Thursday, January 28, 2016

Near an initial buy signal but limit exposure

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Summary

The Long-Cash Ratio is marginally improving, and strength today (Thursday) will most likely trigger an initial entry signal.  Other confirming indicators I have are not as bullish, so caution is advised.

Long Cash Ratio

The LCR Table shows the thawing that I discussed all last week:


Click on the image to enlarge.

The LCR is improving despite the downward days that we've experienced in the markets.  This means that there is buying on price and volume action, so people are stepping in.

The middle of the table shows growing "green", or positive slopes that stocks are improving on a short-term basis.  The red in the middle of the table indicates a huge pool of stocks that are beaten down, and we need continued, day-over-day improvement off the recent low for this area to turn green.  One of my internal signals is triggered when the 8d slope turns green, but note that this action was not confirmed by other internals, so I did not post it.

The right side of the table shows the problem.  Foward-backwards-forward-backwards is the characteristic, and the red shows weakness in the buying of the bottom.  This being said, as a longer-termed investor, the green on the right shows that we are not aggressively moving downward (in fact, we are moving upward, albeit slowly), so the bottom is clearly in.

This being stated, we can dawdle here if the markets decide to do so.  I'm seeing lots of churning, or turnover occurring, so I'm not convinced that we're out of the woods.

I've placed orders in the longer-termed portfolios at C2 and in my personal holdings, but am limited in committing resources to less than 30% or so in investments.

Cumulative Tick


Click on the image to enlarge.

The cumulative tick is not as strong as I'd like to see.  The white trace, which is the instantaneous value, is mixed in with the moving averages, and the result is a tightening of the band and a possible break above or continued drop below the longest moving average, which is in heavy red.  The implications here are that it's hard to tell if we have short-covering occurring or if this is actual buying of this market.  If short-covering, I would not be surprised if we resumed a downward slope and that selling would dominate.

Hence, extreme caution is advised based on this chart alone.  I like to see clear buying of the bottoms with this chart, and we do not have this.  

Strategy

I'm staring to place orders in stocks that I want to hold for the longer-term.  These orders are BUY STOPS, set to 0.1% above the previous day's high, and effective after 9:45 a/ET.  If they do not fill I will adjust the entry value downward, never upward, after the market closes and to prepare for the next day.

Stock selection is found in my stock files, specifically on the Portfolio tab of the shared Dropbox files.  Instructions on how to access those files follows.

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Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

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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Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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





Thursday, January 21, 2016

Continuation...

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Summary

The Long-Cash ratio continues to move lower in the single-digit range, indicating that whatever stocks are left on the long side (235 out of 3023) are falling apart in terms price.  Volume was extraordinarily high on Wednesday, perhaps pointing to capitulation.  We had a "V" shape occur on the Cumulative Tick which supports an intraday reversal, so we have more signs of buying stepping in.

Despite all of this, risk is extraordinarily high.  Sidelines are king, at least for now.

Long-Cash Ratio

Click on the image to enlarge.

Out of 1860 observations since 2008, we are at the 31st lowest reading in the LCR ever recorded.  We have always rebounded from here, but note, it could take a week, a few weeks, or a couple of months.  See my post from a few days ago -- we had one event last 70 days until the number of stocks hit parity (equal number of Long/Cash-rated stocks in the database).

The value of 0.084 means that 8.4% of the database is rated "long" -- the remaining stocks are in "cash" or "avoid".  This number can continue to drop, although it becomes harder and harder because rotation begins to appear as people bottom-feed.

The middle of the table shows the continual "sea of red", indicating that on a day-over-day basis, the number of stocks that are rated as "long", or worthy of consideration in this market, is dropping.  Put another way, "cash" rated stocks are dominating, and movement out of stocks that are rated cash continues (as evidenced by increasing supply and subsequent dropping prices).

Nothing in the middle of the table tells me that Thursday is a buying day.  Take it off.

A note came in yesterday asking "whether the LCR acceleration is pointing to a bottom?  If so, when should we consider buying?  If not, what is the LCR showing that is useful?"  The LCR on the right is showing more green -- in fact, we've had two consecutive days where we have solid green on all measured time frames.

Remember, the LCR measures the transitions of stocks from "long" ratings to "cash" ratings and visa-versa.  It implies (by the sheer number of cash-rated stocks) that prices are dropping.  A falling LCR indicates that prices can continue to drop -- keeping the stocks in a "cash" rating.  When we get to extremely low levels, like now,  the day-over-day change in LCR will actually begin to slow, showing that the NUMBER of stocks making the transition is abating.  This is where we are today.  There simply isn't a great deal of fuel left to transition from "long" to "cash", hence, we have an abatement of the transitions.  Is this calling a bottom?  Sure, to a degree.  Can prices continue to fall?  Absolutely, and they are.  As long as the "net" -- the sum of the New Long and New Cash values on a day-over-day basis favors the New Cash side of the assignments, then it's a fair bet that database prices are falling.

The following chart may help to better understand:


Click on the image to enlarge.

The chart shows the daily assignments of "New Longs" (blue), "New Cash" (red), and the resulting GGT database average price (green).  If you look closely you see that when red (New Cash) falls, blue (New Longs) typically rises, and the result is that the database price (green) also rises.  This makes sense -- the number of stocks that are jumping from a cash rating to "New Long" implies that price and volume are increasing across the board, hence the GGT database price increases.  The converse is true too:  the number of stocks transitioning from a "long" rating to "New Cash" implies that prices are dropping across the board, and of the pool of remaining "long-rated" stocks, fewer and fewer remain to make the transition to "New Cash".

