Notables from Monday, December 14th

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In running the numbers, a few things stand out at me this morning:

1. The GGT Price Index is hitting an all-time high of $20.03 on average volume of 1.4M shares.  All major price EMAs are pointing upward.  These two things are short and intermediate-term bullish.
   
2. The GGT Long-Cash Ratio (LCR) has hit a local high of 1.325, indicating that 2627 stocks in the database are LONG in recommendation and 1982 are CASH recommendation. All LCR EMAs are pointing upward.  These two things are short and intermediate-term bullish.
3. After bouncing around back and forth, the the LCR Change Timer has moved to a LONG (+1) value with yesterday's action.  This is short-term bullish.
4. GGT database strength is now at 0.79 and is indicating that we are approaching over-bought territory.  If you are a short-term trader, protecting gains would be prudent.
5. The NASDAQ-100 jumped in strength from 0.525 to 0.733.  This is short-term bullish for tech stocks.
   

Converse to the LONG indicators above, we have some weakness:

• The DJ30 strength FELL yesterday, from 0.68 to 0.64.  In other words, large caps stocks did not participate.
• Brazil did not change in strength, remaining at 0.60.  It has had a great run, so a pause here is not a major cause of concern, but is noteworthy.
• India continues to get beaten, falling from 0.297 to 0.226.  Stay away from India until the trend reverses.
• China jumped from 0.494 to 0.709, although the FXI sold-off mid day and gave up it's intra-day gains.  I like China, but it's struggling.
• The S&P400 is now at 0.95, up from 0.76.  Give particular attention to MYY (1x contra) and MZZ (2x contra), as these will benefit from a short-term reset in the mid-caps.
• The Russell 2000 has moved to a value of 0.88, up from 0.68.  Give attention to the relative changes of RWM and TWM, which are the 1x and 2x contras of the R2K.
  

Clearly, small and mid caps are rotating back into the equation. 

IWC, the Russell MicroCap, has appeared on a series of early scans and is looking very good.  Continued weakness in large caps will cause this to rise -- watch it's acceleration relative to the small and mid-cap indexes (IWM, IWR).

Remember, you're responsible for your own investment decisions.

Regards,

pgd

Notables from Thursday, December 10th

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Yahoo is up to their old tricks and the GGT process did not update in full last night, so this will be greatly abbreviated.  They may be tired of me hitting them 5000 times a night for updates ....

Several of my contra positions fired yesterday around 1:20 pm, causing me to commit to this market.  You may be sitting there smiling that I'm going to get taken to the cleaners this morning -- futures are up, so it looks like these positions will be underwater at the open.  If the markets move aggressively to the upside, say a >2x ADV/DEC ratio or better, I'll lick my wounds and close the contras, else I'm sitting pat for today.

We have a VectorVest/GGT meeting tomorrow in Lorton -- about 60 people have responded that they will come.  Hope that you can make it too.  Check back later today/tonight for yesterday's update.

Regards,

pgd

Notables from Wednesday, December 9th

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With Wednesday night's close, the GGT LCR Change Timer has moved to CASH (-1).  I have sold all of my long positions and am now going to move more aggressively to contra ETFs.  Yes, the futures are up today.  Yes, we can still oscillate here.  But the fact that we had higher prices yesterday but more stocks have fallen away from a LONG recommendation tells us that we have a major divergence.  Simply put, either we need another rally on volume to move stocks to the LONG side, or we're going to see prices reverse, adding to the down side.  I do not see a sustained rally in the near term.

GGT price has been hitting resistance in the $19.60-$19.76 range since 12/1.  Volume has been decreasing.  You cannot maintain higher prices on decreasing volume--for every buyer, there has to be a seller, and buyers seem to be drying up (no large institutional movements).  Average volume is now 1.38M shares, down from 1.47M shares one month ago.  Prices are well above 1-month ago values of $18.98.  I'm having a hard time justifying being on the long side here, although all of the price EMAs (13, 22, 34, 55) are still pointing upward, which is a bullish sign.

