Tuesday 3:15 pm update

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Contra ETF volume is mixed in terms of meeting the 90% of the 10d MA by 3:15 standard.  Some of the contra ETFs (SMN, SCC, SKF, SRS, UDN, TWM) are all below threshold, while some (DXD, DUG, SSG, BZQ, FXP, EFU, QID) are above threshold.  All that are above, with the exception of DUG, are below yesterday's high, precluding entry.

DUG typically moves higher as confidence falls, but who knows where it is going to go.

Consequently, I'm not moving on any of these until we get a clear signal downward.  Note that the bias in the database suggests that we could have more upside room than downside (as measured by the GGT strength indicator).

Regards,

pgd

LCR Signals MOVE TO CASH

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Despite the markets being up yesterday, the underlying momentum of the database was down, as evidenced by the LCR moving down.  Given the length of this bull leg, and this type of divergence, I will close my positions in UWM and QLD using a 1% Trailing Stop Loss, placed before the open of normal trading.

Here's the tea leaves:

GGT Price moved up +0.45%, in tandem with the markets, on volume that was +6% above the 50d MA of volume.  This is normal price/volume action and is unremarkable.

Contrasting, as evidenced by the 4th and 5th columns, the GGT Long-Cash Ratio (LCR) fell -12% to 0.536, which is a divergence from the price action of the day.  It takes more to cause the LCR to move up or down than simple price action, and a falling LCR tells me that for the underlying stocks, price, VOLUME, and RATE OF CHANGE are all collapsing.  This isn't to say that we can't see a reversal, but right now the foundation of price action is falling, which is worrisome.

Confirming this move downward is that the entire strength of the database, as indicated by the GGT Strength Index (6th column), also fell.  I know it says 0.366, the same as the previous day, but I grabbed the screen shot before this field updated -- THE ACTUAL STRENGTH IS 0.318, which is below yesterday's value.  Correspondingly, I think that the falling LCR and falling strength are in sync, and it is thus prudent to close my long ETF positions (UWM, QLD).

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GGT Short Term LCR Change Timer

The short term Change Timer has signaled a move to CASH.  I am chosing NOT to ignore it.  If the markets are up today we will not get a signal to move long until the close on Thursday.  If the markets are down then we will be confirming the signal.

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Elder Intermediate Timer

Elder continues to indicate LONG on the intermediate-term timer, and with the 2d Force Index below 0, continues to indicate that there are good entry positions within the present market.

Yesterday, I provided a HGSI list of stocks that met the Elder Criteria.  I watched these throughout the day -- not one cleared the previous day high (Friday).  Correspondingly, I DID NOT ENTER ANY INTERMEDIATE LONG POSITIONS.

I'll watch again today, using the same filter and selection criteria.

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Trading Plan for Tuesday

I will close my short-term positions in UWM and QLD using a 1% TSL.  I will open positions, on strength only (volume and price), in QID, DXD, TWM, etc.

I will open intermediate-positions, as determined by my HGSI filter I presented yesterday, if they show strength (volume and price).

For review, my volume criteria is:

12% 10d Avg Vol by 10:00
25% by 10:30
33% by 11:15
50% by 12:15
60% by 1:15
70% by 2:15
90% by 3:15

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

Regards,

pgd

3 pm update. Although the markets are in positve territory, not one of the Elder stocks is making highs larger than Friday. I'm keeping my powder dry today...

LCR Change Timer - Poss Transition, but Maybe Not...

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Let's start with our GGT status figure.  As with all my images, right-click on the picture to open in a separate window.

As we all know, the markets took a major hit on Friday.  GGT indicated this, with a drop in the price index of -1.77% on volume that was +14% above the 50d MA of volume.  We are now sitting at a price of $24.45 and 50d MA volume of 2.69M shares.  Typically, a big down-draft in prices on higher volume should be cause for pause, but this volume number is well within average standard deviation, so actually, we can consider it "normal".  Given too that this was expiration day, I'm not overly concerned, despite the talking heads about "failed breakout", etc.  It simply is too early to tell if this is a failed breakout.