Here's another chart that makes the point a bit clearer:

Click on the image to enlarge.

This chart shows the same data except I've netted New Longs with New Cash values.  The net will be negative (below the solid red line) when New Cash > New Long.  Conversely, the net will be positive when New Long > New Cash.

As you can see from above, we still have a net negative (New Long - New Cash), so the value is negative.  BUT, you also see that the number of day-over-day transitions is abating -- indicating that we are approaching a bottom of some sort.  You also can see that the GGT price is continuing to fall, indicating falling prices.  Because people are bottom feeding we have some "New Longs", and because the market as a whole is falling, we have some "New Cash" assignments.

Remember, there are 30 lower values of LCR in the database out of over 1800 observations -- we can certainly continue to drop.  This being said, the data doesn't support it -- we're seeing people step in and buy the dip, which is the definition of a bottom.

If this isn't clear send me a note and I'll try to explain a different way (lots of ways to address the question!)

Cumulative Tick

The CT showed an interesting "V" reversal that started about 12:50 p/ET:


Click on the image to enlarge.

The reversal needs to be sustained -- futures are all over the map as I write this, so your crystal ball is as good as mine for what is going to happen today.  Suffice to say though that this is the first step in achieving a local bottom, so we'll simply have to wait and see.

Note that the level of 52-week New Lows (top plot) dominates everything prior -- some would call this combination with the "V" reversal capitulation, some would simply say it was a severe down day.  Both are correct, and only time will tell what the correct descriptor is.

Note that buying/selling was an equal bull/bear war into the close (horizontal white line).  This isn't ideal -- what I'd like to see for a continuation pattern is that we have strong buying into the close.

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Strategy:

Sitting on the sidelines on Thursday, getting ready for our blizzard on Friday/Saturday.  By some models we're going to get 2-3' (yes, feet) of snow in the Northern Virginia area.  Denver can handle it -- we can't.  Can you say paralysis?  Fired up the generator yesterday so it's working.  Have over a cord of seasoned wood ready to go, and will move the snow blower to the main level and get it primed.  Bring it on....

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Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Wednesday, January 20, 2016

Sitting on the Sidelines on Wednesday

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Summary

The Long-Cash Ratio continued to fall with Tuesday's action, keeping the status quo.  Downward forces are abating though, so the selling is not as severe as previous days.  I'm sticking to the sidelines for Wednesday.

Long-Cash Ratio

Click on the image to enlarge

Tuesday was the second consecutive day of single-digit LCR values, indicating that out of a database of over 3000 stocks, less than 10% are worthy of consideration here for medium-to-long-term buying.

The left side of the table shows that the new LCR value is 8.9% and is falling.  The LCR has fell every day this new year, and this alone is remarkable.  Don't fool yourself though -- it can continue to fall.

The left/middle portion of the table is a sea of red.  The LCR moving averages, all with different time scales, all have negative slopes.  The moving averages are all pointing downward, again, not a buying environment.

The right side of the table is showing some continued abatement of the downward slopes of the LCR.  The emergence of green, and the completely green row on the bottom of the table shows that the day-over-day rate of descent is slowing (which is good).  Continued green on the right will lead to green on the left.

We're not there yet, so I'm taking Wednesday off.

Cumulative Tick

I tweeted the following chart mid-day Tuesday:

Click on the image to enlarge

It basically shows that the upward movement in the major indices were being sold on the NYSE, and that the "rally" was false.

Here's the end-of-day chart:

Click on the image to enlarge

After the mid-day peak we sold off until about 3 p/ET, where we then saw some buying stepping in, offsetting the selling (horizontal white line from 3 p/ET).

With the severely downward-pointing moving averages, and the white trace (instantaneous cumulative tick) well under all it's moving averages, nothing here says to buy.

Again, I'm taking Wednesday off.  Risk is wayyyy to high, even for short-term trading.

~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Monday, January 18, 2016

Single-Digit LCR and Uncorrelated Quality Stocks

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Please subscribe to this using the "Follow by Email" link to the left.  Having your email helps me see the number of folks reading this.

Summary

The Long-Cash-Ratio (LCR) has fallen into the single-digit measurement range, indicating incredibly oversold conditions.  Acceleration indicators are not plunging downward but are starting to ease and show mixed movements upward / downward depending on the analysis time frame.  It's only a short period of time before we see broad market participation regarding buying.

What is the LCR?

The LCR is an indicator that I created that compares the number of stocks in the database that are rated "Long" to those that are rated "Cash".  It is a ratio, so in today's example, we presently have 260 stocks that are in some form of "Long" and the rest (2762) are in 'Cash".  This is a ratio of 260/2760 or 0.094.  Stocks assignments are adaptive to individual market performance (price, volume, price rate of change) so the individual stocks are evaluated first, then aggregated together to form the LCR.  The global behavior of the stocks in the database in no way influences the individual stock recommendation -- this is performed in a "brick-by-brick" analysis and a big summation sign is put in front of all the stocks.  This makes the LCR superior to other methods of understanding market behavior.

Single-Digit LCR -- What does it Imply?

Simply, it suggests that this could be a good buying opportunity, although there are limited observations using the approach described below:

1) Buy the GGT index (looks most like the ETF VTI, or Vanguard Total Index) at the closing price the following day the LCR index enters single digits.
2) Hold the GGT index until the LCR index moves back above parity, that is, when the number of "long" rated stocks exceeds the number of "cash" rated stocks.

