Sunday, September 4, 2016

Labor Day Weekend Update

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After a brief hiatus I am back in the saddle again.  It has been a whirlwind summer.  Before I get to the markets portion let me offer something that Kari and I are both very proud of:  both of our boys competed at USA Diving Nationals, and my oldest son (Greg) is now ranked #2 in the country on both the 1m and 3m springboards and my youngest son (Sam) is 13th and 20th respectively.

Furthermore, Greg qualified for the World Championships in Kazan, Russia in late November.

Here are a couple of pictures I took during their competition; click on any of the images to enlarge:

Greg:


Greg:


Sam:


Sam:


Oh, to be a teenager again.  Suffice to say I was *never*, even as the physical training coordinator for our Navy base, in the shape that these boys are in.  Simply amazing, and diving is an amazing sport.

So, onto the markets...

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Market Overview - Difficult Time for the General Market

Long-Term Timer:  Long
Intermediate-Term Timer: Cash
Short-Term Timer: Cash, Improving to Long (but not there yet)

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Long-Cash Ratio (LCR) Table



Click the image to enlarge.

The LCR directly measures the number of stocks that are rated "long" versus those that are rated "cash".

A "long"-rated stock is outperforming in BOTH price AND volume (price is moving up, as is volume).

A "cash"-rated stocks is underperforming in price and perhaps volume and is not being accumulated.

When I apply various moving averages to this day-over-day measurement, I get a sense of stocks being accumulated and stocks being sold.  The "slope" -- or rate of change of the number of stocks that are being accumulated will go up as more and more stocks are being accumulated, and it will drop as they are being sold.

It really is that simple.  The magic is in determining how to rate a stock "long" and how to rate a stock "cash".

Takeaway:  the left side of the table shows a sea of red.  On most of the measured time frames the slope is DOWN (red), meaning, this is a really difficult time to buy stocks.  The analogy is that the tide is flowing out.

I have provided the LCR state back to July so you can see how this market has been weakening, ever-so-slowly, over time.  Sure there are periods of strength, but there is no sustained reversal to the upside.

The "strong" movement of markets this past Friday only resulted in a +4% change in the LCR -- not a very strong move at all.  Overall, nothing to get excited about.

I am waiting to see the 8d column -- shown in the black box -- to turn green.  That will be a "full up" signal to get in on this leg.  Until then, caution my friends.  If you choose to enter the markets here, you'd better be really good at picking stocks that are not correlated with the overall markets.  I have many positions working, but they were purchased some time ago and are somewhat ignoring the market gyrations.

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Cumulative Tick


Click the image to enlarge.

The cumulative tick (CT) figure shows intra-day buying and selling.  I have put three different components on the figure:

1) top:  52-week new highs (green), 52-week new lows (red), and their difference (yellow)
2) middle:  daily filter on the strength of buying (moves upward) or selling (moves downward).  This is presently set to 500 stocks PER MIN filter setting, meaning, it takes 500 stocks per minute all moving upward to get 1 little tick upward. 
3) bottom:  the cumulative tick (white), and various moving averages (colored).

Regarding 1):  we want to buy stocks when the broad market has stocks making new 52-week highs, at least significantly greater than 52-week lows.  Friday was very strong -- but if you look back over the week, you saw many stocks having problems.  Takeaway:  we are still in a buyer's market and there is demand for stocks

Regarding 2):  extremely strong buying at the market open on Friday due to the jobs report.  It was steady throughout the day (from the bottom white trace) BUT it was not huge like after the opening.  Takeaway:  a good sign.

Regarding 3):  Complete reversal of the CT.  This is good, and necessary for moving back to the upside, but a reversal of the CT is only one component.  A good sign is buying into the close (look at the white trace), so we ended on a positive note.  Positive, but not fully sufficient.

Takeaway:  The CT reversal is good, but as you saw in the LCR presentation, we have had many since the beginning of August so we need a sustained follow through.  

Patience grasshopper, patience.

