Sunday, November 1, 2015

End-of-Month Update, October 31, 2015

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Summary Movie

Cumulative Tick

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Last week's action was positive in that we have resumed "buying" as far as the market is concerned, but it is negative with respect to the overall strength of the markets.  The top right area of the figure shows that red and greens were fairly matched, meaning that on Friday we saw the 52-week New Lows outpacing the 52-week New Highs.  This is a warning sign of a not-so-strong market.  Volume was higher Friday, so the war was being waged equally on the driving of the NYSE stocks to both new highs as well as new lows.  Not ideal, in my view.

The bottom part of the figure is positive -- upward slopes on all moving averages for the cumulative tick and this indicates a resumption of net buying pressure, which is good.  

Certainly, there is no reason not to be long in the market, but if you're sitting on a bucket of cash, now is probably not the time to jump into the markets with both feet.  Here's justification of that statement:

Percent Longs

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The percent longs chart plots the percentage of stocks rated in some form of "long", using my GGT methodology, that are in the database.  The database is comprised of about 3000 stocks, and as you can see from the chart above, about 55% of them are "long".  The actual number is 55.3% as of the close on Friday (October 30th).  Historically, when stocks have hit the 55% level, the number of reversal days (where the market goes down to at least 46.2% longs in a series of steps downward) goes upward, indicating that we're in overbought territory right now.  If you look closely you can see that we're bouncing around a bit here -- the market is struggling to move higher.

This chart simply tells me that risk is higher -- it's okay to add stocks to a portfolio, but adding huge positions from large percentage levels of cash should probably be thought through.  This is because the chart shows you that the best place to buy stocks is when the percent longs is in the green zone -- specifically below 46.2%, and chances of moving higher increase dramatically if the value is below 34.3%.

For you statistical folks, the separation between the 46.2% and the 34.3% is one standard deviation (~11.9%)  so it follows that buying stocks below 22.4% would be a good idea.  Conversely, when the percent longs rises above 71.9% (today's numbers), unloading positions that have not been profitable would be a good call.

Long-Cash Ratio Table

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The LCR table, which shows the slopes of multiple moving averages of the Long-Cash Ratio (LCR), as well as the slope of the slopes, is shown above.  We're slowing -- and here's why:

On the left you can see that we hit a peak of the LCR of 1.331 on 10/28 -- 1331 stocks were long for every 1000 that were in cash.  We've fallen back the last two days with fairly small changes downward -- realize that more stocks in the database are failing in price behavior, hence why a cash ranking is climbing (long in the numerator, cash in the denominator, and if cash numbers go upward, then the value decreases).  

The Slope of the LCR EMAs shows that on the 2d, 3d, and 5d ranges that the slopes are negative.  The 8d is almost ready to flip over to red (negative), and if it does, we'll have another caution signals (like on 10/27).   The rest of the table is green but the numbers are smaller on Friday than on Thursday -- slowing.

On the right side of the table you see far more red -- this is the slope of the slope, and over on the right side, red always precedes red on the left (why?).  The numbers are less relevant on the right, but the color is important -- more red on the right will lead to red on the left.  We need more green on the right or else the table will be telling me to raise cash....

Long-term Timer Transitions LONG

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On a positive note, the longer-termed 5d/65d price MAs crossed from below, creating a BUY signal on a long-term basis.  We're weak here -- because we're in overbought territory -- but if we pull back slightly yet keep this signal long, it will be good for our portfolios as I'll be able to invest all the way to 100%.    We'll see.



I'm adding positions in my customary way -- I buy strength above the previous day's high.  For those of you who subscribe to my portfolios at C2, you're getting a good idea of how GGT is doing.  The Dividend Portfolio there is 100% invested and is doing well.  Everything else is improving but still underwater -- but I stay with the plan.  For you subscribing to my text messages of trades and breakouts, you see my trades (buys and sells) as they are placed, so you see the good, the bad, and the oh my, what is he doing?

I have most of my monies in my Dividend portfolio strategy, as it seems more stable than any of my other portfolios.

Not making excuses here, but this has been a rougher-than-expected market for me.  I'd be interested to hear how others are doing -- my Dividend portfolio is up 2.3% since June and 6.6% in October.  Every trade is listed at C2 -- the link is below.


Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Bargains:
Greenfield Dividends:
Greenfield Leaders:
Greenfield Low Beta:


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