Tuesday, May 10, 2016

A few leading stocks are noteworthy; mostly on the sidelines

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Futures are up as I write so we may see a bounce today.  My time frames are a bit longer than a single day so I am not overly influenced one way or another with simple day-to-day action.

One of the biggest challenges I see is that the broader ETFs are rolling over into "cash" as tracked by GGT:

Click on the image to enlarge.

These signals are more/less on an intermediate time frame, e.g., 3-6 weeks in length, so when I see a transition I pay attention.  At a macro level market sentiment is shifting one way or another.

Because these are not all transitioning en masse I am not completely bearish on the markets, so I intend to continue to hold my winning positions.

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The cumulative tick chart is (at least for now) resuming it's upward march.  Note that this is a short-term chart:

Click on the image to enlarge.

Top trace:  more 52-week new highs than low, so we are still uptrending in the market.

Middle trace:  we fought back yesterday to more/less our starting point.  Not exciting one way or another -- buyers had the upper hand, but not convincingly, for most of the day.

Bottom trace:  solid red line is still trending upward, so we are in an advancing market.  White trace is starting to diverge away from the solid red line, which is good and supportive of expanding markets.

Conclusion:  okay to enter strong stocks with clear exit points established.  Do not over commit but this could be a good entry area for positions.  Overall, we are still in the woods and risk is quite high.

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The LCR Table paints a very cautionary view of entry into the markets:

Click on the image to enlarge.

Of significance is that the Long-Cash Ratio, which measures the number of stocks that are outperforming their 52-week optimized uptrends relative to those that are underperforming, continues to indicate that we're moving DOWN, e.g., more stocks are moving to the dark side.  Put another way, the tide is flowing out.

It is more difficult to pick winning stocks when the tide is flowing out.  A rising tide lifts all boats and all of that ...

Taken in isolation, the LCR table says DO NOT ENTER stocks at this time.  The left side is red.  The right side is mixed.  The right side is generally very sensitive, so the fact that the right side is red is a big warning flag.

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My "GGT Longs" Leaders List is still performing well in this market

AXGN
BANC
COR
DWA
EBIX
ERI
FB
FIZZ
LGND
PLPM
SCLN
ULTA
WBMD

Click on the image to enlarge.

Top trace:  Group performance relative to S&P 500.

Middle:  Group price performance

Bottom:  Group volume performance.

Note that I'm seeing constructive behavior in the following stocks:

LGND
FB
FIZZ
EBIX

For LGND, a close below 114.53 would be bearish.  Continued strength could be worthy of entry.

For FB, a close below 116.57 would be bearish.  This is a powerful stock.  Disclosure:  I own FB.

For FIZZ, a close below 47.91 would show a failed breakout.  I entered this stock this past Friday, and I told all of you about it last week!

For EBIX, two closes below 46.47 (the 21d EMA) would be bearish.

For all of these, I would only enter on strength:

LGND: above 123.07
FB: above 120.40
FIZZ:  above 52.31
EBIX:  above 49.37

Try to combine with volume too, as price alone is not necessarily sufficient in this market.

These entry values adjust daily.  I cover the methodology in my newsletters; the last published newsletter is here:   goo.gl/e75Ayj

I'm on the sidelines for the most part.  I still continue to hold COR, CTWS, EFX, FB, FIVN, FIZZ, and a position in VXX, as well as a few puts in EBIX, IPHI, and VXX.

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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.  The stocks I have listed here are not recommendations -- they are seeds for you to do your own research.

Regards,

pgd