Return of Large Cap Dominance?

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I'm not advocating a move to long positions -- hardly.

What I note with interest is that large cap stocks are performing better than small caps in the present market climate, and in a macro-sense, they represent a safer haven than small caps.  Here's a chart for your consideration:

The graph above is constructed using a function within HGSI which allows you to compare two series of numbers -- in this case, Large Cap stocks as represented by the Russell 1000 (IWB) in the numerator, and Small Cap stocks as represented by Russell 2000 (IWM) in the denominator.  When you divide the two you get the choppy line; when you smooth it using a 34d SMA you get the indicated trend line.

The indicated trend line shows a reversal in slope -- it is now pointing upward.  This indicates that large caps are dominating, and when/if I move into the market, I'll start looking at large cap strategies.

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Here is an update on the status of the GGT system, given in a different format.  Please let me know if this is useful by leaving a comment below.  As with all my graphs, right-click on the graph to view in another window or save to disk:

Lots of red.  Tread carefully right now.

Note that database strength increased slightly yesterday, but the LCR continues to fall.  The LCR Change Timer is still in CASH.  Elder's Force Index Timer is still in CASH.  This information is presented above -- make sure you see where this is indicated.

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Remember, you are responsible for your own investment decisions, not me.  Do your homework.

Regards,

pgd

Price Rises, LCR Falls, Elder Force Index Changing?

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Status: 

• LCR Change Timer: The LCR Change Timer transitioned to CASH-LONG (0) from CASH (-1), but did so on a very narrow margin. 
• GGT Price EMAs are bearish. All but the 65d EMA are below their faster values, e.g., 55d > 34d > 21d > 13d > 8d. Statement is true as of morning of 6/9/10.
• GGT Price ($22.92) is trading BELOW the 8d EMA ($23.66), which is bearish since all of the EMAs are inverted.
• GGT Price ROCs are negative, which is bearish.
• Slope of 65d EMA of GGT Price is negative (bearish).
• GGT Volume was +5% higher than the 50d MA, but this is within a normal distribution (neutral).
• Elder's 13d Force Index on the GGT Price continues negative (bearish) @ (384K) but is nearing a transition to the positive side, which would be bullish.  Note that the 13 and 34d MAs are still very downward-pointing, which is bearish.  We need to watch this (see figure below).
• GGT Long-Cash Ratio (LCR) fell from 0.139 to 0.136, which is short-term bearish.
• GGT LCR EMAs are all inverted (13 < 21 < 34 < 55), which is longer-term bearish.
• GGT LCR ROCs are all negative (bearish) and are pointing downward (bearish).
• GGT Strength Index rose from 0.04 to 0.16, which could be indicative of a short-term bounce.
• GGT Equity Curve, based on the LCR Change Timer, dropped -0.4% with Tuesday's action.

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Here is an interesting chart on the Elder 13d Force Index, applied to GGT stocks:

 

Note the solid black line -- heading upward, nearly ready to pierce the 0-line and move into positive territory.  You can see that when this is positive the GGT Price Index tends to move upward, which means we're making money. 

 

My recommendation is that you start applying Elder's 13d Force Index measurement to your favorite stocks to see where they fall.

 

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This next graph is of the BRIC stocks which I created using FinViz and ADR.com:

 

Note the black line in the 65d EMA Slope window, which is the 21d EMA of the slope of the 65d EMA on all the BRIC stock prices.  Thinkabout that and make sure you understand it, because it is an important indicator that does not get much attention.

We see that the black line is starting to trend upward -- this is usually an inflection point.  Note the scale -- it is below 0 so ALL the BRIC stocks are losing ground when measured on a 65-day lens, but more importantly, with it pointing up, we are bleeding less fast.  The green line in that same window is the 13d EMA of the same, and we see that it too is pointing upward.  I take that as another bullish sign for BRIC stocks.

Risks with BRICs are the normal ones: 

• 50d MA < 200d MA (solid red line below solid blue line in price window),
• the slope of the 200d MA is horizontal, not upward
• aggregate prices well below 50d and 200d MAs, which is usually considered bearish

As an exercise left to the reader (grin), take a look at the constituent stocks in the BRIC countries.  First, start country-by-country (Brazil, Russia, India, China), and look for the same pattern above (21d line turning upward).  Then look for emerging stocks where you see this happening on a per-country basis.

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Setups for Wednesday.

I'm in Denver, so I cannot watch the markets while they are open.  If we have strength today it could be a good chance to add to contra positions.

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Remember, you are responsible for your own trading decisions, not me.  Please do your homework.

