Sunday, April 19, 2015

Short- and Intermediate Model Transitions to Cash, Close of Markets 4/17

.
NOTE:  Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you.  It helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.  If you miss a signal this system will most likely produce sub-par results, which isn't my fault.
.
Summary:  The GGT system saw a significant pullback on Friday with the GGT index falling about -1.26% on heavier than normal.  The short and intermediate-term timers have transitioned to CASH,  which means that it is time to raise cash to at least 66%.

Back-forth-back-forth.  Choppy waters indeed.

~~~~~~~~~~~~

Timers:



With the transition of the short-term and intermediate-term timers to CASH, I'm forced to raise cash to at least 66% of my holdings.  For those of you familiar with my state flow diagram for money management, we have a transition that looks like this:



The entire state flow for money management looks like this in case you're interested:


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

It looks complicated, but it's really not.  We're now sitting in the "66%" bubble and there's only a couple of options from here:  everything goes "LONG" which means get to 0% cash,  the long-term timer flips to cash and we move to 100% cash, or either the short OR the intermediate move long and we move to 33% cash.

Don't worry about it if you can't follow it -- I keep track of it so you don't have to .

The end result is to raise cash from my present holdings.  66% is the target.  To do this:

1) sell all "cash" rated stocks using a 1% trailing stop loss (TSL), good til canceled (GTC), effective after 9:45 a.m. ET.
2) progressively sell the worse performers in each portfolio until each portfolio is at 66% cash.


Long-Cash Ratio Table:


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

The LCR drop of -29 in one day is significant -- this was the 70th strongest drop in the LCR since September 2008.  The left side of the table didn't fully capitulate --we still have the 88d and the 143d slopes of the LCR showing (barely) positive.  On the other hand, the right side of the table, which shows accelerations of each of the slopes, is clearly showing a picture that points down and to a large amount, so caution is advised.

This all being stated, when you look at the raw numbers on both the slopes (left) and accelerations (right), you see these are REALLY NEGATIVE numbers.  Too negative actually.  Because of this I am expecting a bounce upward on Monday.  What happens beyond Monday is anybody's guess.

Cumulative Tick:


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

The Cumulative Tick chart is weak.  Starting at the upper right, the number of 52 week new highs is about the same as the number of 52 week new lows.  We want the 52wNH to dominate the 52wNL, and this is not the case.  If we end up with 52wNL > 52wNH I will not buy.  Period.

The middle plot shows lots of selling throughout the day.  There was a bit of buying at the end of the day, in the last 30 min, but the damage had obviously been done.

The bottom plot shows that we are precariously close to dropping below the red line, which is a longer moving average of the cumulative tick.  If the white drops below the red all the slopes of the cumulative tick will be negative within a day or two, and this is a TERRIBLE buying environment.  I will not buy if white is below red, period.

Strategy:

1) I'm selling all my "New Cash" and cash-rated stocks.  Period.  1% TSL, GTC, eff after 0\9:45 a.m. ET
2) I'm selling my worse performers in each portfolio until I get to 66% cash position in each portfolio.

~~~~~~~~~~~~~~

Relatively simple at this point.

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

Regards,

pgd