The LCR continues to fall from Monday's peak of 1.234, and is now at 1.058.  The 55d EMA of the LCR is topping out, and another down day will change the slope of this EMA to negative.  That is a bearish stance.  The shorter EMAs on the LCR are still pointing upward, which is bullish.  They are slowing though, and continued downward pressure in the markets will pull stocks down, causing the LCR to drop.  Of course, the converse is true too .. the LCR is a LAGGING indicator-- remember that.

GGT Bull Strength -- the ratio of stocks that would qualify as new longs to the number that would qualify as new cashes, continues to drop from last Friday's peak of 1.4356 and is now at 0.4247.  The trend is decidedly downward, so the bears have been winning.

I actually track two GGT strength indexes -- one that uses volume, and one that does not use volume.  Rarely do we see that the non-volume strength indicator diverge from the one that uses volume, but yesterday's action sees that overall, non-volume strength is appreciating.  This is a bubble -- and it can only resolve itself two ways:

1. investors see that they are missing gains and swam to the market, driving volume upward, causing the present bearish stance to reverse
2. investors continue to show lack of confidence in the market and we continue to see lack of volume, and eventually, lack of price appreciation

I'm putting my money on bucket #2 -- I may be wrong!

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The strengths of the various indexes are supportive of the bearish stance, if not a bit late.  Although several rose a bit yesterday, most are in a downtrend, especially when viewed from Friday's peaks.  Here's the rundown:

DJ30:  Up to 0.444 from 0.3 on Wed, but down from 0.7 last Friday
NDX100:  Up to 0.440 from 0.427, but down from 0.7 last Friday -- note the slight change; little participation
Brazil:  Up to 0.441 from 0.402, but down from 0.611 last Friday
Russia:  all time low of 0.00.  Russia looks terrible.  Keep your eye on the RSX to see if it rebounds.
India:  Up to 0.25 from an all-time low yesterday of 0.00.. Watch for a rebound here too.
China:  continues to slip and is now down to 0.355 from a recent high of 0.65
S&P500:  Up to 0.407 from 0.376, but down from 0.732 last Friday
S&P400:  Down to 0.435 from 0.546 -- the slipping of mid-caps worries me.
S&P600: Down to 0.566 from 0.657 -- the slipping of small-caps is not good for the market overall
R2K:  Down to 0.5722 from 0.618, not a huge drop, but down significantly from last Friday of 0.904.

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Strategy:  Bearish stance.  With the sell of my longs (I actually got out mid-day yesterday to protect gains) I think that my bears (contras) are going to steal the show for the next few days, but my primary goal will be to protect whatever gains that I have today.  I'll sell any position that looks like it could drop under water -- we're in a horizontal-trending market, with a 2-3 day period, so we're not going to see huge movements one way or the other.

My contras on the indexes are doing quite well.  I hope that you all followed me Monday.

Remember, you are responsible for your own investment decisions.

Regards,

pgd

Monday Morning Addendum ...

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When I posted last night I had not given any real attention to the HSI software -- there are a few golden nuggets to watch for in the next few days.

First of all, for all the contra ETFs, it's just a matter of time before we see the reversal of the market.  I say this because of the chart below; click on the image for a larger view.
 

The top pane of the above graphic is something you've probably never seen or paid that much attention to in standard analysis packages ... it's the slope of the 65d EMA of price.  The faster curve (the one that moves more -- red) is fitted with a 5-day fit (corresponding to a week), meaning it looks at the change in the 65d EMA over the last 5 days, the blue curve is fitted to a 21d fit (corresponding to a month) and the slower one (orange) looks at the change in the EMA over the last 34 days (corresponding to ~7 weeks).  The selection of 5/21/34 is somewhat arbitrary.  The image shows an index that I've constructed of all the ProShares 2x Contra ETFs -- the ones that go down when the market goes up and visa versa.

The middle pane shows the price action super-imposed with the 65d EMA (purple), 34d EMA (orange), 21d EMA (blue), and 13d EMA (green).  Note that for the most part these are all trending down.

The two thin strips across the viewing window are Elder's 13d Force Index and 2d Force Index.  We like it when we see a simultaneous change of red to green in both of these.