Regards,

pgd

LCR Change Timer Signals MOVE TO CASH for 6/8

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Status:

• LCR Change Timer:  As anticipated at the FinViz site, Monday's action resulted in the timer moving to CASH (-1).  I am closing all long positions associated with this timer using a 1% trailing stop loss (TSL).  Unfortunately, they will all be for a loss, but we must live to fight another day.
• GGT Price EMAs are bearish again.  All but the 65d EMA are below their faster values, e.g., 55d > 34d > 21d > 13d > 8d.  Statement is true as of morning of 6/8/10.
• GGT Price ($22.83) is trading BELOW the 8d EMA ($23.70), which is bearish since all of the EMAs are inverted.  Note that the GGT price has penetrated the Fib 23.6% retracement, and the new support would be $20.89.
• GGT Price ROCs all turned down with Friday's action, which is bearish.  All are negative, which further nails the coffin shut.
• Slope of 65d EMA of GGT Price is negative (bearish) and pointing downward (bearish).  This is the wrong direction.
• GGT Volume was -7% lower than the 50d MA, but this is within a normal distribution (neutral).  We are seeing less participation in the market, which I consider bearish.
• Elder's 13d Force Index on the GGT Price continues negative (bearish) @ (470K) but is holding this relative level, which I consider mildly bullish.  We'll see.
• GGT Long-Cash Ratio (LCR) fell from 0.210 to 0.139, which is short-term bearish.  It has dropped below it's 4d SMA, which I consider bearish.  
• GGT LCR EMAs are all inverted (13 < 21 < 34 < 55) and with Friday's action, are all pointing downward.  
• GGT LCR ROCs are all negative (bearish) and are pointing downward (bearish).
• GGT Strength Index dropped dramatically from 0.19 to 0.04, which is the 2nd lowest value since July of last year.  We can't get much lower than this, so we favor a bounce from here.
• GGT Equity Curve based on the LCR Change Timer dropped -1.8% with Monday's action.

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I plan to enter contra ETFs today, and will watch for a bottoming in their prices using the MACD.  My index contras that I will play are TWM, QID, DXD, SDS, and MZZ.  Sell longs into this rally.

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Remember, you are responsible for your own trading decisions, not me.  Please do your own work.

Regards,

pgd

GGT Weekend Update, Posted early Monday 6/7

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Status:

• LCR Change Timer:  Signaled long on 5/27, remains long as of 6/4 close, but has transitioned to LONG-CASH (0).  If Monday is a DOWN day as far as the GGT database is concerned (watch FinViz ADV/DEC) then this timer will transition to CASH (-1).
• GGT Price EMAs are bearish again.  All but the 65d EMA are below their faster values, e.g., 55d > 34d > 21d > 13d > 8d.
• GGT Price ($23.27) is trading BELOW the 8d EMA ($23.88), which is bearish since all of the EMAs are inverted.
• GGT Price ROCs all turned down with Friday's action, which is bearish.  All are negative, which further nails the coffin shut.
• Slope of 65d EMA of GGT Price is negative (bearish) and reversed, now pointing downward (bearish).  This is the wrong direction.
• GGT Volume was +2% higher the 50d MA, but this is within a normal distribution (neutral).  We are seeing less participation in the market, which I consider bearish.
• Elder's 13d Force Index on the GGT Price continues negative (bearish) @ (471K) but is holding this relative level, which I consider mildly bullish.  We'll see.
• GGT Long-Cash Ratio (LCR) fell from 0.291 to 0.210, which is short-term bearish.  It has dropped below it's 4d SMA, which I consider bearish.  We need a strong up day or this trend will continue.
• GGT LCR EMAs are all inverted (13 < 21 < 34 < 55) and with Friday's action, are all pointing downward.  The database is struggling on the long side.
• GGT LCR ROCs are all negative (bearish) and are pointing downward.  This is problematic.
• GGT Strength Index dropped dramatically from 0.57 to 0.19, and is below my less-than-scientific 0.2 threshold.  When we are this low the market favors a bounce upward on a short-term scale.
• GGT Equity Curve based on the LCR Change Timer dropped dramatically from $2.5080 to $2.4017 with Friday's action.  The day-of-the-signal (5/27) value was $2.4812 as a point of reference, so we're down about 3.2%.  This is in the 3rd standard deviation of daily movements, which means that it is very uncommon (but obviously can occur).  Stay the course on the short-duration side.