The Long-Cash Ratio (LCR), which is just what it's name indicates, fell a huge amount on Friday, indicating that we had a huge downward shift in the database.  It is now at a value of 0.608 and indicates that 964 stocks have some form of long status and 1585 stocks have some form of cash status.  We saw a number of days last week where the LCR was moving upward but the price was drifting down, and as I'm fond of saying, there is no way that that type of divergence can be sustained.  Correspondingly, the world is whole since these two are in agreement, and given the sustained run of this mini-bull (see my blog from Friday morning), I think a pull-back over the next few days would not be very surprising.

THIS BEING SAID, the 6th column from the left shows GGT Strength, and this value acutally states that we are more likely to move upward than we are to drop.  A value of 0.37 on a scale of 0 to 1 means that the underlying database is more oversold than overbought, although I like to see values below 0.2 before I call a next run up.  I'm not convinced that we're starting down here, as we've moved down a good chunk this past week (in terms of strength).  Make sure you look at the numbers and see the trend yourself.

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LCR Change Timer

Because the LCR dropped a big amount, we expect the LCR Change Timer to signal a possible state change to CASH *** IF MONDAY IS A DOWN DAY ***.  The transition caused by the downdraft on Friday is a head's up signal to be cautious; continued weakness on Monday will tell us to close our LONG positions and enter CONTRA positions.  The best way to evaluate this is to watch the home page at http://www.finviz.com/, and in the upper left corner of the land screen, you'll see an ADV/DEC bar:

You can see that on Friday we had 892 ADV and 5326 DEC.  Hence, if we see more DEC than ADV on Monday, there is a high probability that the GGT LCR Change Timer will confirm the move to CASH, and hence, I will close my longs (I did keep them over the weekend).

IF Monday is an up day, then we're going to bounce around as far as the LCR Change Timer is concerned.  Stay the course on the long side, as we could certainly move up from here.

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Elder Timer

Elder's intermediate timer is LONG for entry into long positions:

1. The 13d Force Index is greater than 0, telling us that entry into long positions is "safer"
2. NOTE THAT THE SLOPE OF THE 13d FORCE INDEX IS NEGATIVE, which is a warning sign.
3. The 2d Force Index is LESS than 0, telling us that we are experiencing a shorter-term pullback and that we can get better prices right now
4. The 13d and 34d EMA PRICE slopes are POSITIVE, which is bullish
5. The 13d > 34d EMAs are aligned properly, telling us we are in an uptrend

Here's a view of candidate Elder stocks that have an HGSI ERG above 240, sorted by Relative Strength descending:

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Trading Plan for Monday

Intermediate-term holdings:  I intend to open positions in the strongest RS stocks above if they begin to move above Friday's high.  For example, IDT's high was $15.77.  If we move significantly above $15.77 today (say above $15.82 or so) then I'll open an initial position with a fairly tight end-of-day-stop loss of $15.05.

Short-term holdings:  I intend to keep my long ETFs (UWM and QLD) if the markets continue higher.  I will sell them if they look like they are going to give up their gains, and if the markets are down significantly by 3:30, I will enter the index contra ETFs.

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Remember, you are responsible for your own investment decisions, please do your own diligence.

Regards,

pgd

Definition of Short-Term and Intermediate-Term Timers...

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Sorry for the delay in posting this morning.  Returned from my trip this week to find no AC in the house, much to my family's chagrin, so I've been dealing with that this morning.

Let's start with the dashboard:

The GGT Price Index is bouncing against resistance at $24.89 (Thurs), $24.92 (Wed), and $24.94 (Tues).   The volume index has been within the normal distribution at around 2.6M shares, which is right in line with the 50d MA.  Hence we're churning -- there is buying and selling at healthy levels, and price is holding steady.  This is neither bearish nor bullish -- it simply indicates that there is some participation in the markets by the big boys.

Of particular note is that GGT price is losing ground ever-so-slightly, yet the GGT Long-Cash Ratio continues to build.  In fact, it is nearly in balance, finishing Thursday at 0.991.  This indicates that 1296 stocks are in some form of long status and 1308 stocks in some form of cash status.  Of greater importance is that bull markets see this tip in favor of more longs, so we MAY be moving from our correction period to a period of new growth -- only time will tell.  The importance of the absolute value of the LCR is not nearly important on a short time frame as it is on the longer time frames -- historically, when this value has been below 1.0, we are in a period of consolidation.  We're moving higher, so let your common sense guide you from here.  I'm cautiously optimistic.

