Monday, January 25, 2016

The bottom is being bought but could be short covering; care right now is prudent

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Summary

The Long-Cash Ratio *just* moved out of single-digit territory, and is now indicating a value of 0.100.  We have had 2 full days of buying off the bottom; indicators are significantly improving but we are operating on a buy signal yet.

Long-Cash Ratio:


Click on the picture to enlarge.

The left side of the table shows that the LCR now has a value of 0.100, up from a low two days ago of 0.084.  273 stocks are rated as "long" or worthy of our consideration, 2743 are in some form of "cash" and are "avoid".  Internally, and not visible to you, is that there are subrankings and the number of stocks that are positioned to move to "long" jumped from 513 on Thursday to 1207 on Friday -- all they need is volume.

The two green cells in the "Slope of LCR EMAs" section tells me that on a short-term basis, the number of stocks moving to a "long" status is improving.  The 5d and longer slopes are still negative (pointing downward), so we are super early in the start of a new trend.  Risk is quite high, and we may simply have short-covering.

The right side of the table is a sea of green, which I've been writing about almost daily.  This is a great presentation (on the right), and continued green over there will force green in the middle part of the chart.

We do NOT have a buy signal going into Monday. Any purchases are to be considered very risky -- short-covering spurts typically last 2-3 days, so we need a solid performance on Monday, January 25 and perhaps on Tuesday before we can call an entry signal.

Cumulative Tick

The CT shows dramatic improvement:

Click on the image to enlarge.

The "V" reversal on Wednesday is classic and a trait that I love to see at market turning points.  Both Thursday and Friday have upward trending CT lines, and this is pulling the moving averages upward.  If the white CT line (which is the real-time, non-averaged value) crosses the solid red line from below all the slopes of the CT moving averages will turn positive, which is a good initial entry signal.

Strategy:

It is important to not get too trigger happy at this point in the turn.  While this is a great opportunity, it can also be related to short-covering.  We have lots of room to go down from here if the market desired to do so, so a retest would not surprise me.

I will be making limited purchases for stocks that I intend to hold for the longer term (e.g., "Long"-rated value picks).  If you are a subscriber to my Dropbox you will have access to the list.

My short-term momentum indicators are telling me not to move in on Monday.  Tomorrow (Tuesday) may be the day.

I only buy strength, so I will place a BUY STOP order for 0.1% above Friday's close; if the order does not fill it will be adjusted downward to be 0.1% above the high of the day.  The order will be effective after 9.45 a/ET.

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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.

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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