implying that we should not be buying at the present time.


All the timers are LONG, which implies in the money management model that we should be fully invested (0% cash target) at this time.  Anywhere between 0 - 33% is probably okay, as we've been bouncing in this range for a bit.

LCR Slope Tables:

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The LCR is looking relatively good on a macro scale.  The left side of the table is solid green, which means we should be long and not considering any type of short position, and the right side of the table indicates that we're still accelerating upwards.

Of course, all of this could change.  If we start seeing more red on the right side we know the left side will be changing soon.  I'm watching this and will post a note if we start seeing more red on the right.

Percent GGT Longs

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This is one of two indicators that I have that tell me we're in overbought territory and that on average, we've experienced reversals.  The current level of GGT % Longs is 61.1%, and levels above about 57% are generally indicating that we shouldn't be buying until we drop back into the green zone (below ~43 %).

Consequently, if you're not fully loaded (0% cash), keep your powder dry and wait for a pullback.

Historical Turning Points

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The figure above is a histogram, which counts the number of times some parameter is within a specific range.

In this case, the parameter is the 8d slope of the LCR.  Why I picked this is a topic for a different time, but suffice to say it does not whipsaw very often and once it turns south (or north), the trend generally continues.

Further to this, in general, when the 8d slope of the LCR falls into the range of 0.1095 to 0.1889, the market 5 days after it hit this range was lower.

On 4/15 the 8d slope of the LCR hit 0.133, so it was in this bin, and today (4/16), the LCR fell to 0.0995.  It's anybody's guess to whether the trend will continue, but be aware, we may just have experienced a local maximum and perhaps the market needs to pause here -- your crystal ball is as good as mine.


We're in a short-term, medium-term, and long-term uptrend.  We're entering a point in the % longs that says we could reverse -- history is on our side as we have reversed from these levels in the past.  A perfect scenario would be to reverse down to below ~ 43% % Longs and this could present a buying opportunity.

The histogram presented above shows that history tells me that we've seen reversals from this level.  In fact, the highest occurrence of reversals has occurred in this range since I started keeping track of this in September 2008.

Even though I'm not fully loaded in my portfolios, I'm not buying on Friday.


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