Tuesday, January 5, 2016

Silver Lining in Monday Jan 4 Action, New Meeting Announcement

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Despite the beating that the markets took yesterday, there are a number of positive indicators that are indicating that we presently may have a buying opportunity:
  1. The cumulative tick continues to show a positive slope on it's moving averages, so on a multiple-day timeframe, we are still in an accumulating market.
  2. The cumulative tick started a major, sustained intra-day buying reversal at exactly 11:30 a/ET and it continued largely unabated throughout the day.  
  3. The major indexes all started their intraday reversal at 3:30

Let's look at each one of these.

Cumulative Tick

Click on the image to view a larger version.

I've covered the cumulative tick presentation in previous entries so read back a few to get other details.  The top plot, which is bearish on the short-term and only looks day-to-day, tells me that 52-week new lows are dominating 52-week new highs.  This is a major warning sign and shows that risk is high.

Contrasting, we have the action shown in the middle and bottom plots.  The middle plot is an algorithm indicator -- it shows me the strength of sustained buying or selling from a broad market perspective.  The day started strong and fast to the downside -- a large dumping of stocks on a minute-for-minute basis.  By 9:50 a/ET it was over -- at least until 10:33 a/ET, when it picked up and continued until 11:13 a/ET.  By 11:15 we hit our sustained selling bottom and almost to-the-minute at 11:30 we started to see sustained, continuous buying in the markets that lasted throughout the remainder of the day.  Note that this was in contrast to the indexes, which were down hard at this time.

Put another way, the markets started to buy the dip at 11:30 and as far as I can tell, never looked back.  This is why I really do not like watching the indexes -- they are not the markets, and they can be manipulated, apparently quite easily by the looks of it.

The bottom trace shows the cumulative tick and the ribbon of moving averages.  All ended the day with a positive slope -- and this is a buying environment, despite the 52-week new lows dominating the markets.  

There is nothing in the cumulative tick presentation that says "sell" -- and I am only unloading those GGT positions that are "New Cash" recommendations.  I am holding everything else.

Long-Cash Ratio Table

Click on the image to view a larger version.

The LCR table *just* turned bearish, although it has been indicating caution for the past 3 days.

The left side of the table shows the running LCR and it is presently indicating 0.405.  This means that for every 1000 stocks that are in some form of "Cash" (avoid) recommendation, 405 are in some form of a "Long" (okay to hold) recommendation.  Taken in isolation this indicates that the bears are beating the heck out of stocks and that prices of the 3037 stocks that I am tracking have been hammered.

The next column to the right shows that the drop of the LCR of -16% ranks relatively minor -- out of 955 evaluated trading days yesterday's action ranks 252 in terms of strength downward.  This was not a very strong day in general, despite the index volatility.

The Slopes of the LCR EMAs all turned negative on Monday, which is a warning sign.  While all of these slopes are negative they will be red, and this is not the time to buy, despite the indications from the cumulative tick.  As a lagging indicator it will ALWAYS be later than the bottom, and it will ALWAYS be later than the peak.  Make sure you understand this.

I'm looking for the 2d, 3d, and (at a minimum) 5d slopes to turn positive before I start getting into the markets.  We can continue downward from here -- your crystal ball is a good as mine.

The right side of the table is considered the leading indicator for the left side of the table.  Here, I have the slopes of the slopes, and for those of you with a science background, you will recognize this as the acceleration.  Here, we have the acceleration of the long-cash ratio, and as you can see, Monday's action turned everything red -- negative.

Negative acceleration is a bad climate for buying -- period.  Various analogies apply but simply, the tide is flowing out (market prices are dropping on volume) and the boats are all falling (individual prices are dropping), relative to their docks (often our buy points).  We absolutely need to see the right side of the table turn green before the left side will (make sure you understand why this is true and ask for an explanation if you don't get it), and right now, there is nothing pointing to buying en masse.

No buying for me on Tuesday, contrary to the reversal that I presented in the cumulative tick chart.  Risk is quite high at the present time.

