Thursday, June 4, 2015

Whipsaw ... back to 67% cash target

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Once again the Cumulative Tick saved my tail, and hopefully, it saved yours.  Here's what it looked like at the end of the day:



Internally, the selling continued throughout the afternoon, e.g., it didn't reverse, which (generally) means that we haven't seen the local bottom.  Of course, your crystal ball is as good as mine.

The middle plot is a filter -- the negative values that occurred mid-day indicated that we were seeing over 500 stocks per minute that were ending on a lower price after the transaction than what they started.  This is significant, if only that the selling pressure was large.

The top plot is the 52-week high and 52-week lows.  The green (hi) and red (lo) traces show that nearly the same amount of stocks were making new highs as those that were making new lows.  When this has occurred in the past it basically has meant that we're not at a turning point -- so I'm expecting more of the same drift sideways, at least for the short term...

Timers

The short-term and intermediate-term timers have whipsawed back to "Cash", so money management says that we're back to a 67% cash target.  I didn't buy anything except dividend stocks yesterday and today (which have fared worse than expected by the way), so my powder is still quite dry.  The dividend stocks are more/less immune to the short and intermediate timers, but of course, a rising tide ... (and the converse is true too).

Strategy

I'm still in the mode of getting down to 33% equity / 67% cash.  I'll continue to sell my worse positions first, then work towards  the better positions, until I hit the equity target.

Note that I'm *really* close to the long-term timer triggering a sell signal.  I hope we don't trigger, and this is a danger of a moving average system in the face of a sideways market.  The longer we move sideways the more the moving averages decay, and eventually, they will flip the other way.  In fact, this is the exact situation we're in now with the short-term and intermediate-term timers -- since their period is so short, sideways markets really put havoc on their operation.

"Trade the market given to us, not the one we want ..."

We're in a great buying zone here, so as soon as things turn just a tad and confirm, we'll be ready to commit capital.

I'll post when the signals change....  until then, daily commentary (time permitting) will be on the Yahoo site.

Regards,

pgd