I can't plot LCR indicators in HGSI, so here is my own window:

What is important to view above is that we've certainly FAILED once we reach the LCR greater than 1.0 level (just look to the past since inception of the GGT system), so don't bet the farm long just yet...

Another item that draws my attention is the slight decrease in GGT price over the last few days, but the incredible strength of the GGT LCR.  Here are the LCRs for the week:

• Monday: 0.409
• Tuesday: 0.827
• Wednesday: 0.922
• Thursday: 0.991

This divergence CANNOT be sustained.  The reason is that the LCR is comprised of several variables:  price movement, volume movement, and rate-of-change movement.  Price movement is just that -- price movement.  The fact that LCR is showing a tremendous amount of strength indicates that there is more occuring within the database than just price movement -- volume is improving, and prices, relative to their recent past, are moving dramatically upward.  The strength of the LCR is good, as it transcends simple price movement. 

Here's my tea-leaves prediction:  a pullback in LCR, but higher lows will signal a wonderful entry into longer-term positions.  Remember, not to be taken as gospel, as my tea-leaves are only as good as yours.

[Kevin B:  I saw your request for clarification on what "intermediate-term long positions" mean, and I'll address that shortly].

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LCR Change Timer

The LCR Change Timer continues to indicate that we should be LONG, and has been in this status without any form of a pullback since the close of 7/7/10.  This is a 7 consecutive day run, and certainly is pushing our luck with this streak.  NOBODY WOULD FAULT YOU TO LOCK IN PROFITS AT THIS POINT, especially going into the weekend.  I'm seriously considering taking my profits in UWM and QLD.

The LCR Change Timer is a SHORT-TERM TIMER.  What is short term?  For this timer, AND THIS TIMER ONLY, we can gleen the following statistics since inception in August 2008:

• Average Signal Length (both LONG and CASH):  9.7d +/- 6.9 days
• Average Signal Length (ONLY LONG):  9.1d +/- 6.4 days
• Average Signal Length (ONLY CASH):  10.3d +/- 7.5 days

Unfortunately, the data is not bell-curve shaped, so normal statistics do not directly apply.  Here's the historgram for the long signal:

So, even though the data says that we have an average duration of 9.1 days with a standard deviation of 6.4 days, your eye can tell that signals lasting 2 days have the most occurances, followed by 5-6 days, followed by 7-8 days.  This tells me that the present LONG signal is getting old (it's 7 days old) and don't worry about what others would say if you started protecting profits.

When we are LONG, like right now, we can expect the average long signal to last 9-10 days.  We are at day 7 with the close on Thursday.  As I bang this out the markets are down, so we'll move from LONG to CASH-LONG with today's action, if the FinViz ADV/DEC line is favoring declines at the close of today.  This means that IF TODAY IS DOWN, we will be at day 8 in this signal.  A continued down day on Monday would be the day of transition to CASH, and hence, this signal would be counted as 8 days in length.

Here's the view of the CASH signal, again since inception:

The normal stastistics tell us that the average signal length for the CASH signal is 10.3d +/- 7.5 days.  We can see in the figure above that 7-8 days has the greatest number of occurances, followed by 1-2 days, then a tie on 5-6 and 11-12.  So although the average is 10 days, our eye clearly jumps on the 7-8 day bin as being more of the "center".

The conclusion of this is that this timer has a "feel" of being LESS THAN 20 days on the LONG side and LESS THAN 20 days on the CASH side.  Ask questions of the data above if you do not understand what you are seeing.

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Elder Timer

The Elder Timer is a longer-term timer.  The question is out there about "what is intermediate duration?"

The Elder system uses a 13d moving average on the Force Index, as well as movement of a 13d EMA and a 34d EMA.  If we just consider the 13d MA on the Force Index as our gate to be "long" or "not long", we get the following duration of LONG signals since inception of the GGT system:

Simply by using the 13d Force Index, we have whipsaws, which is evidenced by 7 occurances under 5 days in duration, 1 occurance 6-10 days, etc.    Note though that when this signal DOES move positive, we can be long as much as 71-75 days.  THIS is an intermediate-term timer signal.  The 13d FI > 0 is a primary gate for us on whether we should be long in stocks.