There have been 3 of these events since 2009.  All have made money.  All take a bit of fortitude because every one has dipped from the buying point to underwater before they recover.


The data above uses the GGT index from those dates.  The GGT index is an equal-weight average of all the stock prices in the database, and in general, the total number of stocks strives to maintain 3000 or so, plus or minus 100.  I've been able to keep that level since inception in 2008 so the index is sound.

The first thing that should be apparent is that the durations of holding after the buy can be quite long.  This suggests that we could continue to play in a rough area for a considerable length of time.  Note that the Duration indicated reflects calendar days, not trading days.  Nevertheless -- buying in August and holding a momentum portfolio until October is rather unusual.

Also not that you'll need to understand that every portfolio gave up some gains sometime during the holding period.  I've indicated the Drawdown -- this is the amount dropped from any local peak.

What if we bought/held GGT "long" rated stocks from those dates?  

In general, the answer is favorable.  Using HGSI ( http://www.highgrowthstock.com/ ), it's possible to build the "what if".  Note though that although I have the stock lists that were "GGT New and Affirmed Longs" on those dates shown above, some of the stocks have either been acquired or have gone out of business.  Hence, the database today is not 100% accurate to reflect exactly what would have transpired on the dates in the past. 

This is known as survivorship bias, and you can Google it if you want to read more about what it means.

Anyways, baskets of stocks purchased/sold on the aforementioned dates in the previous table result in the following charts:


Click on the image to enlarge

Click on the image to enlarge

Click on the image to enlarge

If you click on the charts, you see the following gains:

March 2009 Portfolio:  11.2% gain
May 2010 Portfolio:  2.9% gain
August 2011 Portfolio:  4% gain

So, we have a reasonable expectation that buying in these conditions could produce a positive gain.  Note, your crystal ball is as good as mine, and the past is certainly not a guarantee of the future.

This being stated, *if* we were to consider buying, what is the group behavior of the stocks that are being considered.

GGT separates "long" stocks into three groups:

  • New Long -- previously in some form of "cash" recommendation, these stocks *just* converted to "long" recommendations on higher volume AND price.  These stocks are attracting attention in the present climate.  They may be undervalued, overvalued, or have something else going on with them -- all that I know is that they are appreciating in price and doing so on higher-than-average volume.
  • Affirmed Long -- previously in some form of "long" recommendation, these stocks are moving higher on combined higher volume and prices.  These stocks have already been firing on all cylinders, and these stocks are showing strength in the present market.  These are what some people call "leaders".
  • Long -- These stocks are in some form of long but do not have enough downward price pressure to kick them into "cash".  They could be moving upward or downward, but are moving in a low-volume environment.  Specifically, there is not enough downward forces to drop prices dramatically, and there is not enough upward demand (due to low volume) to drive prices higher.  Higher volume on these stocks would kick them up to "Affirmed Long", while severe dropping in price, with or without volume, would kick them into "New Cash".
Of the 3, the "New Long" and "Affirmed Long" stocks are of interest to me.

Here's the charts of how New Long, Affirmed Long, and a combined "New Long + Affirmed Long" index appears:


Click on the image to enlarge

This is a New Long group index.  The individual stocks are available for subscribers to my Dropbox folder (free); instructions on how to do this are below.

The first thing that jumps off the chart at me is that the "New Long" stocks have been trading below their group moving averages.  This is to be expected -- "New Long" is a new breakout behavior pattern and hence I see the huge move on Friday from these stocks on higher volume.  

Of significance is that the middle of the plot shows the 13d and 34d slopes of the prices, and these are trending upwards.  This is a good sign, and these stocks have been slowly building the last week as the market dropped lower and lower.

A key question is whether I would buy these stocks?    As a group, they all have the required characteristics, except we are at the beginning of a (possible) change in trend.  This always suggests higher risk, so buyer beware.  If I were to jump in here I'd do so only on strength, and with a fairly tight stop loss.

Here's the chart for Affirmed Longs:

Click on the image to enlarge

This chart shows a much more established trend with these stocks.  The trading-above-moving averages is hugely positive, and the slopes of the 13d and 34d are pointed upwards and expanding.  There is positive momentum with this portfolio.

Compared to the New Longs, this Affirmed Long portfolio is more established.  Whether stocks will move up at the same rate as the New Long portfolio is to be seen.  Historically, the answer is "no", but I have no idea (nor do you) about the future.

If we combine the "New Longs" and the "Affirmed Longs" we get the following plot:

Click on the image to enlarge

This chart shows the combined behavior of all the stocks with "New Long" and "Affirmed Long" recommendations.  I see nothing wrong with this chart, and if I could buy the index, I certainly would.  It shows that we have established stocks as well as a major bump on Friday on higher volume, which is amazing.  Strong stocks in a down market are noteworthy, and this is a large basket of diversified stocks.

One thing that I like to do when I'm "bucking" market trends (and the primary market trend is downward right now) is to select low-correlation stocks, relative to the major indexes.  Correlation is measurable, and stocks are correlated if they move in the same direction together.  

For example, suppose the S&P500 (SPY) moves up 1%.  If the stock under consideration also does this, meaning move up 1%, and if this occurs a large number of times, say, over the past 100 trading days or so, we can measure the correlation.  A value of 1.0 means exactly correlated.

