Monday gave us another all-time high in GGT price -- $19.40 -- but again, on terrible volume of 1.09M shares, a full 27% below the 50d average volume level of 1.49M shares. Visions of the Robot in Lost in Space "Warning Will Robinson", with arms flailing, are dancing in my head.
Bull-strength continued to fall, indicating that while prices are going up, the number of New Longs + Affirmed Longs continues to drop. You can't sustain rising prices with a falling bull-strength -- it's impossible over the longer-haul.
The GGT LCR fell again, albeit only slightly, from 1.35 to 1.322, with 2827 stocks now indicating a long status and 2139 stocks indicating some form of a cash status. This is a -2% change in the LCR, and it's not much.
Because of two successive days of falling LCR, the LCR change timer also has moved from a LONG/CASH (0) to a CASH (-1) position. This timer is recommending that all short-term long positions be closed.
GGT strength continues to fall, and is now at 0.70, down from 0.75. This is still somewhat bullish, but the trend is weakening, which is not the direction we want to move. Nevertheless, we could easily rise from here, especially in a bull market. Note too though that we could easily fall :)
Here are the individual index strength numbers:
DJ30: 0.788, rising 1d
NDX100: 0.637, falling 2d
Brazil: 0.83, falling 2d
Russia: 0.941, rising 1d
India: 0.323, falling 2d
China: 0.765, falling 2d
SP500: 0.94, rising 2d
SP400: 0.858, falling 2d
SP600: 0.834, falling 1d
Russell2k: 0.86, falling 1d
Yucky. Get your contras ready in the appropriate indexes, and play them if they break decisively above yesterday's high range level (see the weekend post for details). DO NOT USE MONDAY'S LEVELS -- do your homework.
Remember, you are responsible for your own investment decisions...
I'm traveling the rest of the week, so postings may be delayed each of the upcoming days.
Regards,
pgd
Tuesday, October 13, 2009
Sunday, October 11, 2009
October 9th Weekend Update
**** [Click on any picture to view in detail] ****
With Friday's close GGT has hit an all-time high in price of $19.36, $0.08 higher than the previous high set on 9/22. Volume on Friday was in the toilet, 1.14M shares, which is 24% lower than the normal average level of 1.50M shares. This past week has been poor for volume -- -15%/-3%/-21%/-3%/-24% -- and when I see this I get really, really nervous.
Looking back, the period starting May 11 - July 27 was characterized by successive periods of low volume, and the period June 2nd through June 25th saw continuously below average volume every day. Note too that this same 6/2 - 6/25 period saw range-bound prices: we closed 6/2 with a price at $16.54 and we ended 6/25 at a price of $16.04, with a high during this time of $16.63 and a low of $15.49, a 7.4% range.
The close on 6/1 at $16.48 on only 1% above average volume was a new high for GGT, relative to that date. The next day (6/2), prices finished higher again at $16.58, another new high, on -2% below average volume. On Thursday, 6/4, we closed at $16.58 again, on volume -8% below average, and this established $16.58 as a resistance level. On Friday, 6/5, we tried again, closing at $16.57, on volume -11% below average. On Tuesday, 6/9, we closed at $16.56 on volume -22% below average -- we demonstrated the inability to break through resistance. On Thursday, 6/11, we closed at $16.63 on -5% below average volume, a new high for GGT relative to that date, and we never revisited that value until 7/20.
My point here is that there are many parallels between then and now. We are just hitting a new high in GGT, but are doing so on weak volume. If the past is any indicator, we will continue to push upward in price, but do so on lower volume, not higher volume. I have no idea where the top will be, but a channel line formed with the top on 5/8 ($15.83) and 9/22 ($19.28) (94 trading days) indicates that we could see a GGT upper bound around $19.76, or another 1.9% higher than where we are today. This increases at a rate of about $0.037 per day, so by this time next week we could see an upper channel line around $19.91 or so. We'll see...
On the support side, we can take the line formed from the 5/13 low ($14.90) and the 10/2 low ($18.39, 99 days), and establish that we are about 4.5% above this support line value of $18.53. I draw channel lines relatively parallel and look for 3 or more points where the line intersects, in case you're wondering (support slope is $0.035 per day). A pullback to this area but a refusal to drop below it would be a bullish indicator to move in with new entries.
===========
The GGT Long-Cash Ratio (LCR) FELL on Friday, just a bit, from 1.369 to 1.350, and is now indicating that 2857 stocks are long in the database and 2116 are in cash. This change to the negative side is almost in the noise floor, so I wouldn't read too much into it, but generally, when we get higher prices, yet we have GGT falling, we end up with some form of profit taking and a drop in prices. This may be too close to call so we'll just have to watch. Bottom line, even though it dropped, it didn't drop much, so regardless, there was not tremendous conviction in the market as a whole.
GGT Bull Strength, which is a ratio of the number of (New Long + Affirmed Long) : (New Cash + Affirmed Cash) positions fell on Friday to 1.13, down from 2.00 on Thursday. This indicator was sitting at 0.08 last Friday (strong move to cash) and although it did bounce up to 2.00 by Thursday, it's had a hard time breaking out. This indicator is most meaningful when the LCR is opposing the direction of bull-strength, but this week saw both increasing/decreasing in sync. The reason these two are important together, it's not consistent for LCR to increase (more Long positions than Cash) but have the number of New Cash/Affirmed Cash positions grow faster than the New Longs/Aff. Longs. Keep watching for a divergence -- until then, the trend is intact (except for the light volume warning indicator).
The GGT change timer moved from Long (+1) to Long/Cash (0) on Friday, caused by the drop in LCR. Since the drop in LCR is so slight, I would not read too much into this -- it could whipsaw if we have a strong Monday. Conversely, this could be a perfect setup if LCR continues to drop ... a truly good "first indicator" for moving to the cash side. On the long side this timer is up 54% since 9/11/08 and on the contra side is up 26%.
The way I trade this timer with the "0" status is watch the ADV/DEC line today around 10-11 a.m. You can watch it here: http://finance.yahoo.com/advances If the Declining Issues to Advancing Issues Ratio is better than 1.8 (note that this is reversed of the move to the long side), then there is a reasonable expectation that we'll continue to the downside, for the day. At this time I look at the best performing Contras and generally place a limited position (25% or so of my normal per-equity position, but not less than $1,000) on the best performers at this time. Note that PST and TBT are the only leveraged contras that seem to be performing with any recent strength ...
