Monday, June 29, 2015

Knee-jerk in Markets Signals Move to 66% Cash - June 29 Close

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With the close of markets today (Monday, June 29th), my money-management system says move to at least 66% cash.  This is in response to the Greek Tragedy that is unfolding overseas and is impacting perceptions in the Euro zone.

My take on it?  The GDP of Greece is about $242B in 2013.  Using 2012 numbers, which aren't too far off of 2013, this places it somewhere between Connecticut and Louisiana or Finland and Pakistan.  The amount of debt is somewhere in the range of $317B.  Yes, I'm sure there are nuances here and there, but the point is the same:  this really isn't a big deal as far as money is concerned.   The issue is one of perception, and while that matters, I do believe that today's sell off is actually a buying opportunity.  Not tomorrow (Tuesday) mind you, but soon.  We are incredibly oversold.

But, let's not look at the market we want, let's look at the market we have:

Both the short-term and intermediate-term timers are now in cash.  While I can see the details and you can't, the long-term timer is a whisker above it's transition point to cash.  If it flips I doubt we'll stay there long -- again, we are very, very oversold.

The rationale for the transition of the short-term timer is simple:  the LCR table has moved all red (again):

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

What is important here is that we had a sea of red on the right long before today, hence the move to 50% cash on Friday.  That was easy.  

On the left side of the table you see a "16".  This was the 16th strongest down day, in terms of real LCR change, since September 2008.  Ouch.  Looking back, I do expect to see a short-term bounce -- whether it will continue upward or reverse downward is anybody's guess.  Your crystal ball is as good as mine.

Again, the big tell to not get overly committed to the long side has been the cumulative tick:

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

We've had nothing but sustained selling in the markets for the better part of the last 4 days, independent of what the indices are doing.  You can look back at other blog entries to understand what you're looking at but suffice to say, the smart money has been net selling for at least 4.5 days, and this, over and above the LCR timer table, tells you to take things much slower.  I'm glad I have been.

Until the white trace moves above the bright red trace (bottom plot) and stays there I doubt I'll get too committed in the markets.  You can tell by the slopes that today's selling accelerated to the downside as the day wore on.  Ideally, we want to see some sort of "V" pattern here, and it didn't come.  We're probably not done with this yet.


My strategy is simple.  I'm unloading positions to get to at least 66% cash in my Leader's portfolio.  I'm starting with the stocks that are performing the worse and working towards the best ones.  You can follow this portfolio here:

For my dividend portfolio, I'm simply selling the positions that have signaled "New Cash".  As of tonight there are none, so I'm going to continue to hold the 22 positions that I currently own.  Note that my target is 25 positions, and I'm most likely going to attempt to fill those 3 starting tomorrow night.

You can follow the dividend portfolio here:


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