Again, to address a few comments I've received over the past few weeks, these are all lagging indicators.  LAGGING.  Your crystal ball is as good as mine.  While the cumulative tick chart indicates that we did have a reversal, and that we are still in a buying uptrend, nothing about the chart indicates that yesterday's buying action will continue today.  The LCR table indicates that on a multiple-timeframe review that we are moving downward as a whole, so we need to be careful.

Your takeaway from the LCR table is that:
  1. Short-term risk is high
  2. The acceleration presentation on the left side of the table shows that as of Monday's close, more stocks were experiencing a drop downward in price than where moving upward. 
  3. We need to see the right side of the table turn green, and only then will the left side turn green.  We will not have this information until at least the close of business Tuesday, at the earliest.
Percent Longs

Click on the image to view a larger version.

When we finally do get the right side of the LCR table to turn green, and eventually, in a sustained up market (across multiple days), the left side, we will be in a good location to jump back into the markets.

The chart above is the Percent Longs in the database.  Right now we are in the green zone -- and in fact, we're below 1 standard deviation, which shows that we are in a prime area for moving upward.  We've spent some time here, and if you look to the left of the chart, you can see that it's possible we can continue to spend time here.  Nevertheless, jumping in to the markets when we get a valid buy signal from this vantage point is generally a good idea, so as the LCR table (right site) matures, the Percent Longs chart tells us whether there is enough fuel to power us higher.  The answer, from above, is that historically we can travel from the green to the red area (price appreciation) more often than not, so be prepared to commit when the time comes.


Here are my actions for the day:
  1. No new buying.
  2. A number of stocks triggered a sell signal to get out:
ALE ALLETE Utility New Cash
AVGO Avago Tech Electronic New Cash
BABY Natus Med Inc Healthcare New Cash
BAK Braskem SA Chemical New Cash
CATM Cardtronics Inc Business Svc New Cash
CORT Corcept Thera Drug New Cash
CTRN Citi Trends Retail New Cash
DHI D R Horton Inc Building New Cash
GOOGL Google Class A Internet New Cash
LXFT Luxoft Holding Software New Cash
MO Altria Group Personal New Cash
NTES Netease.com Internet New Cash
PRAH PRA HealthSci Business Svc New Cash
RMTI Rockwell Med Healthcare New Cash
SCHW Schwab Chas Financial New Cash
TFSL TFS Financial Financial New Cash
THRM Gentherm Auto & Truck New Cash
TRIP TripAdvisor Internet New Cash
TW Towers Watson Business Svc New Cash
VA Virgin America Transportation New Cash
VLRS Controladora Transportation New Cash
WOOF V C A Antech Healthcare New Cash

For the non-Collective2 accounts, I will set a 1% trailing stop loss, GTC, effective after 9:45 a/ET and will forget about these positions until they either 1) reverse to a "New Long" recommendation or are sold.

For the Collective2 accounts, I will set a 1% stop loss, GTC, effective after 9:45 a/ET and that will be adjusted upward (never downward) nightly until triggered.

Despite the cumulative tick, which is a ray of sunshine on yesterday's markets, it is prudent to unload positions as the system rules dictate.


These recommendations are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

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Greenfield Dividends: https://www.collective2.com/details/94780986
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Greenfield Low Beta:  https://www.collective2.com/details/95702992


New Meeting Announcement

We will be holding a face-to-face meeting on 2/13/2016 for all interested parties at the following location:

Burke Centre Library
Room: Burke Centre Meeting Room 116K
Address: 5935 Freds Oak Rd, Burke, VA 22015
Library Phone:(703) 249-1520
Time: 10:00 AM to 1:00 PM
Meeting Start Time: 10:00 AM

I will attempt to stream the meeting audio, and perhaps video, as per past meetings, via GotoMeeting.  Attendance via GotoMeeting is limited to the first 25 call-ins.  The ability to do this is completely controlled by the library and I have no say in Internet access.


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.