GGT Long Strength and GGT LCR are in sync ... both fell on Friday on higher prices. This is a clear warning sign that the underlying database of ~ 5000 stocks is weakening. This does not mean that Monday will be a down day, but it certainly is not a sustainable condition. Either we'll need to see strength increase in the database to support higher prices, or we'll have to see price pressure relax, resulting in synchronization between a falling LCR/strength and prices.
============
Individual index strength is all over the map. Here's the most recent rundown from Friday's close:
DJ30: 0.74, down from Thursday peak of 0.81
NDX100: 0.67, down from Thursday peak of 0.76
Brazil: 0.85, down from Tuesday peak of 0.95
India: 0.38, down from Tuesday peak of 0.79
China: 0.84, down from Thursday peak of 0.90
S&P500: 0.94, down from Thursday peak of 1.00
S&P400: 0.89, down from Thursday peak of 1.00
S&P600: 1.00
Russell 2000: 1.00
Based on these values alone, we can draw some conclusions:
Russell 2000: TWM, the -2x leveraged inverse of the Russell 2000, is a great candidate for entry if we see any strength above $28.10. RWM is the -1x inverse and we'd want to see some action above $46.45 before entry.
S&P600: SBB is the -1x inverse of this small-cap index but is thinly traded, with only 16K shares average volume over the last few days. The SDD is the -2x leveraged inverse of the S&P600 and while it is a bit more liquid, it still is not a barn burner. We would want to see some action above $29.90, but since this is so close to the psychological level of $30.00, I'd say let's make sure we have action well above $30.30 or so before considering this one.
S&P400: MYY is the -1x inverse of the mid-cap index and is thinly traded, so I'm going to ignore this one. MZZ is the -2x leveraged inverse of the S&P400 and is more liquid, with a 10d average volume of 230K shares. I want to see action above $24.96, but again, since this is very close to the psychological level of $25.00, let's look for action well above $25.25 before giving broad consideration.
S&P500: SH is the -1x inverse of the large-cap index and is very liquid, around 2.8M shares 10d average volume. I want action above $55.80 before considering this one for entry. SDS is the -2x leveraged of the S&P500, and we want action above $39.70. Given that is is very close to the psychological level of $40.00, look for a threshold today above $40.40 before consideration.
China: FXP is the -2x inverse of the Xinhua 25 FTSE index. This is a very liquid ETF, and movement above $8.91 would be bullish.
NASDAQ-100: PSQ is the -1x inverse of this index, and it is very liquid at 275K shares 10d average volume. Look for movement above $48.00 before entry. QID is the -2x leveraged inverse of this index, and I want to see movement above $23.10 before entry.
Finally, DOG is the DJ30 -1x inverse, and is very liquid with 466K shares volume average for the last 10 days. I want to see prices above $56.60 before entry here. DXD is the -2x leveraged inverse of the DJ30, and again, I want to see trading above $34.60 before entry.
*** In all of these positions, just because they may hit their entry target today, it does not mean that I'll jump in with both feet. I intend to jump in only with 25% positions, and can always add later.
===========
For Monday, 10/12: I'm not expecting a tremendous amount of volume on Monday -- the Columbus Day holiday will certainly put pressure on heavy participation. Prices could go either way, but given where we are in the channel lines, we have a few % that we could go before we hit historical resistance levels.
With Friday's close GGT has hit an all-time high in price of $19.36, $0.08 higher than the previous high set on 9/22. Volume on Friday was in the toilet, 1.14M shares, which is 24% lower than the normal average level of 1.50M shares. This past week has been poor for volume -- -15%/-3%/-21%/-3%/-24% -- and when I see this I get really, really nervous.
Looking back, the period starting May 11 - July 27 was characterized by successive periods of low volume, and the period June 2nd through June 25th saw continuously below average volume every day. Note too that this same 6/2 - 6/25 period saw range-bound prices: we closed 6/2 with a price at $16.54 and we ended 6/25 at a price of $16.04, with a high during this time of $16.63 and a low of $15.49, a 7.4% range.
The close on 6/1 at $16.48 on only 1% above average volume was a new high for GGT, relative to that date. The next day (6/2), prices finished higher again at $16.58, another new high, on -2% below average volume. On Thursday, 6/4, we closed at $16.58 again, on volume -8% below average, and this established $16.58 as a resistance level. On Friday, 6/5, we tried again, closing at $16.57, on volume -11% below average. On Tuesday, 6/9, we closed at $16.56 on volume -22% below average -- we demonstrated the inability to break through resistance. On Thursday, 6/11, we closed at $16.63 on -5% below average volume, a new high for GGT relative to that date, and we never revisited that value until 7/20.
My point here is that there are many parallels between then and now. We are just hitting a new high in GGT, but are doing so on weak volume. If the past is any indicator, we will continue to push upward in price, but do so on lower volume, not higher volume. I have no idea where the top will be, but a channel line formed with the top on 5/8 ($15.83) and 9/22 ($19.28) (94 trading days) indicates that we could see a GGT upper bound around $19.76, or another 1.9% higher than where we are today. This increases at a rate of about $0.037 per day, so by this time next week we could see an upper channel line around $19.91 or so. We'll see...
On the support side, we can take the line formed from the 5/13 low ($14.90) and the 10/2 low ($18.39, 99 days), and establish that we are about 4.5% above this support line value of $18.53. I draw channel lines relatively parallel and look for 3 or more points where the line intersects, in case you're wondering (support slope is $0.035 per day). A pullback to this area but a refusal to drop below it would be a bullish indicator to move in with new entries.
===========
The GGT Long-Cash Ratio (LCR) FELL on Friday, just a bit, from 1.369 to 1.350, and is now indicating that 2857 stocks are long in the database and 2116 are in cash. This change to the negative side is almost in the noise floor, so I wouldn't read too much into it, but generally, when we get higher prices, yet we have GGT falling, we end up with some form of profit taking and a drop in prices. This may be too close to call so we'll just have to watch. Bottom line, even though it dropped, it didn't drop much, so regardless, there was not tremendous conviction in the market as a whole.
GGT Bull Strength, which is a ratio of the number of (New Long + Affirmed Long) : (New Cash + Affirmed Cash) positions fell on Friday to 1.13, down from 2.00 on Thursday. This indicator was sitting at 0.08 last Friday (strong move to cash) and although it did bounce up to 2.00 by Thursday, it's had a hard time breaking out. This indicator is most meaningful when the LCR is opposing the direction of bull-strength, but this week saw both increasing/decreasing in sync. The reason these two are important together, it's not consistent for LCR to increase (more Long positions than Cash) but have the number of New Cash/Affirmed Cash positions grow faster than the New Longs/Aff. Longs. Keep watching for a divergence -- until then, the trend is intact (except for the light volume warning indicator).
