Price/LCR Divergence

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This will be incredibly short, as I'm waiting to board an aircraft to Ft. Worth.

GGT Price FELL -0.45% Monday on below average volume of -27%.  Nevertheless, the Long-Cash Ratio increased +10% to 0.409, which is the first day of a divergence.

The LCR Change Timer remains LONG @ +1, and indicates that on a very short term basis, that I should be long in my ETFs.  I am, but only in UWM and QLD, which are both holding positive gains.

Elder's 13d Force Index is still below 0, indicating that on the intermediate-term horizon, we should NOT be in long positions.Correspondingly, I am only holding AAPL across ALL of my investments (I evaluate AAPL on a daily basis, not in view of the larger indicators).

Although the 13d and 34d pricing slopes of the GGT price index are pointing upward, they are inverted (34d > 13d), which is bullish for the upward-pointing aspect but bearish for being inverted.  In fact, ALL of the pricing slopes are pointing upward, which is bullish.

The slopes of the LCR EMAs are just starting to move upward, with the 5d,8d,13d and 21d pointing upward, all to be considered bullish.  The 34d is pointing downward, which is bearish.  The 55d remains pointing upward, which is bullish.

Conclusion:  we have the makings of a start of a good bull run, BUT WE ARE VERY EARLY.  WAY TOO EARLY TO COMMIT MONIES. 

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Trading Plan for Tuesday:

No changes.  Futures are up, so my positions in AAPL, QLD, and UWM will most likely move upward.  I intend to sit pat and watch these gain.

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

Regards,

pgd

LCR Change Timer Long, Some Blocked Roads for Intermediate-Term Long Holdings

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Let's start the review with my Elder screen of the GGT universe, updated through the close of Friday, July 9th:

• We're seeing some positive movement in Bull Power and corresponding decrease in Bear Power, which is short-term bullish.
• The 13d MA of the Force Index is PINK, which means that it is still below 0 and is intermediate-term bearish.  Overall, this precludes longer-term movement into long positions.
• The 13d/34d EMA slopes of the price index are pointing upward, which is short-term bullish.
• The 13d EMA of the slope has just moved above 0, which is short-term bullish.
• We have had a crossing of the 34d EMA slope by the 13d EMA slope from below, which is short-term bullish.

Hence, from Elder's perspective, we have a number of indicators that are bullish or moving bullish on a short-term basis, but overall, until the 13d Force Index moves above 0, we have to be intermediate-term bearish.

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The figure above will take some studying to interpret.  The upper pane contains EMAs of SLOPE of 65d EMA of price -- do not go any further until you understand that.  Take a price sequence (lower pane), take the 65d EMA of that price sequence (65d = 1 trading quarter of time), then determine the slope of that 65d EMA, then smooth with another EMA, varying from 2d (red) to 34d (purple).  Depending upon your investment horizon these slope EMAs can really help you understand where you are jumping into the cycle, and more importantly, if momentum is waning.  So let's look at the details in the upper pane:

• Without exception, every slope EMA is below zero.  This means that in every time frame, 2d through 34d, that the slopes of the 65d pricing EMAs have been or are falling.  In Ken Phillips' parlance "the car has been driving backwards".  Using a broad-brush, this is to be considered BEARISH.
• The 2d slope EMA (red) is moving upward, and has been for several days.  It is sitting at a value of -0.111.  Hence, on a short-term (day-over-day) basis, the pricing EMA is bullish because it is pointing upward:  "the car is driving backwards but is slowing almost to 0, ready to go forward".  The fact that it is poised to break positive is a good sign, and is necessary for us to move into a bullish market.
• The 8d slope EMA (blue) just reversed and is now pointing upward, which is short-term bullish.  It is the most negative of the slope EMAs, and correspondingly, has a distance to go before it moves positive.  This is telling us that on a rolling, 8-day basis, the intermediate-term slope of price is still falling, and I see this as a huge barrier to intermediate-term entry on long positions.  I want to see this move positive for sustained up leg, so we are early.
• The 13d slope EMA (green) is pointing downward, but it looks like it could be bottoming and possibly starting an upward move.  Hence, the intermediate-term price EMA is still losing ground on a 2-3 week basis, and this is a huge warning sign.  We MUST have this pointing upward (even if it is negative) for us to enter intermediate-term long positions.
• The 21d slope EMA (black) has just started to point downward.  Yuck.  Another brick wall for intermediate-term long positions.
• The 34d slope EMA (purple) continues to point upward, which is WONDERFUL.  If we can get the 13d and 21d slope EMAs to work their way pointing positive we'll have a good setup for intermediate-term entry of positions.