Let's look at the CASH side of the 13d Force Index:

As you can see, by using the pure 13d Force Index < 0 as a primary gate, we have whipsaws in the timer, as this has happened 9 times from 1-5 days in duration.   The important number is the 45d value -- we have seen this timer keep us in cash as long as 41-45 days, again, representing an INTERMEDIATE-TERM timer.

THIS IS NOT HOW MY ELDER TIMER IS CONSTRUCTED ... BUT BECAUSE IT IS THE PRIMARY GATE, THIS IS THE EXPECTED BEHAVIOR OF MY ELDER TIMER.

Remember, I combine the SLOPE OF THE 13d and 34d PRICE EMAs, as well as whether the 13d > 34d in value, in determining whether we should move INTO a long position.  I'll cover more of this in an upcoming blog.  Make sure you understand the colors in the status table below for the ELDER section:

What we see above for 7/15/10 is that:

1. The Elder 13d Force Index Gate signal is LONG (green), and it has been since Tuesday.
2. The 13d Force Index SLOPE is pointing downward, which should give us pause.  We want this moving upward.
3. We have a NEGATIVE (green) 2d Force Index.  This means that IF I HAD MY LONG SHOPPING LIST READY (I don't because I've been traveling), that stocks that are showing strength TODAY (FRIDAY) would be good candidates for entry, despite warning in bullet #2.
4. The 13 and 34d slopes of the PRICING EMAs are pointing UPWARD.  THIS IS BULLISH and triggered an entry IF YOU ARE AGGRESSIVE.
5. The 13d has just crossed above the 34d EMA with Thursday's close, which is VERY BULLISH.  THIS is telling us that from a conservative point of view, Elder's methods are telling us that we can enter the market, ON STOCKS THAT HAVE STRENGTH.

Note that we could fail here.  We've had a long bull run (7 days), are due for a pull back, but as long as the 13d Force Index stays gated long, entering stocks that are showing new strength after having a 2-day FI pullback (and meet the 13/34d criteria) could be good candidates for entry.

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Trading Plan for Friday

I'm watching my UWM and QLD positions get the heck beat out of them.  I plan to NOT LET THEM GO NEGATIVE in ROI, so I will sell them if they get down to 1-2% positive gain over the last 7 days.

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

Regards,

pgd

Price/GGT LCR Divergence

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Still traveling and am challenged to provide graphics.  I return late tonight so tomorrow should be back to normal.

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My primary short-term indicator, the Long-Cash Ratio (LCR) value, continues to move upward.  This is constructed using about 2600 stocks that have over 100K volume, prices above $1, and trade on the primary exchanges.  Correspondingly, these are liquid stocks.  The new LCR value is 0.922, indicating that we have 1249 stocks with some form of LONG status and 1355 with some form of CASH status.  Why this is important is that

1. if we continue, we'll have more stocks on the long side than cash; this has not occurred since May 5th, and
2. this continues to tell us that we should remain LONG if you are following the LCR Change Timer.

Correspondingly, I am continuing to hold my long positions in UWM and QLD, which are up 9.4% and 6.9% since the signal last week.

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The Elder 13d Force Index continues to indicate a positive value, indicating that it ok for us to enter intermediate-term long positions.  I've been quite busy this week and have NOT been able to research which stocks to review, so I cannot provide guidance on what I'm going to do.  Check back tomorrow and across the weekend to see how I will look forward with stock selections.

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The GGT Price Index fell from $24.94 to $24.92, although the LCR moved upward.  Volume was within statistical norms.  Correspondingly, even though we now have a significant divergence, my money is on the LCR moving upward.  I am short-term bullish, and am becoming more longer-term bullish, but have to look deeper at the tea leaves.  I'll do that this weekend.

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Trading Plan for Thursday

I am staying the course in terms of my long ETFs and will make no changes today.

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Regards,

pgd

Elder Force Index 13d has Moved Positive

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I'm traveling this week so I cannot write much at the present moment.

I note that the Elder Force Index, 13d, has moved positive.  This is bullish for the intermediate term and indicates we need to look at entry of long positions.  Tempering this is that although the 13d and 34d EMAs are positive, in the big picture, they are still inverted, which means we have a ways to go. 

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Trading Plan for Wednesday

Unchanged.  I continue to hold positions in UWM and QLD, as well as AAPL. 

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Regards,

pgd