The GGT change timer moved from Long (+1) to Long/Cash (0) on Friday, caused by the drop in LCR. Since the drop in LCR is so slight, I would not read too much into this -- it could whipsaw if we have a strong Monday. Conversely, this could be a perfect setup if LCR continues to drop ... a truly good "first indicator" for moving to the cash side. On the long side this timer is up 54% since 9/11/08 and on the contra side is up 26%.
The way I trade this timer with the "0" status is watch the ADV/DEC line today around 10-11 a.m. You can watch it here: http://finance.yahoo.com/advances If the Declining Issues to Advancing Issues Ratio is better than 1.8 (note that this is reversed of the move to the long side), then there is a reasonable expectation that we'll continue to the downside, for the day. At this time I look at the best performing Contras and generally place a limited position (25% or so of my normal per-equity position, but not less than $1,000) on the best performers at this time. Note that PST and TBT are the only leveraged contras that seem to be performing with any recent strength ...
GGT Long Strength and GGT LCR are in sync ... both fell on Friday on higher prices. This is a clear warning sign that the underlying database of ~ 5000 stocks is weakening. This does not mean that Monday will be a down day, but it certainly is not a sustainable condition. Either we'll need to see strength increase in the database to support higher prices, or we'll have to see price pressure relax, resulting in synchronization between a falling LCR/strength and prices.
============
Individual index strength is all over the map. Here's the most recent rundown from Friday's close:
DJ30: 0.74, down from Thursday peak of 0.81
NDX100: 0.67, down from Thursday peak of 0.76
Brazil: 0.85, down from Tuesday peak of 0.95
India: 0.38, down from Tuesday peak of 0.79
China: 0.84, down from Thursday peak of 0.90
S&P500: 0.94, down from Thursday peak of 1.00
S&P400: 0.89, down from Thursday peak of 1.00
S&P600: 1.00
Russell 2000: 1.00
Based on these values alone, we can draw some conclusions:
Russell 2000: TWM, the -2x leveraged inverse of the Russell 2000, is a great candidate for entry if we see any strength above $28.10. RWM is the -1x inverse and we'd want to see some action above $46.45 before entry.
S&P600: SBB is the -1x inverse of this small-cap index but is thinly traded, with only 16K shares average volume over the last few days. The SDD is the -2x leveraged inverse of the S&P600 and while it is a bit more liquid, it still is not a barn burner. We would want to see some action above $29.90, but since this is so close to the psychological level of $30.00, I'd say let's make sure we have action well above $30.30 or so before considering this one.
S&P400: MYY is the -1x inverse of the mid-cap index and is thinly traded, so I'm going to ignore this one. MZZ is the -2x leveraged inverse of the S&P400 and is more liquid, with a 10d average volume of 230K shares. I want to see action above $24.96, but again, since this is very close to the psychological level of $25.00, let's look for action well above $25.25 before giving broad consideration.
S&P500: SH is the -1x inverse of the large-cap index and is very liquid, around 2.8M shares 10d average volume. I want action above $55.80 before considering this one for entry. SDS is the -2x leveraged of the S&P500, and we want action above $39.70. Given that is is very close to the psychological level of $40.00, look for a threshold today above $40.40 before consideration.
China: FXP is the -2x inverse of the Xinhua 25 FTSE index. This is a very liquid ETF, and movement above $8.91 would be bullish.
NASDAQ-100: PSQ is the -1x inverse of this index, and it is very liquid at 275K shares 10d average volume. Look for movement above $48.00 before entry. QID is the -2x leveraged inverse of this index, and I want to see movement above $23.10 before entry.
Finally, DOG is the DJ30 -1x inverse, and is very liquid with 466K shares volume average for the last 10 days. I want to see prices above $56.60 before entry here. DXD is the -2x leveraged inverse of the DJ30, and again, I want to see trading above $34.60 before entry.
*** In all of these positions, just because they may hit their entry target today, it does not mean that I'll jump in with both feet. I intend to jump in only with 25% positions, and can always add later.
===========
For Monday, 10/12: I'm not expecting a tremendous amount of volume on Monday -- the Columbus Day holiday will certainly put pressure on heavy participation. Prices could go either way, but given where we are in the channel lines, we have a few % that we could go before we hit historical resistance levels.
Friday, October 9, 2009
GGT Notables from Thursday, October 8th
We're within $0.03 of our all-time high (about 13 months lookback) with the GGT Price -- with the close on Thursday we're at $19.25. We got there on volume of 1.46M, which is just below our 50d average volume of 1.51M shares. By themselves, these two indicators are bullish. If we finish above $19.28 on normal to higher volume we have to take this as long-term bullish.
All of the pricing EMAs, through the 55d, are in an up-trend. This is bullish.
The Long-Cash Ratio (LCR) jumped from 1.024 to 1.369, indicating that 2874 stocks are long and 2099 stocks are in cash. The LCR trend lines above the 12d are still continuing downward, but the 5d and 8d have just reversed to the upside. There is no other way to interpret this other than short-term bullish, but with the downward trends on the longer EMAs, it still shows that we are intermediate-term bearish. In 13 months of data it has been shown impossible to sustain an up-trend when the LCR is pointing downward. One or the other has to get in sync, so the jury is still out on what is going to happen over the next few weeks.
The LCR change timer is still pointing upward, and we moved "cash positive" yesterday with the change on Monday/Tuesday. The lesson here is to follow this timer, not our hearts.
GGT long strength jumped from 0.65 to 0.79, which has now put us back into bullish territory. I also track something called GGT cash strength, and it normally "leads" the long strength in magnitude. Thursday's action is a deviation of that rule: long strength in the database beat cash strength, and when this has happened in the past, a reversal has occurred within a few days. We need to pay attention to this, as it could signal a great entry for contra ETFs.
In terms of GGT strength of the various indexes, here's were we are sitting:
DJ30: 0.81
NDX100: 0.755
Brazil: 0.863
Russia: 0.705
Indai: 0.647
China: 0.903
S&P500, S&P400, S&P600, and Russell 2000 are all sitting at a 1.000
Consider your contra positions indeed.
Regards,
pgd
All of the pricing EMAs, through the 55d, are in an up-trend. This is bullish.