Remember, EMAs are LAGGING indicators.  Think of driving forward while only looking in a rear-view mirror -- this will give you my perspective of this approach.

Look at the image above again.  In the lower pane I've added a 150d EMA on the pricing sequence ... note that many people use the slope of the 150d to give an indicator of the long-term trend.  Note that the slope is horizontal/downward, so there is a slight bias to the ugly side if you use this indicator.

Conclusions?  While there may be some short-term opportunities available to us, until we see the 13d and 21d starting to point upward, the intermediate-term prospects for long positions are very risky.

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LCR Change Timer Status

I can't plot the Long-Cash Ratio (LCR) in HGSI, so all I can do is describe it here. 

The LCR jumped on Friday on terrible volume, so I'm suspect at the legs in this bull.  Nevertheless, the LCR Change Timer, which is a very short timer (2d to 11d average) continues to indicate that we should be long on a short-term basis.  I continue to hold my 2 long positions -- UWM and QLD, which are up 5.6% and 2.6% respectively since my purchase on this last week's signal.  The earliest we could see a change in this timer would be the close on Tuesday, and for this to occur, we need both Monday and Tuesday to be down.

I note with interest that Friday's action saw 149 New Highs and 50 New Lows, the first time we've had more NH than NL in some time.

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Trading Plan for Monday, July 12th

In short, no changes to my existing plans.  I intend to continue to hold UWM and QLD, and will sell them before Tuesday if they show signs of moving negative.  I only hold a position in AAPL, and will continue to hold this independent of of the larger picture (I evaluate AAPL individually based on the approach above).

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

Regards,

pgd

LCR Change Timer Transitioned to LONG

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Before I forget, there is a good chance that there will be no blog update the morning of Friday, 7/9, as I will be traveling and it will be difficult for me to access data.  I'll try, but no guarantees.

Here's the status dashboard:

As with all my images, right-click on it to open in a new window.

The GGT price index soared Wednesday, finishing the day up 3.19% at $22.96.  This was accomplished on  volume that was -12% lower than the 50d MA of volume.  Despite this lower number, -12% is within the standard "bell curve" and can be considered normal.

The GGT LCR Change Timer, which is a very fast timing system, has moved to LONG, as predicted in yesterday's blog entry.  If you have been following along with my trades you would have been faced with a difficult decision near the close of yesterday's market:  all the 2x leveraged ETFs were UP, but they were substantially below their 10-day MA on volume.  This is quite worrisome overall for any sustained bull.  Nevertheless, I did pick up positions in UWM, the Russell 2000 2x leveraged ETF, as well as QLD, the NASDAQ-100 2x leveraged ETF, in accordance with plan rules.  If I see strength in the others I may follow with additional long entries, but for now, I am content to hold these two.

GGT database strength, which fits on a scale of 0 to 1, moved from 0.231 to 0.537, which places it firmly in no-man's land.  This tells us that we have nearly 1:1 odds on failing this breakout, as well as possibly moving higher.  Of significance is that there are many currents working against the long side right now, but only a few in support of moving higher.  Of the ones that are pointing us higher, the upcoming earnings season, as well as being down here in the oversold area for some time are both significant psychological triggers that could overcome the lower volume and bleak economic picture for growth.

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Elder

The Elder setup is still quite bearish:

• the 13d Force Index is negative, precluding any intermediate-term long positions
• the 13d EMA on price slope is negative
• the 34d EMA on price slope is negative
• the 13d MA is below the 34d MA

These four bullets cause me to hesitate in committing any substantial positions to the long side.  Here's what HGSI has to say about Elder, when applied to the entire GGT universe of stocks.

Of significance in the above Elder graph are the following:

• Bull power is becoming less negative, which is bullish.  I want to see this move above 0 though
• Bear power is becoming less negative, which is bullish.  It appears bigger than bull power, so we need to see bear power "get smaller", relative to bull power.  The bears are still in control.
• Elder 13d Force Index is pink, indicating that it is negative.  This is bearish.
• Both the 13d and 34d slopes are negative (the car is driving backwards), but they are just starting to point upward, becoming less negative (the car is driving backwards, but is slowing down).  This is the first sign of a possible bull leg (necessary, but not sufficient for you math types)
• The 13d slope line is below the 34d slope line.  Until these cross, we are not in any form of a bull run.
• Prices are trading BELOW the EMAs.  This is bearish.

