Wednesday, July 6, 2016

No Change from Tuesday, July 5 - No New Buy Signal

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Market Overview - No Change from Friday, July 1st

Long-Term Timer:  Long, weaker than start
Intermediate-Term Timer:
Short-Term Timer:

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Long-Cash Ratio Table

Click on the image to enlarge.

We made no progress on Tuesday; in fact, we lost a bit of ground.  An ideal buying signal looks like this:

Click on the image to enlarge.

When the left side 8d transitions to "green" it generally is a good time to start buying stocks.  You can see the "sea of green" on the right, and this shows overall acceleration.  This loosely correlates with IBD's "confirmation day" or "follow-through day".

Compare the ideal picture to where we are now -- less than ideal.  I did not buy any positions on Tuesday.

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Strategy

A note came in overnight asking why I buy strength -- "... there is better value in buying quality on the dips".

This may be true, but timing is important.  

My experience is contrary to the questioning statement -- buying a stock that is moving higher has historically worked better for me compared to purchasing a stock that is "undervalued".  When you buy a stock that is moving higher in price the market is recognizing that the stock is worth more than it was in recent history.  It is in demand (especially if volume is higher).  The "Darvas Box" concept buys these types of breakouts, and although I do not follow this methodology, the "buy strength" concepts that are used in the approach are proven.

So, you'll see me buy stocks that are at least 1.001 x (previous-day's-high) as my entry.

I've placed a number of day orders for strong dividend stocks in both the Collective2 Greenfield Dividends portfolio as well as my personal portfolio.  Futures are weaker as I write so I am not overly optimistic that these orders will fill today.  If we have a strong day those positions may fill, bringing my invested level upwards.  Here's the group performance of the list:

Click on the image to enlarge.

The top plot shows the group performance (blue) relative to the SP500.

Subscribers to my Dropbox can get the list of Dividend stock candidates for today by looking for the file that is called "16JUL05-DividendOrderListFor16JUL06.txt"

The sequence to select stocks goes something like this:
  1. I start by looking at my holdings and those stocks that are signalling "Buy" and that are in an uptrend on multiple periods are added first.
  2. I look at the most recent (internally generated) scan for new "Buy" candidates that pay dividends.  These must meet my "Greenfield" criteria, which I've described numerous times elsewhere in this blog and my newsletters.
  3. I look at the "Dividend Champions" list from David Fish (Google it).  These stocks meet a unique set of criteria, and they only fail one step of my Greenfield criteria (specifically that they have not moved more than 50% in the past year).  David's list of dividend stocks is a stellar list and if you invest in dividend-paying stocks you have to use his list as a starting point.
Again, all my holdings are quality stocks that have shown a great resiliency to this market, so I'm not overly concerned about the exposure.  As a comparison, the markets were down about a percent on July 5th but the C2 portfolio rose slightly, as did my personal holdings (which more/less mirror the C2 portfolio).

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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 (if I have listed any) are not recommendations -- they are seeds for you to do your own research.

Regards,

pgd