The Long-Cash Ratio (LCR) jumped from 1.024 to 1.369, indicating that 2874 stocks are long and 2099 stocks are in cash. The LCR trend lines above the 12d are still continuing downward, but the 5d and 8d have just reversed to the upside. There is no other way to interpret this other than short-term bullish, but with the downward trends on the longer EMAs, it still shows that we are intermediate-term bearish. In 13 months of data it has been shown impossible to sustain an up-trend when the LCR is pointing downward. One or the other has to get in sync, so the jury is still out on what is going to happen over the next few weeks.
The LCR change timer is still pointing upward, and we moved "cash positive" yesterday with the change on Monday/Tuesday. The lesson here is to follow this timer, not our hearts.
GGT long strength jumped from 0.65 to 0.79, which has now put us back into bullish territory. I also track something called GGT cash strength, and it normally "leads" the long strength in magnitude. Thursday's action is a deviation of that rule: long strength in the database beat cash strength, and when this has happened in the past, a reversal has occurred within a few days. We need to pay attention to this, as it could signal a great entry for contra ETFs.
In terms of GGT strength of the various indexes, here's were we are sitting:
DJ30: 0.81
NDX100: 0.755
Brazil: 0.863
Russia: 0.705
Indai: 0.647
China: 0.903
S&P500, S&P400, S&P600, and Russell 2000 are all sitting at a 1.000
Consider your contra positions indeed.
Regards,
pgd
Thursday, October 8, 2009
GGT Notables from Wednesday, October 7th
Volume was incredibly low on Wednesday, the 7th, -21% below average, which is the second day this week of significantly lower values but higher prices. Here's the series:
Monday: $18.70 (up from Friday's value of $18.39), Volume -15% below average
Tuesday: $18.99, Volume -3% below average
Wednesday: $19.03, Volume -21% below average
I know those of you in the market are making money, but I can't justify the risk right now. Higher prices on lower volume (to me) is a "sucker's rally" because it shows that the institutionals are NOT participating. I need to see a big price day with a big volume day for me to believe in this rally. Until then, I'll miss out on the gains -- it's that simple.
Nevertheless, on pricing EMAs alone, we have a full "throttle up" situation, so if you're holding onto long positions, you're probably in good shape.
The LCR moved from 0.975 to 1.024, indicating that 2518 stocks have a long recommendation and 2459 stocks have a cash recommendation. DIVERGING from this gain in the LCR is the bull-strength, which actually fell from 1.53 to 0.73. Any time we see the bull-strength diverge from the LCR it means that while MORE stocks are moving to a longer-position, when we look at the number of stocks moving long relative to those falling to cash, the CASH stocks are winning. Think of bull-strength as GGT's "New Highs/New Lows" ratio. Prices --> upward, LCR --> upward, bull-strength --> downward = DIVERGENCE. In raw numbers, there are more stocks falling out of a long status compared to those moving from cash, even though the ones rated long are appreciating in price faster.
Just so everybody is aware, the intermediate-term EMA on the LCR peaked on 9/25 and has been falling ever since. The correlation of this daily value to GGT pricing value is 0.8813, which is very, very good. We may go upward in price (much to my chagrin), but I can't justify jumping in with both feet (disclaimer: I do hold a few longer-term core position ETFs).
Our GGT change timer is now into day 3 of the LONG recommendation. Since the recommendation went long, we have dropped about -1.8% in overall value. No timer is perfect -- remember that.
GGT strength of the entire database has fallen from 0.7171 to 0.6584, and we're now in no-man's land. Anything can happen below about 0.7 and above 0.3 or so. Your guess is as good as mine.
Here are the strength's of the various indexes and lists I am watching:
DJ30: 0.535, falling
NDX100: 0.590, falling
Brazil: 0.780, falling
Russia: 0.529, falling
India: 0.514, falling
China: 0.823, rising
SP500: 0.807, falling
SP400: 0.656, falling
SP600: 0.776, falling
Russell 2000: 0.735, falling
=========
Summary: we have rising prices on really low volume --> DANGER WILL ROBINSON! We have rising prices but a divergent GGT bull-strength --> indicative of topping. The GGT change timer, while long, has lost nearly 2% since going long, which is uncharacteristic, since it is up 51.4% in about a year.
Be careful out there. We need higher prices on higher volume. Ideally, we need two days of this to really show a powerful up leg. Until then, I plan to keep my powder dry.
Regards,
pgd
Monday: $18.70 (up from Friday's value of $18.39), Volume -15% below average
Tuesday: $18.99, Volume -3% below average
Wednesday: $19.03, Volume -21% below average
I know those of you in the market are making money, but I can't justify the risk right now. Higher prices on lower volume (to me) is a "sucker's rally" because it shows that the institutionals are NOT participating. I need to see a big price day with a big volume day for me to believe in this rally. Until then, I'll miss out on the gains -- it's that simple.
Nevertheless, on pricing EMAs alone, we have a full "throttle up" situation, so if you're holding onto long positions, you're probably in good shape.
The LCR moved from 0.975 to 1.024, indicating that 2518 stocks have a long recommendation and 2459 stocks have a cash recommendation. DIVERGING from this gain in the LCR is the bull-strength, which actually fell from 1.53 to 0.73. Any time we see the bull-strength diverge from the LCR it means that while MORE stocks are moving to a longer-position, when we look at the number of stocks moving long relative to those falling to cash, the CASH stocks are winning. Think of bull-strength as GGT's "New Highs/New Lows" ratio. Prices --> upward, LCR --> upward, bull-strength --> downward = DIVERGENCE. In raw numbers, there are more stocks falling out of a long status compared to those moving from cash, even though the ones rated long are appreciating in price faster.
Just so everybody is aware, the intermediate-term EMA on the LCR peaked on 9/25 and has been falling ever since. The correlation of this daily value to GGT pricing value is 0.8813, which is very, very good. We may go upward in price (much to my chagrin), but I can't justify jumping in with both feet (disclaimer: I do hold a few longer-term core position ETFs).
Our GGT change timer is now into day 3 of the LONG recommendation. Since the recommendation went long, we have dropped about -1.8% in overall value. No timer is perfect -- remember that.
GGT strength of the entire database has fallen from 0.7171 to 0.6584, and we're now in no-man's land. Anything can happen below about 0.7 and above 0.3 or so. Your guess is as good as mine.