Elder's methods are clearly telling us to wait for intermediate-term positions on the long side.

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There was no substantial change to the status of the pricing or LCR EMAs yesterday, save one:  the 8d slope of the GGT system has now started to point upwards (whippee!).  Again, a very weak indicator, especially when all the others are pointing down, so I intend to keep the majority of my powder dry for now.

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Trading plan for Thursday

I may add to my long ETF positions that are tied to the LCR Change Timer.  I need to see higher prices than yesterday on volume that is higher than the 10d MA of volume.  A good benchmark that I use for this is the following:

@ 10:00 need to see 12% of the 10d MA Volume
@ 10:30 need to see 25%
@ 11:15 need to see 33%
@ 12:15 need to see 50%
@ 1:15 need to see 60%
@ 2:15 need to see 70%
@ 3:15 need to see 90%

Admittedly, neither UWM nor QLD met this criteria yesterday -- but because of the signal change, I had to have something in play (I believe in my own timers).

Watch MVV, DDM, UYM, UGE, UCC, UYG, URE, USD, and UPW to see if they meet the criteria.

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

Regards,

pgd

Volume is below 10d on all 2x ETFs tied to indices. Picked up positions in UWM and QLD only.

LCR CHANGE TIMER signals "GET YOUR LONG LIST READY"

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First, the dashboard:

As with all my images, right-mouse click on the image to open in a separate window or tab.

Tuesday's action saw the GGT Price Index fall another -0.5%, ending the day at $22.25, a level it has not seen since February 12th, 2010.  Volume was -15% below the 50d MA at 2.3M shares, which is actually in the "bell curve" of being normal, so consider this a standard market day.

Of interest is that we squeeked out an almost insignificant gain in the Long-Cash Ratio (LCR), one that I attribute more to mathmatics than market behavior.  What is significant though is that this 2% increase from 0.142 to 0.145 on a day when the prices fell indicates that we are apparently holding our low-ground.  Is the bottom in?  Your crystal ball is as good as mine.  What I do see though is that across the entire database, the average price fell, but at the same time, we're seeing volume increase, resulting in an increase in the number of long-status stocks.  Indeed, Tuesday's action saw the largest number of "New Long" stocks since 6/25.

Also of note is that the database strength index increased from 0.208 to 0.231.  This is an oscillator that runs between 0 and 1 inclusive.  Values near 0 indicate weakness and oversold, and values near 1 indicate strength and overbought.  A movement UP in strength, but on falling prices, indicates that within the database numerous stocks are starting to appreciate in terms of rate-of-change (ROC), price, and volume, relative to where they have been in the recent past.  This is a big deal, and suggests again that we may be bottoming.

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LCR Change Timer Transition to CASH-LONG

Whether mathematical or not, the LCR moved up.  The increase was enough to trigger a transition change from cash to CASH-LONG, which means that IF TODAY IS UP, we will have a long signal with the close of Wednesday's action.  Here's how to deal with this:

If today (Wednesday, 7/7/10) is up near the close of the markets (say after 3:30 p.m. EDT) as determined by the home page at FinViz (http://www.finviz.com/), specifically the ADV/DEC bar shown above (we want more ADV than DEC in the last few bars of the day), then we have fairly good assurance that the LCR will continue higher.  At this time I will move into my favorite long ETFs that I tie to this timer:  UWM, QLD, MVV, SSO, SAA, EFO, DDM, etc. if they are showing strength on higher volume.

[Caveat:  look at the FinViz image above:  note that there were 110 new highs and 262 new lows on Tuesday.  We could EASILY fail in any bounce here, as the currents are unquestionably against us on the long side.  Trade at your own risk.]

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Elder Intermediate Timer

Back to the GGT Status Figure. 

Elder's methods for the intermediate-term trend continue to look ugly. 

• The 13d Force Index is negative, which is BEARISH and blocks us from holding any long positions for any extended length of time. 
• IGNORE the fact that the 2d Force Index is negative -- it is negated by the 13d status. 
• The 13d Price Index slope, as well as the 34d Price Index slope, are both heading downward, which is BEARISH. 
• The 13d rice Index is below the 34d Price Index, which is BEARISH.

The status of these indicators tells me that it simply is not in my best interest to be long on an intermediate-term basis.

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Other EMAs

While I'll not dwell, ALL the pricing EMAs are inverted, e.g., 8d < 13d < 21d < 34d < 55d.  This is simply the wrong direction for a bull market, independent of the LCR Change Timer transitions (which is a very short-term timer!!!!).    I note too that the slopes of each of the pricing EMAs are trending NEGATIVE.

