Thursday, January 14, 2016

Selloff continues

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Summary

Wednesday continued the sell-off in the markets, as we all know.  The short bump up in the morning was greeted with significant and steady selling throughout the day, with computerized/algorithmic selling also dominating.  There is no chance of entering the markets on Thursday in any capacity on the long side, and Friday has significant weekend risk.  I'm considering the week "cooked".

Cumulative Tick


Click on the image to enlarge.

Lots of annotations, but simply put, all negative.  The 1739 52-week New Lows completely dominated the 44 52-week New Highs, and yes, I checked -- the 52-week new highs are all relatively speculative or under-volume stocks.   Don't think for an instance that these are "strong performers" -- they are not.  Their fundamentals (revenue, EPS growth) are terrible, and do not pass my "Greenfield" test for subsequent consideration.

The take away here is simple:  They NYSE is selling this market hard, and this is evidenced by the downward slopes of the cumulative tick ribbon plot in the lower half of the picture.  Until the white CT line turns up and crosses the solid red line from below, you're at a high risk if you're long in this market.  Aside from selling some out-of-the money puts, I'm nearly 100% in cash.

Long-Cash Ratio


We are near single-digits on the Long-Cash Ratio, which means oversold.  This being stated, as as we saw Wednesday, markets can go lower.  The present value of the LCR is 0.115 and this is the 54th lowest value out of 1856 observations.  This means that there are only 312 stocks that are "Long" in the database of 3028 stocks, and of these, 2489 stocks are a solid "Affirmed Cash" recommendation, meaning, both volume AND price are confirming to stay away.

Despite being oversold, risk is quite high.

The right side of the table shows we lost some ground on Wednesday with the accelerations turning red, meaning slopes (on the left) are plunging downward faster on all time frames except the 8d and 13d.  Again, until we get solid greens on the right, across all measured time frames, there is no hope of getting a signal on the left to enter.

I'm taking Thursday, and most likely Friday off from the markets.  My next post, unless something remarkable occurs today (Thursday), will not be until late this weekend.

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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.

Regards,

pgd