Conversely, if we take a stock and it does not move in correlation to the SPY, meaning that as the SPY goes up or down the stock does it's own thing randomly, then we get a value of 0.0 and this means the two are not at all correlated.

If a stock moves opposite the thing it's being compared to in exact sequence (SPY moves up 1%, stock moves down exactly 1%), then the two are inversely correlated and the value is -1.0.  For ETFs, the ETF (SPY) and it's inverse (SH) are inversely correlated with each other.  The correlation matrix for these two looks like this:

  SPY SH
SPY 1.00 -1.00
SH -1.00 1.00
 
So, as the theory goes, if we pick quality stocks that are bucking the trend, the stocks will continue to buck the trend as long as they continue to buck the trend.  Meaning, nobody knows how long in the future the low-correlations will continue but it's a good start.

When I do this for the basket of New Long and Affirmed Long stocks, and I filter those out that are correlated with the Russell 2000, S&P 500, NASDAQ 100, and the DJIA, I'm left with the following:


Click on the image to enlarge

The "red" on the left shows that the R2K (^RUT), the S&P500 (SPY), the NAS (QQQ), and the DJIA (DIA) are all heavily correlated with each other, as we would expect.

The remaining green shows the correlation to these indexes and were hand-picked:  if the correlation was between -0.25 < stock < +0.25 turn it green and pick it.

When I take this list and pump it into HGSI here is what I get for the past recent behavior:




Click on the image to enlarge

The uncorrelated basket of stocks looks pretty good.  Not as strong as the previous basket, but not bad.

My personal expectation is that this basket of stocks will continue to outperform the markets over the longer haul as long as they remain uncorrelated.

Again, buyer beware.  Not recommendations -- do your diligence.
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The LCR Table

Jumping into the markets on Tuesday, the first trading day after the MLK holiday, is ill-advised, correlated or not.  Nothing on my LCR Table suggests that Tuesday is a day of entry:

  
Click on the image to enlarge

The long-series of down days in the drop of the LCR suggests that we're going to bounce.  We haven't bounced, nor is there any indication that "Tuesday is the day".  Your crystal ball is as good as mine.

On the far right we do have an initial sign of an abating downward acceleration.  The ball may be reaching the top of the apex and may just start to fall back to earth, hence reversing direction.  Who knows?  What I do see is that the right side of the table is between reds and greens, meaning that the slope of the acceleration is different depending on time frame.  This is good.  Note though that history suggests we could play around in these low numbers for awhile, so care is required.

Given the LCR table status, which I believe in with 100% of my portfolios, Tuesday is not a buying day, uncorrelated basket or not.  Correlation doesn't change over night so the same basket of stocks that I calculated today will have (more/less) the same correlation values if I run them any time this week.  The only thing that will change is the GGT recommendation.

What I need to see in the table is that we see some green on the left side of the table.  I'd like to see (minimally) the 2d and 3d turn green in 1 day, and be quickly followed by the 5d and 8d.  If the 8d moves green I'm going to start buying and will let everybody know.


 Cumulative Tick


Click on the image to enlarge

Confirming a bit of "relaxing of the selling" is the cumulative tick indicator that I use.  See previous posts to get a flavor of what you're looking at.  For those of you who follow me, you see that we came (mildly) off the lows of the day so Friday wasn't a complete blood-bath -- there was some buying into the close.

This being said, NOTHING in the CT chart looks like a buying opportunity.  I intend to sit on the sidelines on Tuesday.

~~~~~~~~~~~~~~~~~~~~
Strategy:

Although not discussed here, I'm probably going to buy deeply out-of-the-money cash-secured puts on some quality stocks that have earnings beyond the February options expiration date. These are going to be on quality stocks that I have evaluated as "undervalued" and that I would not mind owning a even a lower price than I can get right now.  Many do not pay a dividend so I free myself of having to track the ex-div dates, etc.   Might as well generate some minor income.

No buying of stocks, correlated or not, on Tuesday.

I continue to unwind positions that are recommended as "New Cash".  There aren't many left that I'm holding.  I've set my exit criteria and will be out of the positions if they hit their stops.  For those of you subscribing to the real-time alerts, you'll get automatic notification when the positions are exited.

For the non-Collective2 accounts, I will set a 1% trailing stop loss, GTC, effective after 9:45 a/ET and will forget about these positions until they either 1) reverse to a "New Long" recommendation or 2) are sold.

For the Collective2 accounts, I will set a 1% stop loss, GTC, effective after 9:45 a/ET and that will be adjusted upward (never downward) nightly until triggered.  The C2 accounts have been battered with this last round of down markets and I'm re-evaluating stocks and entry/exit criteria.

~~~~~~~~~~~~~~~~

Stock updates are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


Friday, January 15, 2016

One Day Does not Make a Trend

.
Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you except to communicate something concise with the system.  Note that after several years I've never emailed the entire list.  Having your email helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.

Summary

The indexes all skyrocked upward on Thursday and my two primary indicators, the Cumulative Tick and the Long-Cash Ratio table both indicate some abatement of the downward move.  It is way too early to determine if this is sustainable -- but we are very oversold so the odds are in favor of some movement upward.

I intend to sit on the sidelines Friday.

Observations:


Click on the image to enlarge

The Cumulative Tick started to move upward around 12:30 p/ET and although it showed a bit of weakness into the close, it ended the day higher than it started.  There was net buying on the NYSE.