The LCR EMAs are the same as the pricing EMAs, so the DATABASE is heading more negative, relative to the respective EMA time frames, than not.  Same thing here:  the slopes of each of the LCR EMAs are trending negative.

Again, the macro currents are against long positions.

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Trading Plan for Wednesday

I intend to jump onto long ETFs as noted above IF the ADV/DEC bar at http://www.finviz.com/ indicates that we are up across the market, as measured at the end of the day.  I acknowledge that this is a risky set of trades, as the currents are decisively bearish, not bullish.  I also acknowledge that I am swimming up stream if I choose to go long right now.

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Remember, you are responsible for your own trading decisions, not me.  Please do your own homework and diligence, and always check my work.

Regards,

pgd

A New Divergence: Price & LCR Lower, Strength Higher

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Let's start with our summary dashboard:

GGT Price fell to the lowest level since February 2010, and is now at $22.79.  It did it on surprisingly higher volume of 3.2M shares, where 2.8M is the 50d MA.  Lower prices on higher volume is another distribution day, and we've had two this week.  Certainly the bears are in control, and if you are buying long positions, you're swimming upstream.

The Long-Cash Ratio (LCR), which is exactly what the name says it is, continues to drop and is now at 0.177, indicating that 425 stocks in the database have some form of long status (New Long, Affirmed Long, or Long) and that 2404 stocks in the database have some form of cash status (New Cash, Affirmed Cash, or Cash).  A mere 15% of the stocks are long, which means that 85% of the stocks are below their optimized pricing and volume levels.  Buyer beware.

Of interest is that the database strength, which is a value between 0 and 1 and is one that indicates how "strong" a stock is relative to it's optimized past, is now moving UP, e.g., gaining strength.  The new value is 0.197, up from Wednesday's close of 0.113.  This is a divergence and indicates that we may be bouncing upward from here -- we'll see.  I want to see the LCR and price action of the database fall in line with this today to see some steam behind a relief rally.  Strength cannot continue to increase while the LCR and price action fall, either strength must drop as LCR and prices fall, or they all will rise together.  This is because they are inter-related in terms of volume and price action.

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LCR Change Timer

Our LCR Change Timer, which is a very short-term timer, continues to indicate that we should be in cash (if you are conservative) or in Contra ETFs (if you are more aggressive).  I, unfortunately, sold all my contras except TWM last Friday, so I've missed out on this big drop.  Nevertheless, my limited position in TWM is up 13.49%, which is wonderful.  The cash signal occurred with the close on 6/22; if you would have shorted a theoretical position in the VTI @ $55.87 (Vanguard Total Index, closely resembles the GGT price index), with the close yesterday of the VTI at $52.33, you would be up 6.3%.  If you think that this is unrealistic then you can use the following ETF chart as a guide for your favorite ETFs and invest on the Contra side to whatever your tolerance:

As with all my charts, right-click on the image to open in a new tab or window.  I suggest you print the figure and place it on the wall close to your PC.

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Elder Timer

Elder continues to look ugly.  As a whole, the 13d Force Index is below 0, indicating we should not be considering long positions.  This is the prudent approach and unless your time frame is very short, I would stay away from intermediate-to-long-term buys on long positions UNLESS your trading plan averages downward in positions (see my TSP trading blog) as the markets fall.

For the record, here is what HSGI has to say about the database, from the perspective of my Elder screen:

As I said, ugliness.

• Bull Power is negative and Bear Power is growing more negative, so there should be no question as to your alignment.  
• The 13d Force Index is pink, indicating that it is below 0.  This negates the 2d FI indicator, which is showing green (I reverse the 2d from what you default in HGSI because you want to consider entering on strength off of PULLBACKS, not when the 2d FI is making new positive highs)
• Most telling is that the slope of the 13d and 34d EMAs are
  
  1) below 0 -- prices are falling
  2) are pointing downward -- prices are falling faster
  
  Until I see some bottoming in these slope values and they start pointing upward long positions are at risk, if they are correlated with the broad markets.

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Back to the GGT status graphic:  Pricing and LCR EMAs are all looking bearish.  Again, avoid long positions unless they are counter-trending by nature (e.g., gold, long bond, etc.)