Strategy

I have two portfolios at Collective2, one is a dividend portfolio, the other is the leaders portfolio.  Performance in the dividend portfolio has been great (a general demand for stocks that pay dividends) and performance in the leaders has not been great.  We're not seeing large breakouts in leading stocks hence the Leaders portfolio is 

If you are interested in subscribing to the Greenfield Dividends portfolio and following the trades, you can do so by clicking the following link:


The first 30 days are risk-free so you can kick the tires and trade with me, if you choose.

After a rocky start in January 2016 (with the Greenfield Dividends portfolio), performance since then has been acceptable.  After January's debacle I tweaked the money management rules and applied them in February and onward, and am pleased with the results since:

February:  +4.5% gain, S&P 500 was flat at -0.1%
March:  +2.1% gain, S&P 500 was up 5.5%
April:  -1.4% loss, S&P 500 was up +0.9%
May: -1.1% loss, S&P 500 was up +1.4%
June:  +2.4% gain, S&P 500 was flat at +0.2%
July:  +4.5% gain, S&P 500 was +3.6%
August:  +3.3% gain, S&P 500 was flat at 0.0%

I have almost erased the mistake I made in January, having recovered almost all of the 15%...   Here is the performance chart since February 2, 2016:

Click the image to enlarge.

There were two major tweaks:

1) lowering exposure to earnings release (ER).  This requires defining a base or core position size, which is approximately 2.5% of my account value.  I place an order to reduce the size of the position to the core just before the close of markets, just prior to ER.
2) letting the portfolio time itself.  This is an active management rule but it works if the stocks are not correlated with the broader indexes and timer signals.  If the stocks you are holding, as a group, are breaking down, then its time to raise cash - it doesn't matter what the overall market is doing.  Conversely, if they continue to perform well, while the market drops, continue to hold, despite the timers, etc.

Both of these are working well through two ER cycles.  Of course, going forward is unknown -- your crystal ball is as good as mine.

My goal is to beat the S&P by a significant amount by the end of the January 2017 month.  This date is simply the date that I changed management rules for the account.

Takeaway:  I continue to manage the Greenfield Dividend strategy at C2, and also mirror it within my own portfolio.  I continue to buy stocks that meet the Greenfield Dividend strategy screening criteria, but as of late, am simply re-investing into currently held positions as fewer and fewer stocks have passed screening (with the exception of this past Friday -- numerous stocks look like candidates).

For the record, this is what is currently being held in the account, as well as the most recent GGT recommendation and my present thinking:

Symbol GGT Recommendation Comments
AMAT Hold
AOS Buy
CINF Hold
CMN Hold
CZZ Buy
DW Hold
EBIX Hold
FRC Hold
GPN Buy
MELI Buy
MKTX Buy
MSCI Buy
MTN Hold
NTES Buy
NXRT Hold
OC Hold
POOL Hold Fails 2x21d EMA test and order to sell has been placed
RMP Hold
TD Buy
THO Hold
TTC Hold
UFPI Hold
XIN Hold Under price pressure; closely watching for sell signal
Of course, none of this is a recommendation that you should buy any of these stocks.  Do your diligence please.

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My other strategies (Greenfield Leaders, selling VXX puts, BT) are still valid.  As mentioned above, the Greenfield Leaders strategy is moving all over the place.  The money management plan and rules stabilized and were put in place May 1, with the following results since then:

I know, nothing to write home about, but a few months does not make or break a strategy.  Backtesting this method is very, very good but certainly, there were periods where the strategy and the markets were not in sync.  I continue despite the underperformance.

Regarding the selling of VXX puts -- there has not been any signals to enter this strategy.  Volatility is incredibly low, and the markets keep grinding higher.  I have a large amount of cash simply waiting to deploy once the markets turn -- but may deploy that capital with other stocks if this recent attempted breakout this past Friday holds.  

The BT strategy is a new strategy which gets me completely away from GGT signals.  It has nothing to do with the market overall and marches to its own drummer.  If the stocks in the portfolio are doing well, then it will continue to hold.  If the stocks in the portfolio are falling, then it will exit.  Again, both of these rules are independent of the S&P 500.  I'm holding 6 stocks in this portfolio right now, and will pick up a final 7th position on Tuesday if it breaks out to the high side.  Stay tuned.

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

Regards,

pgd