The white line is below the downward-sloping red trend line, so this is not a good market for buying stocks.


Click on the image to enlarge

The LCR fell to the 49th lowest value (out of 1857 observations) ever recorded, ending at 0.112,
which is a slight fall from Wednesday on really high volume.  We have had 10 consecutive days of the LCR dropping on a day-over-day basis, which is uncharacteristic for the markets.  We sold off fast and hard.

The middle shows a sea of red, indicating that I should plan to do nothing today.

The right side shows a solid row of accelerating to the upside, which is the first step in flashing an entry signal.  We need many more like this to get us out of the deep oversold territory that we are in.

I intend to be safe and not do anything today.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Dividends: https://www.collective2.com/details/94780986

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


Thursday, January 14, 2016

Selloff continues

.
Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you except to communicate something concise with the system.  Note that after several years I've never emailed the entire list.  Having your email helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.

Summary

Wednesday continued the sell-off in the markets, as we all know.  The short bump up in the morning was greeted with significant and steady selling throughout the day, with computerized/algorithmic selling also dominating.  There is no chance of entering the markets on Thursday in any capacity on the long side, and Friday has significant weekend risk.  I'm considering the week "cooked".

Cumulative Tick


Click on the image to enlarge.

Lots of annotations, but simply put, all negative.  The 1739 52-week New Lows completely dominated the 44 52-week New Highs, and yes, I checked -- the 52-week new highs are all relatively speculative or under-volume stocks.   Don't think for an instance that these are "strong performers" -- they are not.  Their fundamentals (revenue, EPS growth) are terrible, and do not pass my "Greenfield" test for subsequent consideration.

The take away here is simple:  They NYSE is selling this market hard, and this is evidenced by the downward slopes of the cumulative tick ribbon plot in the lower half of the picture.  Until the white CT line turns up and crosses the solid red line from below, you're at a high risk if you're long in this market.  Aside from selling some out-of-the money puts, I'm nearly 100% in cash.

Long-Cash Ratio


We are near single-digits on the Long-Cash Ratio, which means oversold.  This being stated, as as we saw Wednesday, markets can go lower.  The present value of the LCR is 0.115 and this is the 54th lowest value out of 1856 observations.  This means that there are only 312 stocks that are "Long" in the database of 3028 stocks, and of these, 2489 stocks are a solid "Affirmed Cash" recommendation, meaning, both volume AND price are confirming to stay away.

Despite being oversold, risk is quite high.

The right side of the table shows we lost some ground on Wednesday with the accelerations turning red, meaning slopes (on the left) are plunging downward faster on all time frames except the 8d and 13d.  Again, until we get solid greens on the right, across all measured time frames, there is no hope of getting a signal on the left to enter.

I'm taking Thursday, and most likely Friday off from the markets.  My next post, unless something remarkable occurs today (Thursday), will not be until late this weekend.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


Wednesday, January 13, 2016

Selling continues, but approaching a bottom

.
Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you except to communicate something concise with the system.  Note that after several years I've never emailed the entire list.  Having your email helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.

Summary

Tuesday continued the selling but the strength of the selling is abating, according to my views.  It is possible, that with a strong positive day, we could get an initial buy signal as early as tonight.  For now, no plans to buy anything on Wednesday.

Long-Cash Ratio Table

Click on the image to enlarge.

The LCR, which measures the number of stocks with a "long" rating (those that have solid volume and price appreciation) to those that have a "cash" rating (those that are falling apart in price) continued a major decline on Tuesday, falling to a low of 147/1000, or 0.147, the 72nd lowest reading since September 2008.  On August 25th we got down to 0.113, which was the 52nd lowest reading.  This is out of 1855 observations so these are significant lows.

The left-center part of the table is a sea of red.  This measures the day-over-day trend on multiple time frames for the LCR, and succinctly answers the question "are stocks reversing and is price appreciation occurring, with volume, on any time frame?"  The answer right now is "NO" and we have no signals to enter on Wednesday.

The right side of the table is showing green.  This is the rate-of-change of the left side of the table, and basically, it is a leading indicator relative to the left side.  Green MUST occur on the right for green to appear on the left.  Make sure you understand this, and if you don't, ask.

We see green on the right.  We are "slowing in the rating of falling prices".  The LCR is slowing as it hits a local bottom.  It is still falling downward (left side red), but the rate at which it is falling is decreasing (right side green).

I'd like to see the right side show green across the entire measured time frame.  We are close -- real close.  If you click on the table and look at the far right you see that the last three red cells are 0.000 -- this is within a fraction of moving positive, so we are close to calling the bottom.

A few lookback statistics:

From the August 25th low to the November 4th high (all done in hindsight) we had a GGT index change of  +7.8%.  Nobody can time this perfectly so this represents best case.  We didn't get an actual official entry signal until 9/8, and the gains from the official entry to the local peak were 3.2%

The same thing happened in October 2014.  We hit a LCR low of 0.158 on October 13, 2014, and by November 26, 2014 we had moved to a LCR value of  1.535.  In the same time frame the GGT index had changed +11.4%.  Again, perfect timing, and nobody can achieve this.  An official entry signal was triggered on 10/16/2014, and the gains to the peak were 9.7%

I can go back and duplicate the events when we have hit lows but suffice to say, this is a good buying location WHEN THE MARKETS SIGNAL ENTRY.

Putting this in context is this chart:


Click on the image to enlarge.