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Trading Plan for Friday

Simple:  I'm expecting poor volume, so I'm content to sit on the sidelines.  The GGT LCR Change Timer will NOT give a confirmed long call today, so no action is required at 3:30 - 4:00 pm.  Conversely, there is nothing telling me to close my TWM positions, so I'll let it ride across the 3-day holiday.

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

Make it a great holiday weekend!

Regards,

pgd

A Sea of Red, Sitting Pat, Happy to Wait and See ...

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As always, let's start with our normal view of the GGT dashboard (right-click on any image to load in a separate window):

We lost -0.87% on price yesterday, ending at $22.90.  As a reference, our recent low was $22.83 on 6/7, so unlike the SP500, we're not yet closing in new-low territory (yet).  Volume was down -10% from the 50d MA, but this is the "new normal" and is within the expected deviations, so nothing remarkable here. 

The LCR continues to fall as the database of stocks consolidates, ending at 0.222.  This means that 510 stocks have some form of long status and 2321 stocks have some form of cash status. 

The LCR Change Timer is still indicating CASH (-1), and has now been in this state for the last 7 trading days.  If you are conservative but like to move in-and-out rapidly, you've been in cash and have been protected.  If you are aggressive and like to move in-and-out rapidly, you've been rewarded handsomely, as the GGT Price has fallen almost 6% in 7 days (you could play this with Contra ETFs).  My lone-surviving contra position, TWM, is up +11.75% in the past 7 days, as a reference point.  Yes, I wish I had not sold all my contras last Friday, but my crystal ball is as good as yours and I didn't want to hold across the weekend.

Elder continues to warn us away on intermediate-term long positions, as the 13d Force Index is negative.  Despite this, I asked for input for stocks bucking the trend, and Hank answered the call with 4 countertrend entries, NRGY, SBS, IDT, and ATHN.  Let's take a quick look at them, but note, THESE ARE NOT RECOMMENDATIONS -- do your own homework:

NRGY is clearly making money the last few days -- volume is increasing on increasing prices.  The Elder 13d FI is clearly green, yet the Elder 2d FI is RED, indicating that the 2d FI is POSITIVE.  This blocks me from entry.  I like that the slopes of the 13d and 34d are above 0 (the car is driving forward) and that the 13d is gaining faster than the 34d (the car is accelerating).  I intend to wait for a pullback before considering this further.

The graph above is of SBS.  Again, this looks very strong, with price action clearly above the 13d MA and both the 13d and 34d slope lines above 0 (car is moving forward).  We see a bit of peaking in the slopes, with them presently downtrending (car is slowing a bit), so we may be presented a good entry opportunity.

Note that the Elder 13d FI is green, meaning that it is positive, and that the 2d FI is green, meaning that it is negative.  This establishes the conditions for entry, so we would want to see price action clear $42.40 before committing our hard-earned dollars.

The graph above is of IDT.  This is a very hot equity, as evidenced by last three days.  A couple of good points, and a couple of cautionary points:

1. The Elder 13d FI is positive.  This is good
2. The Elder 2d FI is positive.  We need to wait for a pullback to enter
3. Both the slopes on the 13d and the 34d EMA of price are positive (the car is moving foward), and they are pointed upward (the car is accelerating).  These are both bullish indicators
4. The industry group is shown in the gray dotted line.  Historically, until recently, IDT has been underperforming, and appears now to be in catch-up mode.  We need to poke around a bit more to explain why lagging.

The final graph above is of ATHN.  This is a new emergent, as is evidenced by the recent 13d Force Index moving positive.  Note that the 2d FI is RED, indicating that it too is positive, blocking entry.

The slopes of the 13d and 34d are both just moving into positive territory.  The car has just recently started moving forward.  Both are pointing upward, so the car is accelerating.  These are bullish indicators.

Note that the 13d EMA is below the 34d EMA on the pricing graph.  We may be a bit too early on this one, especially if you are conservative.

Note too that the industry group has been outperforming this stock for some time (dotted grey line on the pricing graph).  We need to understand why this is so.

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Trading Plan for Thursday

Boring.  I intend to sit on my pile of cash and wait.  I'm waiting for the 1040 level of the SP500 to show us that it is either resistance or yesterday was a fluke.  I'm waiting for a sustained bounce and the LCR Change Timer to move LONG (we are at least two trading days away from that signal, if it happens).  As indicated in the previous few days blogs, I do not typically enter a signal mid-stream, so I'll let my TWM position continue and will let my core AAPL position wither away, possibly adding some more AAPL as it gets cheaper AND as it shows some indications of strength.

Patience is the name of MY game.

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

Regards,

pgd