What you're seeing is the following:

1. The change in slope of the 65d EMA, measured across the last 34 days (orange curve), is in an up trend.  The scale on the right in the top pane is somewhat arbitrary but note that it is negative (-); this upward trending slope means that the change in 65d EMA is becoming less negative. So while the overall 65d EMA is still pointing downward, it is getting closer to an inflection point where it will flatten out, then turn up.  When it turns up the change in slope indicators will be positive, and we'd better be in contras for the longer-term.
   
2. The 5d and 21d change in slopes of the 65d EMA typically stay above the 34d EMA.  While these move around a bit more, they oscillate as the markets move, and they too are oscillating higher between the lower 34d fitted boundary and some less-negative value.  This too means that they are in an up trend, even though the respective EMAs are still pointing downward.
   
3. The 2d FI and 13d FI of this index have are still sitting in RED, which is bearish for contras on Monday.  Note that this is a lagging indicator ... the best-case scenario is to catch this on the day when it transitions from simultaneous red to green.
   

Hence, my read on the market over the short/intermediate (week/month) is this:  it's still too early to become fully invested in Contra positions.  Until we see evidence of these change in slope values crossing into the positive region, we're fighting an up-stream current, and need to be surgical.  Over the long-term (month/quarter), it's simply a matter of time if the change in slope of the 65d EMA continues to move in a less-negative/positive direction.

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Take a look at SMN, which is the Proshares UltraShort Basic Materials ETF.  Elder just moved green on both the 2d and 13d Fore Index.  The aforementioned change in slopes of the 65d EMA are all pointing upward, so this may be a good entry.

SCO is the UltraShort Crude Oil ETF and has been bouncing around in terms of price.  It is very close to moving positive on the 65d change-in-slope metric. with the 5/21/34 @ -0.03/-0.05/-0.07 respectively.  Note that Elder is green on both FI indicators -- it may be a bit late to get into this.


DUG is the UltraShort Oil & Gas ETF and it appears to have cleared a resistance at $13 on Friday.  All of the 65d change in slope lines are upward, which is bullish for this ETF.  The specific numbers are -0.03/-0.05/-0.05 for the 5/21/34 fits.  Again, Elder is green on both FI indicators, so it may be a bit late.

SDS is the UltraShort S&P500 and it appears to have had a big day on Friday.  Again, all of the 65d change in slope lines are now recently trending upward, again bullish.  Specific numbers are -0.12/-0.14/-0.13, so while more negative than the others, they are pointing in the right direction.  Elder is RED on both indicators, so may be a candidate if the markets weaken.

EEV is the UltraShort Emerging Markets ETF and finished at all-time lows on Friday.  Two of the three 65d change in slope lines are moving upward, with the 5d pointing downward.  All numbers are -0.07; Elder is red on both indicators, so give this one a watch.

MZZ, the MidCap UltraShort, is nearing support and had a Doji on Friday.  The chart looks the same as EEV above, so give this one a watch too.

FXP, the UltraShort China, looks the same as EEV and MZZ, so give it a watch.

Good luck today.  Remember, you are responsible for your own trading decisions.
Regards,

pgd

December 4th Weekend Update

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This is a hard week for me for commentary; GGT is conflicted in the indicators so let's see if we can break this down and get some direction for the next few days.  I'm not doing inline graphics tonight -- they take too long to edit and I'm on a very small laptop PC, making it that much harder.

GGT Price/Volume Action:  Bearish with Friday's Performance

Starting with GGT Price, we spent the last week bouncing between $19.32 (Mon) and $19.77 (Wed), finishing the week at $19.68 on Friday's volume of 1.76M shares, over 28% above normal of 1.38M shares.  Note that we saw all the evidence of "churning" with Friday's action:  tremendously higher volume (we've not seen this level above average since September 18th) but only a 0.36% jump in pricing.  This is a shot across the bow.  We want to see significantly higher prices on higher volume, indicating that we have institutional participation on the upside.  It's not there folks, at least not from what I can see.

Adding to my overall bearishness observation of price is the fact that we only spent one day above our old high of $19.70 (10/19), finishing Wednesday at $19.77 on average volume.  I would be a believer in an up leg if we could have closed higher than $19.77 on Friday with as much volume as we had -- again, I call this churning.