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Let's take a look at the GGT Universe of stocks through the lens of HGSI.  I like HGSI because it allows you to create specific charts using any list you desire to put together.  As with all my charts, click on the image for a larger view:

Reminder:  The GGT database of stocks is constructed such that I only pick:

• stocks above $1
• stocks on the three major exchanges
• stocks with at least 100K 50d MA volume

Some obvious things are apparent with the graph above:

1. Elder's 13d SMA on the Force Index is NEGATIVE.  We are in a down-trend.
2. Directional Movement for the database is at 34.  I like values above 40, so we're somewhat indecisive --> risk is higher at the present time
3. Wilder's RSI(14) is at 41.  I prefer entry into longs below 20 or 25.  Conversely, I prefer entry into contras above 75 or 80.  We're not in any position to go either way as of the open on Monday.
4. The Money Flow Index(28) is at 35.  Values below 20 are preferred, so again, we're drifting without a good wind to fill our sails.

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Setups for Monday, June 7th

I am still holding LONG ETFs in UWM, DDM, and SSO, in accordance with the GGT LCR Change Timer status (presently Long-Cash = 0).  My profit targets seem out of reach right now, but we'll see.  I believe the timer, and will stay the course.

I am holding DUG per Drew's StockOwl recommendation, and will not change this today.

I will not add to my contra positions, per items 2-4 above.

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Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.

Regards,

pgd

200d Resistance on the $SPX and $INDU

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Status:

• LCR Change Timer:  Has transitioned to LONG (+1).  The original LONG call was the close of Thursday, 5/27.
• GGT Price EMAs are changing.  The 13d EMA is now trending up (bullish).  The remaining slower EMAs are still trending downward (bearish).
• GGT Price ($24.30) is trading above the 13d EMA ($24.06), and this is bullish.  It is still below the next Fib EMA of 21d ($24.34), but just barely.  I still consider this overall bearish.
• GGT Price ROCs are mixed.  The 13d EMA on the Price ROC is positive now for two days (bullish), which means we have an upward trend to price over the last 13d.  The 21d EMA on the Price ROC is almost positive -- it is at ($0.004)/day.  If today is an up day this could move positive, which would be bullish.  The remaining slower EMAs on the Price ROCs are negative (bearish).
• Slope of 65d EMA of GGT Price is negative (bearish) but has been pointing UPWARD for 2d (bullish)
• GGT Volume was -15% below the 50d MA on Wednesday, but this is within a normal distribution (neutral).  We are seeing less participation in the market, as the "below volume" trend is becoming more prevalent.
• Elder's 13d Force Index on the GGT Price continues negative (bearish) @ (251K) but is moving more positive day-over-day, which is bullish.  Note that weaker volume on strong price movement days is not very positive for a bull.  We need strong volume and strong price movement.
• GGT Long-Cash Ratio (LCR) jumped from 0.227 to 0.291. This is bullish.  We had a low of 282 stocks indicating LONG on 5/25, and with Thursday's close, we now have 668.  The short-term trend is upward in the LCR.
• GGT LCR EMAs are all inverted (13 < 21 < 34 < 55).  The 13d EMA on the LCR has just started to trend upward (bullish) but all the others are still trending downward (bearish).
• GGT LCR ROCs are negative (bearish) with the exception of the 13d EMA on the ROC, which is moving upward.  
• GGT Strength Index jumped to 0.57 from 0.5, and continues to float in no-man's land.  This indicator is relatively useless at this point, with a 43% chance of moving upward, and a 57% chance of moving downward.  This is indicative of a trending (horizontal) market.
• GGT Equity Curve based on the LCR Change Timer jumped from $2.4874 to $2.5080 with Thursday's action.  The day-of-the-signal (5/27) value was $2.4812 as a point of reference.

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Commentary

Although we are seeing some bullish indications (13d EMAs trending upward, ROCs moving upward, Elder FI(13) moving less negative), it is still too early to aggressively move into long positions.  Take a look at the following chart on the $SPX, which is the S&P500:

The $SPX closed at 1102.83, after reaching a high of 1105.67.  Note that the 200d MA is 1106.24, so the $SPX was unable to penetrate the 200d.  Also note how volume is lower than the most recent period.  Until we close above the 200d MA the markets will perceive this as weakness.

Take a look at the same chart, now applied to the Dow Industrials:

Essentially, we have the same story as the S&P500.

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Yesterday, my position in QLD hit it's profit target and I sold it.  In accordance with the GGT timer I am still holding positions in DDM, SSO, and UWM.

I did not purchase a position in DUG, contrary to The Stock Owl's recommendation, because it did not show strength by closing above the previous day's high (let alone close).  $70.15 is my new bogey for entry.

