Saturday, May 14, 2016

Cumulative Tick Signals Bearish Move - Friday May 13 Close

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The Cumulative Tick indicator has made a short-term transition which indicates that I should not be buying stocks, at least in the short-term:

Click on the image to enlarge.

The top trace shows the day-over-day behavior of 52-week New Highs (green) compared to 52-week New Lows (red).  Although red is below green, the difference (yellow) is quite low.  When this is the case stocks, as far as the NYSE is concerned, are dropping in prices and the sidelines/cash is a great position.

The middle trace shows algorithmic buying/selling.  When the trace moves upward we have buying, and when it is dropping we have selling.  It resets every day.  Wednesday, Thursday, and Friday all saw significant drops in buying and a dominance in selling.  The bears clearly won the week.

The bottom trace is the cumulative tick (white) and various moving averages.  The longest moving average is the solid red line.  This has been "tuned" over the years and represents a good level to become cautious if the white line crosses from above.  Friday was the day, and hence, caution is advised on HOLDING positions, and certainly, I am not buying anything  (I may sell a few puts on contra ETFs though).

When the white trace is trading above the solid red trace, and the red trace is in an uptrend (pointing lower left to upper right), we are in an intermediate-termed uptrend.  When the white trace crosses from above the red trace will first move horizontal (like now), and if the white trace remains below the solid red trace, we will start to see more selling in the markets.

White-below-red is a short-term indicator but for Monday, it is very important to look at existing positions and unload any that are below entry points.  Lightening positions too would not be unwise.

It is quite possible that this is all a head-fake and that we will resume an orderly march upward in the broader markets.  If that is the case I will post something here -- I have an indicator that gives me a good view of when this starts to happen.

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As many of you know, this indicator is built on my Long-Cash Ratio.  Here is the table:

Click on the image to enlarge.

Next to the dates on the left side of the LCR table is a green (and now red) column of the raw Long-Cash Ratios.  Every stock in my GGT database has an assignment:  Long (okay to hold) or Cash (not okay to hold).  When I take the fraction Long/Cash I get the LCR value, which is presently 0.83, meaning that for every 830 stocks that are rated "Long", 1000 are rated "Cash".   More importantly, the number is falling, which means the number of stocks with a "cash" rating is growing on a day-over-day basis.

The left side of the table is a sea of red.  These are moving averages on multiple time frames, and what is important is that we see red, and have been seeing red for some time.  When this is the case a strong argument can be made that buying stocks is just plain stupid, unless you are an exceptional stock picker.  

The left side is telling me that "cash" is a position and it is a good one right now.

The right side is a bit more complicated -- it tells us how fast the LEFT side is changing, again on multiple time frames.  What I see on the right is somewhat of a mixed picture, but clearly, the emergence of the red on the RIGHT, in combination with the red on the LEFT, tells me that "the knife is falling and only fools try to catch it".

All this being said, when should we be looking to get back into buying positions?  The best time, at least from the perspective of my system, is when the LCR Table gives us the following presentation:

Click on the image to enlarge.

This shows the RIGHT side as a sea of green, and the LEFT side starting to transition from RED to GREEN.  We're not there.  Patience.  It always happens.  We simply need to wait for the setup.

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Strategy for Monday

Here are my non-option holdings:



All are holding up well in this climate.  All are at least 2.4% above the 21d EMA, and two closes below the 21d EMA would trigger an exit point for me.

I do not intend to purchase any new stocks that are considered GGT "long", despite the rating.

I have my "shopping lists" ready.  My Greenfield Leader's list has solid performers, but some of these are now under the 21d EMA so they are not entry candidates.  Stocks that continue to hold up well in this environment with the "best" fundamentals and relative strength are:

CENT
AMZN
STS
PATK
ERI
TLK
FB
COR
CORE
WBMD
HMSY
ORBK
SFBS
SIMO
ULTA

All this being said, there are a couple of notable stocks on this list:

COR:  This stock is attracting "quiet" money right now.  A close above 78,36 would be bullish and would trigger a stop loss level of 76.28 or so.  Certainly, a close above 79.42 would be extremely bullish, especially in this market climate.  Volatility is dropping but volume is moving upward, so keep an eye on this one.

SFBS:  Same as COR, more or less.  A close above 50.43 would trigger a stop loss level of 48.54.  A close above 51 would be extremely bullish.  Volatility is dropping while price tightens but volume remaining constant -- a tell-tale sign of accumulation.

More risky plays here are SIMO, FB, EFX, and FIZZ, but all show strong Large Effective Volume.

Again though, I do not intend to purchase any stocks on Monday.  Do your own diligence.

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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