This chart is like the LCR but it simply shows the percentage of stocks in the database that are rated "long".  The value is 12.8% and as you can see, we are testing the lows of August 2015.  We have to go back to the summer of 2011 before we could dip down into the single digits.

All of this suggests that we should be getting our shopping lists ready.

Money Management

Risk is always high at these places in the market cycle, for obvious reasons.  The VIX will be high at this point, the cost of options is high, and fear is high since we've been selling as the markets drive lower and lower.

I made a mistake on the last cycle and I changed my money management (MM) methods, and was punished for it.  Looking at the % longs chart above, you can see the rationale -- good buying environment, so put all the chips in and let them rise.  Unfortunately, we never "cleared" the green area above (the area where we historically have transitioned to the pink zone), so losses have been heavy.

I've spent a couple of weeks, a few hours per day, looking at MM and how the losses could have been reduced and applied backwards.  Simply put, returning to my short-term, medium-term, and long-term timers would have kept me out of trouble this last cycle, as it did for years prior.

Lesson learned -- don't change something that works for something that you "think" will be better.  Mr. Market knows better, and he punished me (and my Collective 2 subscribers) for this.


The timer table shows that the signal of 11/25 as well as 12/29 were short lived and should have been exited almost immediately.

Ideally, this next signal will evolve like the following from 2014:


Click on the image to enlarge.

Note that this is 2014, not now.  Note how the left side (short-term timer) starts in the green, and the cash target drops from 100% to 66%.  Then, as the medium-term timer matures and turn green, the cash target continues to drop from 66% to 33%.  Finally, when the long-term timer moves green, we have a cash target of 0%.

This "Combo Timer", as I call it, has relatively solid statistics since 2009:

Click on the image to enlarge.

The values are measured using the GGT index, which looks like the ETF "VTI" (Vanguard Total Index) most of the time.  

Not considering commissions, the compounded rate of return is 11% per year, with only being in the market 44% of the time.  Put another way:  with less than 50% exposure, the gains match the historical performance of the S&P 500.

You can read the rest of the statistics.

This is the timer I'm sticking with going forward.

Strategy
  1. No buying for Wednesday.
  2. I'll be working on getting my shopping lists ready today.
I will not post shopping lists here -- they are for my Dropbox subscribers (which is free and has been for 7 years).

The stock lists are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, as well as to see my new shopping lists, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Dividends: https://www.collective2.com/details/94780986

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Monday, January 11, 2016

Selling continues

.
Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you except to communicate something concise with the system.  Note that after several years I've never emailed the entire list.  Having your email helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.

Summary

Monday, Jan 11 continued the selling pattern, independent of the indexes (which were volatile).  This market continues to be sold and Tuesday is not a buying day.  No floor has been confirmed, but there are possible signs.

Cumulative Tick

The cumulative tick chart is indicating strong, algorithmic selling up until 1:45 p/ET, and aside from a slight bump that started about 3:20 p/ET, it ended the day in this area, showing some minor accumulation in the last hour of the day:


Click on the image to enlarge.

The chart more/less speaks for itself -- white below red is a down market so I'm taking Tuesday off from buying.

Long-Cash Ratio (LCR) Table:

7 consecutive down days for the LCR has done damage.  The new reading is 0.162, so for every 162 stocks that are still indicating "good to hold", 1000 are saying "avoid":

Click on the image to enlarge.

The sea of red is unchanged so all the slopes of the moving averages that measure short, medium, and long-terms are pointing down.  Translated:  stocks are being sold, and prices are dropping a significant amount on all time scales.  This is not a buying market (yet).

On the right, we see some green creeping in.  This isn't overall bullish -- it simply is abating of the selling.  The green simply says that compared to Friday, today's change in slope was positive for several time frames  (2, 3, 5, 8, 13 days), which is good.  Put another way, the red (negative) values on the left side of the table are "less negative" today than they were on Friday.

More green on the right would show a local bottom and would probably trigger a buy signal.  We're not there yet, and won't be until Tuesday night at the earliest.

I'm taking the day off from anything related to buying stocks.  You do what you think is most prudent for your own risk profile.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Ending last week on a selling note - no buying on Monday

.
Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you except to communicate something concise with the system.  Note that after several years I've never emailed the entire list.  Having your email helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.

Summary

We are in the correct "zone" to buy, as prices are certainly oversold.  This being said, there is room to fall from here, so until we get some indications of internal buying, cash is king.

Cumulative Tick

We ended the week with Friday being somewhat neutral as far as the algorithmic buying/selling is concerned but the retail components certainly continued to sell, especially into the close:


Click on the image to enlarge.

The top plot shows 52-week new highs (green) and new lows (red), and you can see the net in yellow.  New lows dominate, net is negative, and the bottom line is that the markets are being sold hard here, causing stocks of the NYSE to hit these new low points.  While a bottom-feeder's paradise, I don't bottom feed, so this is not a good climate to buy stocks.

The middle plot is more/less horizontal.  This represents computerized buying/selling, and the bottom line is that we see net neutral for most of the day.  A bit higher than neutral, a but lower than netural, but more/less neutral.  Nothing remarkable here -- no sustained buying/selling as far as the programs are concerned so the markets did what they did due to manual actions.

The bottom plot is where the money is, or specifically, where it isn't.  It isn't flowing into the markets -- it's flowing out.  The net for the day was negative, showing net selling.  Furthermore, the risk of the weekend is apparent -- the markets sold into the close, which is bearish in the sort term.  Everybody was unwinding positions into the weekend, most likely to remove headline risk from their positions on Monday morning's open.