GGT Price EMAs:  Bullish across the Board
With respect to the GGT Price EMAs (13, 22, 34, 55), we're trending higher on all EMAs.  This means that the change for the week, as well for the day, is pointing upward across all four, which is bullish. Friday's close caused a major acceleration upward in the EMA changes (slope), hence there is no other way to interpret this.

GGT Long-Cash Ratio (LCR):  Bullish with Friday's and the Week's Performance

The LCR moved from 0.626 a week ago to 1.200 on Friday, indicating that we have 2591 stocks with a Long recommendation and 2160 stocks with a Cash recommendation.  Friday's jump in LCR from 0.996 to 1.200 is a large, 20% jump for the database, and shows that both price and volume were significant enough on enough "Cash-rated" stocks to cause them to move to the long side.  As an example of this, we had 313 New Long stocks on Friday, with the 50d average amount usually around 151 stocks.

Bull Strength:  Bullish with Friday's close and Week's Performance

Last week Friday saw the Dubai issue in the market, causing the Bull Strength (BS) (no jokes please :o) ) to achieve a bottom of 0.0371, the lowest value since 10/28 when it hit 0.0391.  We saw a significant run from 10/28 to 11/16, when it finished at a value of 2.003, and we could have expected the same over this past week.  The BS indicator rose for the week, finishing at 1.4356, indicating that we had 1114 stocks which were either New Longs or Affirmed Longs, and 776 stocks that were Affirmed Cash or New Cash.  We could continue upward in the incoming week -- I see nothing in the BS indicator indicating otherwise, but with a 50d average of 0.652 we're well above average, and we could have seen the "capitulation" value in Friday's action.  I'll color this bullish, but be advised we're well above averages.


New Long Spike Behavior:  Potentially Bearish
This isn't a new indicator, but because there are six states to a GGT stock or ETF, I can look at the number of the individual recommendations and compare / infer what this means in the bigger picture. Aside from this week which saw 360 New Longs on Wednesday, we've seen a price pullback within a few days of this New Long spike occurring.  Specifically:

• 11/16/09, $19.61, 506 New Longs (NL), price fell to $19.16 by 11/20 (4 days)
  
• 11/9/09, $19.05, 428 NL, price fell to $18.82 by 11/12 (3 days)
• 10/14/09, $19.68, 338 NL, price fell to $18.09 by 10/30 (12 days)

Correspondingly, given the churning that we saw Friday, the lack of closing above $19.77, and the extreme high number of New Longs on both Wednesday and Friday, I'm growing more convinced of this churning mechanism.

GGT LCR EMA Behavior:  Bullish for the Week

All of the LCR EMAs (13, 22, 34, 55) are in an upward trend and all are accelerating (gaining value faster).  This is decidedly bullish.

GGT LCR Change Timer:  Having a Hard Time Making up it's Mind

The GGT LCR Change Timer has had a difficult time since 11/23 when it signaled a move to LONG, and although the bias is certainly upwards, we've seen some significant down days (witness last Friday) and correspondingly, we haven't gained a tremendous amount of gain.  The GGT Price on 11/23 was $19.45 and as indicated above, the price on Friday was $19.68.  We're clearly struggling, and this timer, which moves quickly, has bounced between Long (+1) and Long-Cash (0) three times since 11/23.  In this time we've seen our trades get smacked -- we went into 11/17 with an all-time-high equity gain of 88.51%, but have seen that trade back to 82.10% with Friday's close.  We need to stay the course and stay long, but this horizontal market is tough to time.  I'm going to color this "in the middle".

GGT Strength: Bullish, but Entering Overbought Territory
The GGT Strength Index has been bouncing between 0.54 (Monday) and 0.756 (Friday), and while it is showing strength, is at a value that suggests a reversal is close.  Typically, values above 0.7-ish (not an exact science) tend to indicate a reversal is imminent, but we've spent considerable time above this value in the past before a reversal and could certainly do so next week.  By itself this oscillator does not tell us much except that we have 25% upside potential and 75% downside potential.