Here are the strength's of the various indexes and lists I am watching:
DJ30: 0.535, falling
NDX100: 0.590, falling
Brazil: 0.780, falling
Russia: 0.529, falling
India: 0.514, falling
China: 0.823, rising
SP500: 0.807, falling
SP400: 0.656, falling
SP600: 0.776, falling
Russell 2000: 0.735, falling
=========
Summary: we have rising prices on really low volume --> DANGER WILL ROBINSON! We have rising prices but a divergent GGT bull-strength --> indicative of topping. The GGT change timer, while long, has lost nearly 2% since going long, which is uncharacteristic, since it is up 51.4% in about a year.
Be careful out there. We need higher prices on higher volume. Ideally, we need two days of this to really show a powerful up leg. Until then, I plan to keep my powder dry.
Regards,
pgd
Wednesday, October 7, 2009
GGT Notables from 10/6
GGT price increased from $18.70 to $18.99, a gain of 1.55%, on average volume of 1.47M shares. Although I'm surprised, I would consider this bullish --> rising prices on solid volume is a good sign that we have broad participation.
GGT price EMAs are intact once we get above the 13d; all have resumed an upward trend. This is bullish, although as I always say, it's like driving with only the rear-view mirror to guide you....
The Long-Cash Ratio (LCR) moved from 0.768 on Monday to 0.975 on Tuesday, reflecting the recent bullishness that we've been experiencing. OF PARTICULAR INTEREST is that the LCR EMAs (8,13, 22, 34, 55) are all in a downtrend ... which I would consider intermediate-term bearish. Interpretation: while the daily LCR is moving up, the amount it is moving up is not enough to overcome the historical momentum that was created starting 9/24 and moving forward. To me, I think this is a crack in the ice.
TIMER CHANGE: Because the LCR Change timer has experienced two-days of back-to-back gains, it has flipped from CASH/LONG to LONG with Tuesday's action. This timer is telling us that IF today is upward by 10-10:30, that we can put some money down on long positions.
GGT Strength, across the entire database of stocks, has jumped from 0.3321 to 0.7171 in two days. This is a huge delta -- meaning we are seeing broad, fast participation in terms of price and volume action of LONG-rated positions -- which I see as a bullish sign. This being stated, once we cross the 0.7 line, history has shown that we tend to reverse a bit, and we're there.
Last weekend I introduced a new concept in tracking the strength of various groups. While it is far to early to tell, the DJ30 was bottoming with a strength of 0.04, and I recommended purchasing either the ETFs following the Dow or the DJ30 stocks themselves. I paper traded the DDM, the 2x leveraged of the DJ30, and luck of the Irish would have rewarded us. If you bought at the 10:30 price of $36.35, as of last night's close at $38.01 you'd have an unrealized gain of 4.5% in two days.
The DJ30 strength is 0.711
NDX100: 0.714
Brazil: 0.95 (recommend closing any Brazillian ETFs or stocks)
Russia: 0.64
India: 0.79
China: 0.78
While we may see another day upward, I think we need to be careful here. Certainly, I am not going to enter in any new positions in any of these areas, no matter how small.
============
Summary: I'm continuing to keep my powder dry. Yes, I've missed the run up the last two days, and yes, it does appear that with yesterday's action that this cycle may have some legs. I'm not going to chase it.
Regards,
pgd
GGT price EMAs are intact once we get above the 13d; all have resumed an upward trend. This is bullish, although as I always say, it's like driving with only the rear-view mirror to guide you....
The Long-Cash Ratio (LCR) moved from 0.768 on Monday to 0.975 on Tuesday, reflecting the recent bullishness that we've been experiencing. OF PARTICULAR INTEREST is that the LCR EMAs (8,13, 22, 34, 55) are all in a downtrend ... which I would consider intermediate-term bearish. Interpretation: while the daily LCR is moving up, the amount it is moving up is not enough to overcome the historical momentum that was created starting 9/24 and moving forward. To me, I think this is a crack in the ice.
TIMER CHANGE: Because the LCR Change timer has experienced two-days of back-to-back gains, it has flipped from CASH/LONG to LONG with Tuesday's action. This timer is telling us that IF today is upward by 10-10:30, that we can put some money down on long positions.
GGT Strength, across the entire database of stocks, has jumped from 0.3321 to 0.7171 in two days. This is a huge delta -- meaning we are seeing broad, fast participation in terms of price and volume action of LONG-rated positions -- which I see as a bullish sign. This being stated, once we cross the 0.7 line, history has shown that we tend to reverse a bit, and we're there.
Last weekend I introduced a new concept in tracking the strength of various groups. While it is far to early to tell, the DJ30 was bottoming with a strength of 0.04, and I recommended purchasing either the ETFs following the Dow or the DJ30 stocks themselves. I paper traded the DDM, the 2x leveraged of the DJ30, and luck of the Irish would have rewarded us. If you bought at the 10:30 price of $36.35, as of last night's close at $38.01 you'd have an unrealized gain of 4.5% in two days.
The DJ30 strength is 0.711
NDX100: 0.714
Brazil: 0.95 (recommend closing any Brazillian ETFs or stocks)
Russia: 0.64
India: 0.79
China: 0.78
While we may see another day upward, I think we need to be careful here. Certainly, I am not going to enter in any new positions in any of these areas, no matter how small.
============
Summary: I'm continuing to keep my powder dry. Yes, I've missed the run up the last two days, and yes, it does appear that with yesterday's action that this cycle may have some legs. I'm not going to chase it.
Regards,
pgd
Tuesday, October 6, 2009
GGT doesn't seem to be working ... why?
If you're trying to chase the market using GGT stocks and ETFs, you've undoubtedly been disappointed at the selections. I received a private message this evening :o) "complaining" that GGT wasn't working, and what were they doing wrong?
Simply put, if you're in this category, you're not doing anything wrong.
Let's make sure we understand how GGT works.
As of today, the GGT back-testing optimization period is two years. This means that when the squirrel is running in the cage, it is grabbing the last two years of price and volume data, then it tries to find the "best" EMAs and ROCs that make that sample set work over the past two years. "Best" is my term for a number of optimizations: I can optimize on peak equity, I can optimize on Calmar Ratio, or I can optimize on plateaus. It varies, and I cycle through the optimizations every 4-8 weeks, depending on what is coming next. The values you see updated in the ETF and stock files are the best-performing values in the context of a 1-year lookback.
So, optimization looks back at 2 years, the values in the spreadsheet are compared to existing values that are established over the last year. Whatever one does the best get's the most recent slot in the appropriate ETF or stock files that I post.
The EMA range is intentionally limited from 2 days to 25 days. This means that EMAs above 25d in length are not considered. I've toyed with letting this go to 34, but for now, it's 25. If you scan down columns R-W in the spreadsheets I post you'll not see anything shorter than a 2, nor will you see anything longer than a 25.