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Being Friday, I'm not very optimistic about holding long positions across the weekend.  If we close above the 200d MAs we will have a very strong confirmation of a new bull; if we fail to do so we will be in trouble.

Remember, you are responsible for your own trading decisions, not me.  Please do your homework.

Regards,

pgd

Some bullish indications, but 1 day does not make a bull...

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Status:

LCR Change Timer:  Continues to remain Long-Cash, with a bias to long.  I did not buy/ sell any positions yesterday.
GGT Price EMAs are all in a downtrend (bearish)
GGT Price is trading below all pricing EMAs, except the 13d EMA.  I still consider this overall bearish
GGT Price ROCs are mixed.  The 13d EMA on the Price ROC is positive (bullish), which means we have an upward trend to price over the last 13d, but all others are negative (bearish)
Slope of 65d EMA of GGT Price is negative (bearish) but has reversed to point UPWARD (bullish)
GGT Volume was -12% below the 50d MA on Tuesday, but this is within a normal distribution (neutral).  We are seeing less participation in the market, as the "below volume" trend is becoming more prevalent.
Elder's 13d Force Index on the GGT Price continues negative (bearish) but is moving more positive (bullish).  Note that weaker volume on strong price movement days is not very positive for a bull.  We need strong volume and strong price movement.
GGT Long-Cash Ratio (LCR) jumped from 0.195 to 0.227.  This is a very oversold reading, and any positive movement will be correlated to strength in the market.  We want this number to get larger.
GGT LCR EMAs are all inverted (13 < 21 < 34 < 55) and are all trending downward (bearish)
GGT Strength Index jumped to 0.5 from 0.17, and is now in no-man's land.  This indicator is relatively useless at this point, because it states that we have equal probabilities of moving upward as well as moving downward.  This is indicative of a trending (horizontal) market.
GGT LCR ROCs are negative (bearish) but are trending slightly upwards, which is a change from yesterday.  Call this lightly-bullish for stocks overall.  The database is struggling to move more positive and is not able to do so with any mass movement.
GGT Equity Curve based on the LCR Change Timer jumped from $2.4224 to $2.4874 with Wednesday's action, and has just broke even with the value on the day of the timer change (5/27)


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One day of gains does not make for a sea-change in sentiment.  While there is some bullish activity, the underlying trends are clearly pointing downward.  


Drew's StockOwl portfolio is adding a 5% position in DUG, which I will do if I see strength in the position (not at open, but if we clear yesterday's high).


I will continue to sit on my longs.


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Remember, you are responsible for your own trading decisions, not me.  Please do your own homework.

Regards,


pgd

LCR Change Timer -- Long --> (Long-Cash)

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Status:

LCR Change Timer:  Transitioned from Long (+1) to Long-Cash (0) with the close of June 1st.  I will protect gains on the long side, if any exist.
GGT Price is just above 23.6% Fib retracement support line
GGT Price is just above upward-trending support line (see weekend video blog)
GGT Price EMAs are all in a downtrend (bearish)
GGT Price is trading below all pricing EMAs (bearish)
GGT Price ROCs are all negative (bearish) and have reversed to point downward (bearish)
Slope of 65d EMA of GGT Price is negative (bearish) and has reversed to point downward (bearish)
GGT Volume was -8% below the 50d MA on Tuesday, but this is within a normal distribution (neutral)
Elder's 13d Force Index on the GGT Price continues negative (bearish) and is moving more negative (bearish)
GGT Long-Cash Ratio (LCR) fell to 0.170 from 0.195.  Another fall on Wednesday will cause the LCR Change Timer to transition to CASH
GGT LCR EMAs are all inverted (13 < 21 < 34 < 55) and are all trending downward (bearish)
GGT Strength Index has fallen to 0.17; values below 0.2 (unscientific) are considered oversold.  Watch for short-term bounce positive
GGT LCR ROCs are negative (bearish) but are trending sideways (neutral).  The database is struggling to move more positive and is not able to do so with any mass movement.
GGT Equity Curve based on the LCR Change Timer fell from $2.4822 to $2.4224 with Tuesday's action.

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We are decidedly bearish in the markets.  I will wait to the end of the day to view market action, and if we move south aggressively, e.g., Contra ETFs create new highs relative to yesterday's highs, I will add to my Contra ETF positions.

I am not opening any new long positions at the present time.

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Remember, you are responsible for your own trading decisions, not me.  Please do your own homework.

Regards,

pgd