Domestic and BRIC Stock Strengths:  Mixed Bag

Here are the strengths, trends, and short comments for the various indexes that I track:

• DJ30: 0.7, up from 0.483.  Spent the week bouncing between 0.48 and 0.855. Trendless
• NDX100: 0.7, up from 0.494.  Spent the week bouncing from 0.367 and 0.767.  Trendless
• Brazil: 0.611, down from 0.645 and has been falling from Wed peak of 0.810.  Avoid Brazil for now
• Russia: 0.388, down from 0.5 and has been bouncing from 0.222 to 0.666.  Avoid Russia for now
• India: 0.592, up from 0.444, but had down trend from 0.716 (Tu) thru Thurs.  Given other BRICs, avoid for now
• China: 0.653, up from 0.589, but has been bouncing around between 0.497 and 0.729.  Trendless
• S&P500: 0.732, up from 0.463, but has been bouncing between 0.0.479 and 0.732.  Trendless
• S&P400:  0.808, up from 0.454 and appears to be in an up trend.
• S&P600:  0.919, up from 0.439 and appears to be in an up trend.
• Russell 2K:  0.904, up from 0.441 and appears to be in an up trend.

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So what to do ....

Starting with the S&P400, S&P600, and the Russell 2K, these are all approaching or are in overbought territory.  Placing a contra position (MZZ, SDD, and TWM respectively) on each of these is high on my list.  I will enter these positions Monday if they move higher than $0.05 above their Friday close.

My long positions were closed out on Friday, and I already entered contra positions on the DJ30 (entered DXD) and NDX100 (entered QID).  We'll see if these pan out.  I did this because of the apparent resistances shown on DDM and QLD, which are the opposing ETF pairs for these two contras.  If you look at DDM and QLD you will see that they have hit a resistance over the last 3 or 4 trading days, hence I felt compelled to move into the respective contra.  QLD started strong on Friday but simply fell apart, further adding to my conviction that I want to be on the contra side.

Hence, all the indicators are pointing upward, but I see some cracks in the ice.  This goes against my normal saying of "Trade the market that we have, not the one you want."  The difference here is that we do have some indexes that are overbought, and if we see strength on Monday, I'll enter.

Remember, you're responsible for your own trading decisions.

Regards,

pgd

Notables from Wednesday, December 3rd

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I'm traveling, so keeping this comment brief...

GGT pricing has now moved above it's highest previous value of $19.70, closing Wednesday at $19.77.  It has done so on volume of 1.28M shares, about 6% below average.  This is a bullish sign.

Bull strength appears to be slowing, although it is still increasing.  This deceleration points to a possible consolidation and profit taking, so locking in some gains is on my immediate horizon.

The GGT LCR has moved above 1.0 for the first time since 10/22, and is now indicating that 2365 stocks have a long recommendation and 2325 stocks are recommended as cash.  This is a bullish sign.

Correspondingly, because the LCR has moved up so aggressively, all the major EMAs on the LCR are now trending upward, which is also a bullish sign.

The LCR Change timer remains long with a value of +1.  You should be on the long side, but with the slowing of the bull strength indicator, a contra hedge could be a good strategy.

GGT strength continues to increase, and is now at 0.7236.  It slowed dramatically from Tuesday's value, and indicates a potential capturing of profits at the present time.  This too is suggesting that a contra hedge be placed.

DJ30 strength FELL from 0.855 to 0.711.  This is a warning shot over the bow.
NDX100 strength FELL from 0.767 to 0.702.  This too is a warning shot over the bow.
Brazil continues to strengthen at 0.810
Russia FELL from 0.666 to 0.444. 
India FELL from 0.716 to 0.614
China FELL from 0.792 to 0.650
S&P500 FELL from 0.779 to 0.732
S&P400 ROSE from 0.629 to 0.688
S&P600 ROSE from 0.617 to 0.717
R2K ROSE from 0.628 to 0.709

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Currents are changing, although we have many bullish signs.  On the shortest time frames, contra positions against the gains we've captured this week are likely a good strategy.  I will continue to hold my long positions but will add contras if the prices move higher for contras than they were yesterday.

As always, leave a note below if so inclined.  I'll be back in NoVA later Friday evening.