The negative slopes on all the moving averages tells you money is flowing out.  Until we see the white cross back above red from the bottom upward, it simply is not worthy of our effort to be in this market from a momentum perspective.

The chart shows a bearish cumulative tick pattern and the markets are continuing to be sold from an internal perspective (at least on they NYSE).

Per my comments last week I have moved to the sidelines and I have raised a considerable amount of cash.  Very little of my portfolio is invested -- most is in cash.

Long-Cash Ratio (LCR) Table

The following table tells me that Monday is not a buying day, despite the oversold nature of the markets:

Click on the image to enlarge.

The left side of the table shows that the long-cash ratio (LCR) value has fallen to 0.193, indicating that for every 1000 stocks that are rated in some form of "cash" (avoid)  status, that 193 are in some form of "long" (okay to hold as far as price action is concerned).  Friday's move was another 24% drop (day over day) of the LCR, and this was the 121st strongest drop since 2008.  Again, significant, and there is acceleration to the downside.  Not a good buying climate.

The middle of the table shows a sea of red.  These are the slopes of the moving averages of the long-cash ratio, and the multiple time frames tell me what is happening on a short-term, intermediate-term, and long-term basis.  In all time frames the market is contracting -- stocks are being sold -- and hence, Monday is not a good buying opportunity.  While we are nearing a floor, we haven't achieved it yet, at least from the LCR slope perspective.  The number of stocks that are falling into a "CASH" ranking continues to dominate the database of 3000+ stocks on a day-over-day basis.

Confirming this is the right side of the table.  The right side of the table shows acceleration, or slope of the slope, and the "red" on the right side indicates that there is strength into this day-over-day movement of stocks into a "CASH" ranking.  Until we see green appear on all time frames on the right side of the table we will not get green in the middle of the table.  We have *some* semblance of this possibility occurring on Friday, but not in a strength that is meaningful.

I need to see the right side of the table turn green before I will start buying this market.  This will turn the middle of the table green if it is sustained, which means prices are moving upwards on volume buying.  

Percent Longs in Database

All of this being said, I believe we are in a great spot for buying, no matter what your strategy:


Click on the image to enlarge.

The table shows the percent long-rated stocks in the database -- 16.2% -- and as you can see, when we get to these levels we are generally oversold.  The green area represents historical areas for buying, and the pink area the values where selling could be prudent.

Also note though that we're on the left-side of a downward pointing dip -- we need a bit of time to form a bottom then start moving upward.  This isn't to say that we couldn't reverse today  and start upward (futures are up as I write this Monday morning), but if history is any indication, we nee some time to really force the bulls out of the market and get some form of a capitulation.  We simply aren't there yet, and the LCR table confirms this.

Another good indicator that I have developed and used is the slope of the 8-day LCR:


 Click on the image to enlarge.

I have circled the present value of the 8-day slope of the LCR moving average.  It is pointing DOWNWARD, which means on a short time frame, we have more stocks moving to the sidelines in terms of recommendation than the opposite condition.  Until this indicator hits a bottom are reverses, I will not be buying.  There are rare exceptions to this rule but in general, you see what I see and it's not confirming any form of an entry for Monday.

Strategy:

I continue to unwind positions that are recommended as "New Cash".  Of my holdings, HCKT, LGND, LMAT, RNG, SFBS, and UVE are all flashing exit signals.

I've set my exit criteria and will be out of the positions if they hit their stops.  For those of you subscribing to the real-time alerts, you'll get automatic notification when the positions are exited.

For the non-Collective2 accounts, I will set a 1% trailing stop loss, GTC, effective after 9:45 a/ET and will forget about these positions until they either 1) reverse to a "New Long" recommendation or 2) are sold.