Of particular importance are the values in columns R, S, and T. The first two are price EMAs, and the value in column T is a volume EMA. If the first two values are relatively small -- 2, 3, 5, 6, whatever -- then this ETF or stock will respond quicker to changes in price. Alternatively, if these values are 11, 17, 20, etc., then this ETF or stock will respond quite slowly.
The values in columns U-W are important -- these are Rate of Change columns. These values too influence the Long/Cash calls; if they are small in value the ETF will respond a bit faster; if they are large it responds slower.
What we're seeing right now is that stocks and ETFs are actually somewhat bound between two ranges. The drop up until last week moved us down to the lower part of a channel, and the rally the past two days has moved us upward towards the ceiling of that channel. The period (or duration) of these oscillations is relatively short -- on the order of a week or two -- and expecting ETFs with a series of EMAs/ROCs to respond when they have values longer than 10 or so is a tall order.
With respect to the "average" values, the ETF file presently has an average value of 9.23 days, so we're going to see some delay. By the time some of the GGT ETFs change, the new trend is already half exhausted. By contrast, the average value of the stock database file is 7.91 days -- shorter, but not tremendously so.
As the administrator, I have two options. I can shorten the range permitted from 2-25 down to 2-18 or so, or I can stay the course. I've decided to drop it to 2-18 as a test, but it'll be several weeks before we see any output into the daily sheets since it takes about 3 minutes per stock/ETF. If I see more whipsaws in horizontal markets be aware that I'll move this back to 25...
You, as the user of the data, really do not need to do anything. If you're frustrated with GGT, then simply paper trade your favorite ETFs/stocks until you feel more comfortable. I posed some ideas about how to "ride the wave" this past weekend (see below).
Regards,
pgd
Simply put, if you're in this category, you're not doing anything wrong.
Let's make sure we understand how GGT works.
As of today, the GGT back-testing optimization period is two years. This means that when the squirrel is running in the cage, it is grabbing the last two years of price and volume data, then it tries to find the "best" EMAs and ROCs that make that sample set work over the past two years. "Best" is my term for a number of optimizations: I can optimize on peak equity, I can optimize on Calmar Ratio, or I can optimize on plateaus. It varies, and I cycle through the optimizations every 4-8 weeks, depending on what is coming next. The values you see updated in the ETF and stock files are the best-performing values in the context of a 1-year lookback.
So, optimization looks back at 2 years, the values in the spreadsheet are compared to existing values that are established over the last year. Whatever one does the best get's the most recent slot in the appropriate ETF or stock files that I post.
The EMA range is intentionally limited from 2 days to 25 days. This means that EMAs above 25d in length are not considered. I've toyed with letting this go to 34, but for now, it's 25. If you scan down columns R-W in the spreadsheets I post you'll not see anything shorter than a 2, nor will you see anything longer than a 25.
Of particular importance are the values in columns R, S, and T. The first two are price EMAs, and the value in column T is a volume EMA. If the first two values are relatively small -- 2, 3, 5, 6, whatever -- then this ETF or stock will respond quicker to changes in price. Alternatively, if these values are 11, 17, 20, etc., then this ETF or stock will respond quite slowly.
The values in columns U-W are important -- these are Rate of Change columns. These values too influence the Long/Cash calls; if they are small in value the ETF will respond a bit faster; if they are large it responds slower.
What we're seeing right now is that stocks and ETFs are actually somewhat bound between two ranges. The drop up until last week moved us down to the lower part of a channel, and the rally the past two days has moved us upward towards the ceiling of that channel. The period (or duration) of these oscillations is relatively short -- on the order of a week or two -- and expecting ETFs with a series of EMAs/ROCs to respond when they have values longer than 10 or so is a tall order.
With respect to the "average" values, the ETF file presently has an average value of 9.23 days, so we're going to see some delay. By the time some of the GGT ETFs change, the new trend is already half exhausted. By contrast, the average value of the stock database file is 7.91 days -- shorter, but not tremendously so.
As the administrator, I have two options. I can shorten the range permitted from 2-25 down to 2-18 or so, or I can stay the course. I've decided to drop it to 2-18 as a test, but it'll be several weeks before we see any output into the daily sheets since it takes about 3 minutes per stock/ETF. If I see more whipsaws in horizontal markets be aware that I'll move this back to 25...
You, as the user of the data, really do not need to do anything. If you're frustrated with GGT, then simply paper trade your favorite ETFs/stocks until you feel more comfortable. I posed some ideas about how to "ride the wave" this past weekend (see below).
Regards,
pgd
Saturday, October 3, 2009
October 3rd Weekend Update
[**** CLICK ON ANY CHART TO ZOOM IN *****]
This has been a pivotal week according to the Gods: warning signs from the timers, prices lower on higher volume, and EMA lines going from a positive slope to a negative slope. Let's see if we can glean what it all means....
In last week's commentary I noted that for the week ending the 26th, we peaked in price at $19.28 on average volume, which was disappointing. This week we finished at $18.39 on average volume of 1.5M shares, a full 3.6% down from our peak on Monday of $19.08. I also said that I thought that we'd start climbing because prices were falling on weaker volume -- I am going to change that view into my crystal ball for a couple of reasons.
On Monday, 9/28, we spiked upwards 1.9% in price on volume that was 25% lower than average --> this is bearish.
On Tuesday, 9/29, we changed price by only -$0.01, yet volume was about normal. This is my definition of "churning" -- stationary price on normal or higher volume. This is a bearish sign.
Volume popped to 18% above average with Wednesday's action, but we had a decrease of only 0.4% in price. This is further evidence of churning, and is bearish.
Thursday was a big signal day. We saw a large jump downward in prices on Thursday of -2.66% on volume that was 12% higher than average.
Friday, we saw decreasing prices of another 0.5% on normal volume --> bearish.
**** On price and volume action alone (falling prices on higher volume), we have very bearish indicators when looking at the short term. ****
So what about the short, medium, and long terms?
The 5d EMA of price has crossed below the 8d as well as the 13d, and is just hovering above the 22d. The 8d EMA has crossed below the 13d, and this should be considered short-term bearish.
A move of the 13d below the 22d would signal nailing the coffin shut -- we'll have to wait and see just how bad things get going forward. The 22 and the 34 are intermediate-term timers, and they are marginally bearish/bullish. With the 22d and 34d in a new down-trend, which started this past week, I'd have to color the intermediate term as bearish.