Regards,

pgd

Notables from Monday, November 30th

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The GGT Price index rose Monday from $19.21 to $19.32 on volume that was -4% below average at 1.33M shares.  This volume value is in line with expectations for the Monday after Thanksgiving, although I would have liked to see more as well as a more definitive price movement -- we had a double hump in prices, one around 10:00, the other near the end of the day.

The major EMAs on the prices -- 13,22,34,55 -- are now in an uptrend, relative to Friday's action.  This is a local bullish sign, and indicates that we have some underlying strength in the movers in the database.

To answer my friend Ray's question, the long-cash ratio (LCR) moved up from 0.626 to 0.659.  Week-over-week this value is lower, but the local trend is now upward, so if today (Tuesday) is an up day the LCR Change Timer will transition from Long-Cash (0) to Long (+1).

The EMAs on the LCRs paint a different story.  ALL are in a down-trend, which is contra to the prices.  This divergence with prices cannot be sustained, and either 1) the LCRs must trend upward to match the increase in prices, or 2) the price EMAs will reverse and head south with their LCR brothers.  The important thing to realize is that the long side of the LCR equation requires volume, and until we see it across the database as a whole, LCR will continue its weakness. See my weekend post for more on the rationale behind this.

As I indicated above and in my weekend post, the LCR change timer is sitting at a value of Long-Cash (0), and if today is up (futures are up), I can expect that the timer will move long, which will keep us there at least until Thursday morning.

GGT strength moved from 0.38 to 0.46, indicating that the entire database appreciating in underlying strength.  On an individual basis all of the individual indexes that I follow were up on Monday, which is bullish.  Here are the underlying indexes and strengths:

DJ30:  moved from 0.3 to 0.566.  A position in DDM was established yesterday.  On an intermediate term the Dow is slowing, but on a longer-term basis the Dow is gaining price momentum.  I like the following stocks in the DOW on a long-term basis:

AXP (Affirmed Long)
T (Affirmed Long)
BA (Affirmed Long)
KO (Long)
DIS (Long)
XOM (Long)
JNJ (Long)
MCD (Long)
MRK (Long)
MSFT (Long)
PG (Long)
UTX (Affirmed Cash)
WMT (Affirmed Long)

NDX100: moved from 0.108 to 0.367.  A position in QLD was established yesterday.  On both an intermediate term and long-term basis the NASDAQ is losing price momentum, but is still very positive.

Brazil:  moved from 0.330 to 0.567.   On both an intermediate term and long-term basis the stocks in the Brazillian index are losing price momentum, but overall are still appreciating.

Russia: moved from 0.055 to 0.222.  On both an intermediate term and long-term basis the stocks in the Russian index are losing price momentum, but overall are still appreciating.

India:  moved from 0.98 to 0.493.  On an intermediate term basis the stocks in this index are losing price momentum, but on a longer-term, there is price acceleration.  Because of this Indian stocks look attractive. 

China:  moved from 0.234 to 0.497  On an intermediate term basis the stocks in the China index are losing price momentum, but on a longer-term, they are just starting to turn up.    I like these China stocks on both an intermediate and long-term basis:

WX
TSL
CTRP
YGE

S&P500:  moved from 0.108 to 0.479.  On both an intermediate term and long-term basis the stocks in the S&P500 index are losing price momentum, but overall are still appreciating.

S&P400:  moved from 0.00 to 0.399.   On both an intermediate term and long-term basis the stocks in the S&P400 index are losing price momentum, but overall are still appreciating.

S&P600:  moved from 0.00 to 0.435.  On both an intermediate term and long-term basis the stocks in the S&P600 index are losing price momentum, and on an intermediate-term basis, the database is losing price value, which is is a big warning flag.

Russell 2000 moved from 0.006 to 0.454.  The intermediate term basis is losing price momentum, but surprisingly to me, the long-term is looking stronger.  There could be some bargains here...

Take a look at:

NTRI
WSII
SNIC
INCY
EWBC


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Overall, there are some opportunities, but the markets are weak on an intermediate to long-term basis.  Do your diligence wisely.

Remember, you are responsible for your own investment decisions.  Leave a comment below if desired.

Regards,

pgd