For the Collective2 accounts, I will set a 1% stop loss, GTC, effective after 9:45 a/ET and that will be adjusted upward (never downward) nightly until triggered.

~~~~~~~~~~~~~~~~

These recommendations are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Dividends: https://www.collective2.com/details/94780986

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

Friday, January 8, 2016

Confirmed Exit

With the close of markets on Thursday, January 7th, all signals are to move to the sidelines.  This signal was confirmed by the Cumulative Tick:


Click on the image for a larger version.

I wrote about this pattern yesterday, and the sustained selling on the NYSE caused the CT to cross below the longest moving average, pulling all of them downward in terms of slope.  This is a free-fall condition for my system and history indicates to get out of positions.

I've set my exit criteria and will be out of the positions if they hit their stops.  For those of you subscribing to the real-time alerts, you'll get automatic notification when the positions are exited.

For the non-Collective2 accounts, I will set a 1% trailing stop loss, GTC, effective after 9:45 a/ET and will forget about these positions until they either 1) reverse to a "New Long" recommendation or are sold.

For the Collective2 accounts, I will set a 1% stop loss, GTC, effective after 9:45 a/ET and that will be adjusted upward (never downward) nightly until triggered.

The Greenfield Dividend portfolio, which strives to maintain income at the expense of portfolio equity value, will remain invested.  Stocks that are "Cash" rated will be liquidated and that money will be deployed in new equities as soon as my LCR indicators indicate a reversal is occurring.

The Long-Cash Ratio fell hard yesterday:


Click on the image for a larger version.

As you can see on the left, the LCR fell 27% from the previous day's value, and relative to all down days tracked since 2008, was the 95th strongest down day.  This places yesterday's selling action in the top 10% of all down days, which is significant and with all my indicators, actionable.

The sea of red in the middle and right sides of the table, which are explained in previous entries, simply tell us that this is not a buying market.  Certainly, the right side of the table still shows that the "knife is falling".

Strategy for Friday, January 8th

My strategy for today is relatively simple.

1) no buying
2) closing all portfolios using a TSL or fixed stop and selling those positions that hit their stops
3) flying my family to Minneapolis for my grandmother's 91st birthday on Saturday

My next post will be Sunday.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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




Thursday, January 7, 2016

Never attempt to catch a falling knife...

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Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you except to communicate something concise with the system.  Note that after several years I've never emailed the entire list.  Having your email helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.

Yesterday morning, before the markets opened, I commented that the dip was being bought.  Yesterday's action did not continue that accumulation -- the falling indexes and the market being sold were pretty much in sync throughout the day, although the selling was not nearly as ferocious as the drop in the indexes would have you believe.


Click on the image to show a larger version.

The middle plot is most telling -- the markets opened with some strong, algorithmic selling, then maintained that area well into the lunch period.  I tweeted in the late afternoon that selling had resumed -- you can see the steady selling kick in around 2:30 p/ET and continue to almost 3 pm exactly, where we saw some buyers step in within the last hour.

The Cumulative Tick is showing that this market is under pressure, with some of the CT moving averages now with a negative slope.  Obviously, if this continues, we'll cross negative and the ribbon will look like this:


Click on the image to show a larger version.

This presentation, where the white crosses the red from above, would be my exit signal and would tell me to unload anything below the water line.  This presentation shows what sustained selling across all market segments looks like and when this occurs, we generally will not have any positions unscathed.

The presentation above is the equivalent of pulling the plug in the bathtub.

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The Long-Cash Ratio continues to show solid bearishness:


Click on the image to show a larger version.

The LCR has fallen from 0.480 at the close of last year to 0.347 last evening, indicating that another 133 per 1000 stocks have fallen to the dark side (recommended CASH).  The trend, on all timescales, is down.

The middle and right side of the tables are bearish, and you can read entries from the previous three days here and catch up on what it means.

With red galore and no green appearing, I intend to keep my powder dry with no new buying.  I will not attempt to catch the falling knife.

On this thought -- the following chart shows that recent history suggests that we could continue down if the market wants to continue the exit through the doors:



Click on the image to show a larger version.

The chart shows the percent long-rated stocks in the database, and as recent as the past three months (since October 2015), we have precedence for strongly selling the markets from this position.  The blue trace is an equal-weighting of price of the stocks in the database and you can see that we are forming some sort of right-shoulder on a classic head-and-shoulder pattern.  You can also clearly see the lower highs/lower lows that were formed on the percent longs, which is not good for a longer-term market trend.  This being stated, there is a natural floor to how low things can go -- the bottom of the green zone and the right scale indicate that things can get much worse if Mr. Market wanted to get ugly.

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Obviously, my short/medium/long-term timers are indicating that caution is prudent:


Click on the image to show a larger version.

The "green" Enter signal on 12/23 was not followed by a corresponding short-term "Long" signal until 12/29 -- and this was due purely to the lack of volume over the Xmas holidays.  The delay told me that the enter signal was tenuous, and with Monday's action of "Exit", the risk models are in full force to the downside and there should be no net new buying.  

As I stated above, the CT crossing the longest moving average from above would be my personal capitulation signal and the point where I'd move aggressively to a full cash position in all accounts, including my Thrift Savings Plan account.

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Strategy Today:

1)  No buying.
2) A few positions that I own are indicating to exit:

AHS A M N Hthcr Sv Business Svc New Cash
HEP Holly Energy Lp Petroleum New Cash
LOPE Grand Canyon Ed Business Svc New Cash
NEON Neonode Inc Computer New Cash
NVDA N V D I A Corp Electronic New Cash
TNET TriNet Group Business Svc New Cash
URI United Rentals Business Svc New Cash
I've set my exit criteria and will be out of the positions if they hit their stops.  For those of you subscribing to the real-time alerts, you'll get automatic notification when the positions are exited.

For the non-Collective2 accounts, I will set a 1% trailing stop loss, GTC, effective after 9:45 a/ET and will forget about these positions until they either 1) reverse to a "New Long" recommendation or are sold.

For the Collective2 accounts, I will set a 1% stop loss, GTC, effective after 9:45 a/ET and that will be adjusted upward (never downward) nightly until triggered.

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These recommendations are posted in a daily file that I attempt to share by the following morning with all subscribers. To review the stocks that you are holding and see how I evaluate them, you need to be a member of my Dropbox.  Send an email to pduncan [ a t} v _ t (dot] e du, fixing the address of course, with the word "DROPBOX" in the subject and I'll add your email.  I attended Virginia Tech many moons ago and it is my alumni address, so it should be easy to see how to fix the address -- simply use "vt.edu".  I also ask that you subscribe to this list using the link to the left, as it's the only way I can communicate with Dropbox users, if the need arises.

Subscribe to my twitter feed if you want intra-day observations:  grems8544 

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Here's how to find me:

Stocktwits/Twitter:  grems8544

Greenfield Dividends: https://www.collective2.com/details/94780986
Greenfield Leaders: https://www.collective2.com/details/94921209
Greenfield Low Beta:  https://www.collective2.com/details/95702992

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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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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