The 55d and 89d EMAs are still in uptrends.
Hence, short term, we're not in very good shape, medium-term, things are falling and getting worse, but over the long term, we're still in an up trend.
===============
In last week's commentary I discussed a divergence between price, which peaked mid week that week, but we saw a continued drop in the Long-Cash Ratio (LCR), which is the ratio of stocks with a LONG recommendation compared to those with a CASH recommendation. It appears that when combined with the price/volume information that we had a very, very good setup for this drop from our peak prices.
For this week, the LCR has fallen to 0.628, indicating that 2105 stocks are LONG and 3352 are CASH. This is a huge change from last week's value of 1.584, and being below 1.0, is a solid precursor to being intermediate-term bearish. Note that the value is below 1.0 -- if we hold here this week, get out your hammer and nails ... :) This being said, when we hit this level on 9/3 (0.698), we rebounded nicely within a few days and it lasted the entire month of September, so there is some precedence that a bounce could be around the corner. Note I said a possibility, as in non-zero probability, but not necessarily likely....
In addition to the Price/LCR data above in the graph, I've notated something interesting... several "W" patterns. Another idea supporting this potential for a bounce is that:
1) we are at some historical levels in the LCR where we have reversed, and
2) the market seems to like these "W" patterns as of late
So, if we do bounce this coming week and next, I doubt that it will be a full-run upwards with the LCR in the 2.x or 3.x range. Of course, I could be wrong, but I don't see anything that will propel us upward at this time.
===============
Our short-term LCR Change timer started the week with a transition from -1 (cash) to 0 (cash/long), but by Wednesday was back at (-1) cash and hasn't budged from that position. I've been reporting that the gain of this timer has been 54%; due to a clerical error the actual gain using this timer and the GGT change in prices is 51% on the long side and 28% on the contra side. Here's the timer since March 1st:
The way to trade this timer is straight forward:
1) Determine whether you are in an up-trending market or down-trending market. You have several tools available to determine this:
- a) look at the 65d EMA price of the broader market indexes. Are they in an upward slope? As of the close of 10/2 the answer is yes
- b) look at the 10w EMA price of the broader market indexes. Are they in an upward slope? As of the close of 10/2 the answer is yes
1) when the timer transitions from a CASH (-1) to a CASH/LONG (0), look for long equities that have been beaten into the ground. Call this Day #1.
2) when the timer transitions on Day #2 from the CASH/LONG (0) value to the LONG (+1) value, jump into the market, either on Day #2 (anticipating the transition), or on Day #3.
I like to jump into the market ON THE DAY of the transition from 0 --> +1. One way to do this, that generally works, is to watch the ADV/DEC on the various indexes. Here's a rip from the web site: http://finance.yahoo.com/advances using the close information on 10/2:
| NYSE | AMEX | NASDAQ | BB | |
|---|---|---|---|---|
| Advancing Issues | 1,211 (32%) | 250 (32%) | 959 (34%) | 484 (35%) |
| Declining Issues | 2,487 (65%) | 485 (62%) | 1,740 (62%) | 548 (40%) |
| Unchanged Issues | 122 (3%) | 50 (6%) | 111 (4%) | 350 (25%) |
| Total Issues | 3,820 | 785 | 2,810 | 1,382 |
| New Highs | 110 | 23 | 34 | 130 |
| New Lows | 38 | 8 | 21 | 372 |
| Up Volume | 2,393,431,427 (107%) | 299,804,561 (28%) | 763,956,486 (31%) | 750,485,914 (33%) |
| Down Volume | 4,092,235,140 (184%) | 772,497,022 (71%) | 1,691,920,477 (68%) | 690,739,264 (30%) |
| Unchanged Volume | 37,889,205 (2%) | 12,694,707 (1%) | 28,760,732 (1%) | 845,944,003 (37%) |
| Total Volume | 2,228,588,4761 | 1,084,996,2901 | 2,484,637,6951 | 2,287,169,1811 |
1 = Total volume calculations include volume from pre-market and regional exchanges.
Take a look at the NYSE column, and let's pretend that it's 10:30 a.m. on Day #2. We're looking for a high probability of a transition to +1. What I like to see is that the ratio of ADV to DEC is up greater than 1.8. For the NYSE we have 1211/2487 = 0.48, which is far less than 1.8, so we know with great likelihood that we probably will not be transitioning to +1. Because of this, go play golf or participate in your favorite past time, because the market is not moving in the long direction. SURE, it can reverse during the day, at at night we can double check the values, but on average, when the markets indicate a good upside by 10:30, they tend to stick.
So for this coming Monday, 10/5, we're at a value of -1 (CASH), so unless we're up on Monday, it's not likely that we'll be doing anything with this timer before Tuesday, 10:30.
What about contras? What about picking up contras when we transition from a +1 (LONG) to a 0 (LONG/CASH)? Again, it depends on the underlying trend of the market. What I've found is that in up trends, LONG positions work better; in down trends, Contra positions work better. There are other ways to play the contras at this time....
==============
The graphic above is the GGT Bull Strength index compared to the GGT LCR. I *really* like the bull-strength indicator because it shows that while we may continue to hit higher highs in GGT LCR (and subsequently, price), it gives me a GREAT indicator of whether momentum is fading. Take a look at the peaks in Bull Strength, then take a look at the peaks in LCR. I'd be interested in hearing your interpretations.
Note that the GGT Bull Strength reading is at 0.08, the lowest level since 8/17. Putting this in to stock terms, we had 232 stocks in the database flash "buy me", while we had 2872 flash "sell me". That should give you pause on what you should be looking at on Monday. There certainly is precedence to stay down here for a while, but there is also precedence to bounce. I suggest waiting until the LCR timer moves to the +1 side ...
================
The graphic above is interesting in that GGT strength has slipped below the visual boundary of 0.4. There's nothing magic about 0.4, but the eye shows that we seem to have a bit of support around the 0.3-ish level in strength. If we fall below this level market sentiment will be very bearish and there is no telling just how far it could drop (look at February/March). I would consider the recent attempt at crosing above 0.7-ish as a failed bull attempt, so stocks are becoming weaker, not more powerful.
===============
Last week I presented TMF, a 3x leveraged ETF that had signaled "New Long" on 9/25. The closing price on 9/25 was $45.74, and the opening on Monday was $46.13. I indicated that I was setting a 3% gain on this one as my target, which is around $47.50 from the 9/25 close. Through a calamity of errors and not paying attention this ETF, it has run all week, and closed on Friday at $47.85, or a weekly gain of 3.0%. If you got into this one I'd like to hear about it; if you're not in on this one it's too late -- don't chase it.
UUP is the only "New Long" ETF from Friday. This is the PowerShares DB US Dollar Index Bullish Fund, which is based on the Deutsche Bank Long US Dollar Index (USDX). The USDX futures contract is designed to replicate the performance of being long the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and the Swiss Franc.
UUP is not overly volatile, nor is it a barn-burner. I am going to enter on Monday with a core position if we trade higher than $22.92, the high from Friday. The 22d EMA is just starting to break upwards, and the 13d EMA has a positive, upward slope. My "core" positions are typically 5% of my tradeable monies. Note that UDN, which is the contra to UUP, has a downward 13d EMA and the 22d EMA is just beginning to point down. I like that these two are out of sync by 180 degrees.
On Thursday the Direxion 3x LargeCap pair BGU/BGZ flipped to Cash/Long respectively, and flashed the "Affirmed" flag on Friday. The 8d EMA of BGZ crossed the 13d EMA from below, a bullish sign. I will move into BGZ on Monday with a 25% position if it continues higher than $23.80. The recent Average True Range (ATR) of BGZ is $1.09, or nearly 5%, so this is a volatile equity and is NOT for the meek or conservative. My target is 5% above my entry, somewhere around $24.39 or so.
On Thursday the Direxion 3x MidCap pair MWJ/MWN flipped to Cash/Long respectively, and both flashed the "Affirmed" flag on Friday. The 8d EMA of MWN crossed the 13d EMA from below, a bullish sign. I will move into MWN on Monday with a 25% position if it continues higher than $$35.96. The recent ATR of MWN is $1.91, or over 5%, so this is NOT a conservative equity. My target is 6% above my entry, or somewhere around $37.54.
The TSP-tracking ETFs EFA, SPY, and VXF, all signaled "New Cash" this week. Correspondingly, I moved my wife's TSP funds (I-Fund, C-Fund, S-Fund respectively) to cash (rebalanced AGG/F-Fund at 8%) as of the close of Friday (it takes a day or two to process within the TSP system).
============
Something "New"
One of the powerful aspects of GGT is that I can determine the strength of a given index, sector, whatever. As many of you know, Geoff Cox recently expanded some of my capabilities and gave me a "dashboard" view, allowing me to watch (e.g.) the DJ30, the NASDAQ-100, and the BRIC stocks. I'm only limited by however I want to group the stocks.
I can normalize the strength value for a group between 0 and 1, so we can compare strengths across different groups.
I only have data since 8/24, so it's too early to make a judgment on how to best use this capability. Let me present some initial ideas:
1) The DJ30 hit a strength of 0.9412 on 8/25. If you would have purchased DOG, the -1x ETF at the open on 8/26 @ $58.26, then held until the strength bottomed on 9/2 (selling at the open on 9/3 @ $59.62), you would have made a gain of 2.3% in 6 days with virtually no drawdown.
2) Using the strength dates above, if you would have purchased DXD, the -2x ETF at the open on 8/26 @ $36.85, then held until the strength bottomed on 9/2 (selling at the open on 9/3 @ $38.35), you would have made a gain of 3.8% in 6 days with virtually no drawdown.
3) Let's assume that you wanted to pick up DJ30 stocks on 9/3 (strength bottomed on 9/2). Let's further assume that you would hold until 9/17, which is when the DJ30 strength had peaked and had started to head downwards. You sold at the open on the morning of 9/18.
a) Selecting stocks from the DJ30 that had the worse VectorVest VST performance (they had been beaten down hard up to 9/3), would have resulted in a gain of 8%, or an annualized gain of nearly 218%.
b) Selecting stocks from the DJ30 that had the worse VectorVest RT performance, would have resulted in a gain of 6% with an annualized gain of nearly 150%
c) While I don't publish the stock data daily, I do have the GGT stocks from 9/2, and more importantly, I know which stocks were at the top and bottom of the GGT DJ30 list. Picking the top 10 GGT DJ30 stocks as of the 9/2 close, and holding until the morning of the 18th would have netted you 6% and an annualized gain of about 150%.
d) Picking the worse GGT stocks from 9/2 and holding until the morning of the 18th would have netted you 6% and an annualized gain of about 150%.
Sooooooo, three different methods of picking DJ30 stocks results in about the same performance over the same period of evaluation. I like that. I like that ALOT.
4) So let's assume you bought the -1x contra ETF at the open on 9/18, and you're still holding. You would have bought DOG at $56.34, and with a close on Friday at $58.37, you would have an unrealized gain of 3.6%.
You get the idea of where this is going.
Here's the normalized strengths if you want to play:
When you look at the table above, you'll see that the DJ30 column is at a very low number. It would be prudent to seriously consider purchasing stocks in the DJ30, based on past tests. I urge you all to paper trade this until we get more history. If nothing else, take a close look at DIA as well as DDM, which are the 1x and 2x ETFs for the DJ30.
When you look at the table above, you'll also see that the NASDAQ-100 is near a bottom, also indicating that we should consider purchasing stocks in the NASDAQ-100 or at least the long ETFs, which are QQQQ and QLD.
When you look at the table above, you'll see that Brazil is bouncing around. I'm sure that the Olympics caused Friday's bounce ... I'm not aware of any contra ETFs in Brazil so we'll have to wait until this one bottoms.
Russia is hard to judge -- only 5 stocks comprise this "strength index", causing me some pause. Nevertheless, the value is on the negative side, which *could* present some opportunity to purchase once we start turning upward.
India is mid-scale at 0.4 -- hold off on India.
China has been falling lately, and although we could play the FXP, the contra Xinhua FTSE 25, according to the strength of the China index, we may be too late. Ideally, I'd like to get into FXP when the strength index is near 1.0, not at 0.13.
Also note that FXP signaled "New Long" on Thursday. I wanted to wait until the EMAs all crossed from below, which they did on Friday (recall that I was burned on this one a few weeks ago). The 8d > 13d, and the 13d > 22d --> go for throttle up, but because of the China strength index, I'd expect some sort of pause here. Based on these two conflicting indicators I will purchase a 25% position in FXP on Monday if the price continues higher than $10.68, and I'll add on strength as long as the trend lines remain positive. The recent ATR on this is $0.43, or about 4%. My target on this one is $11.32 or about 8% over entry.
==========
Enough for now. Lots to think about.
Remember, you're responsible for your own investment decisions.
Regards,
pgd
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