Short Term Timer Could Flip, but ...

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Well, that was a rather pittiful day.

As you may have surmised from yesterday's action, the short-term LCR Change Timer did NOT move long.  The alternating up and down days of the LCR (Long Cash Ratio) has kept the timer sitting at netural, and with a time constant of just shy of 1 day in length (it's adaptive), the timer goes as the market does, well, almost.

Here's the dashboard:

The GGT price index failed to follow through on Monday, which I take as a bearish indicator.  While it jumped over +5% on Friday, it gave up -1.7% on Monday.  Volume, which has been in the toilet, continues to remain there, with volume -34% below the 50d MA level.

[As an aside, we were down -32% on 8/32, -30% on 8/16, etc.  You can scan column 3 above and see for yourself that it's not been a good volume period.]

Poor volume simply means that we, the retail investors, are more exposed to large orders from the big boys and girls, simply because their volume will move the price when (and if) they play in your particular stock.  I consider this specific period of lack of volume as "swimming with the sharks".

The LCR, which is a ratio that puts the number of long-rated (New Long, Affirmed Long, and Long) stocks against the number of cash-rated (New Cash, Affirmed Cash, and Cash) stocks, fell -11% to end at 0.383.  The LCR is waffling, and when it waffles, it's hard to make money.  Also note that the LCR is significantly below 1.0, indicating far more stocks have a cash rating (2075) than have a long rating (795).  Yes, there are some great bargains out there, but also note, there is nothing indicating that the floor is in on those bargains. 

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Short-Term LCR Change Timer

This timer has now indicated it's 4th day of back-and-forth action, and is biased to the cash side simply because that is where it started back on 8/24.  A down day in the markets today (Tuesday) will cause this timer to revert back to the Cash (-1) side; an up day will cause it to flip to a Long (+1) status.  As you know, the financial web site www. finviz.com has everything you need to determine what this timer has done -- simply review the ADV/DEC box in the upper left of the site around 3:30 to 3:45 pm EDT to get a feel for the overall market.  Here's yesterday's view of the ADV/DEC picture:

Note a couple of pieces of useful information:

1. The ADV/DEC was decisively bearish by the end of the day, with only 1245 advancing and 4954 declining.  From this alone you knew with a high degree of confidence that the LCR Change Timer did not flip to long (see yesterday's blog).
2. Volume was poor for the DOW stocks, with it sitting nearly at 75% of the normal volume.  The NASDAQ and S&P500 are also indicated on the same page, so you can see if there is a bias or not (did Technology get hammered more than the S&P500?)
3. The New High/New Low indicator is relatively balanced.  In a bear market we typically see this behavior all the way to favoring a strong bias to New Lows.  In a bull market we see a large number of New Highs and a dry-up of New Lows, starting from this point.  Entering the market now is risky, simply because you are swimming up stream.

I believe it is doubtful that we will see a new bull emerge within the next 4 trading days, and correspondingly, because I will be out of all electronic coverage until the weekend, I do think I will move to the sidelines and sit pat.

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Intermediate-Term Elder Timer

I received a question yesterday about "what is meant by Elder?".  Elder refers to Dr. Alexander Elder, and you should become familiar with his literature, as it will help to make you money.  If nothing else, it will help to keep you on the right side of the market almost all of the time.  Google his name on Amazon and pick up his books -- you will not be disappointed.

I recieved another question about "what filter is used to develop the watch list?".   What I presented yesterday is not a filtered watch list, it was the entire GGT universe.  You can download the universe in the files section at Yahoo! by subscribing to GreekGodTrading-subscribe@yahoogroups.com and going into the files section.

Yesterday's presentment of the GGT universe, but through the HGSI Elder lens, is my own view of a default screen within HGSI.  Here's today's view:

Nothing has changed much from yesterday, although we do see that the slope lines of the 13d Force Index are moving upward.  We need this to cross the 34d from below AND, to be absolutely confident that we're bouncing upward, we need both of these slope values to go above 0 (they are presently below -- make sure you understand what you're seeing above).

As you see above, the 13d Force Index is PINK, which tells you that it is below 0.  Nothing else matters -- if the 13d FI is below 0, do not invest in intermediate-term holdings.  Period.

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Trading Plan for Tuesday

I'm leaving on a mountain-climbing trip with my son in the weee-hours of the morning tomorrow, and will be out of radio contact (literally) for the next few days.  No cell phone, no internet, just the stars, planets, and moon above me and the wind whipping through the rocks.   Oh yes, and my 11-year old who already can't sleep because of anticipation.  Correspondingly, I'm sitting pat for today.

For those of you who are not going with me (all of you), I would watch the ADV/DEC line at http://www.finviz.com/ to get a jump on any bounce.  Note though that we're still bearish, September is a historically bad month, and as of yesterday's data, nothing looks attractive on the long-term.  You'll have to be surgical in order to make money right now, and I don't have time nor the inclination for such a headache.

Note that as the last day of the month I am moving all of my wife's TSP funds to CASH (G-Fund).  I'll revisit reallocating upon my return.

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Please remember that you are responsible for your own trading decisions, not me.  Please do your own work and take ownership for your wins and losses.

Regards,

pgd

Short Term Timer May Move Long, Elder clearly Bearish

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I'm still in vacation mode through Labor Day.  I'll be traveling again Wed-Fri of this week, this time with my 11-year-old son Greg, as we embark on a western adventure in the Sierras.  Tomorrow (Tuesday) will be my last commentary of this week.

Let's review the GGT Dashboard:

The week was relatively ugly through Thursday's action, but Friday reversed the sideways market.  We started Monday at $22.75 and ended Friday at $23.62, so clearly a nice jump (Thursday's price was $22.47 so this was a major jump on Friday).  Volume continues to be anemic, with 11 consecutive trading days trading below the 50d MA, which is presently 2.3M shares.  Friday's action was 10% below this at 2.1M shares.  The big boys simply are not playing in this market.

The GGT Long-Cash Ratio (LCR), which is a measure of the number of stocks in the database with some form of long status compared to those with some form of cash status, bottomed on Thursday at 0.3 and moved upward with a 43% upside change on Friday, ending the week at 0.429.  We started the week at 0.548 so I wouldn't say that this is the reversal.  Nevertheless, Friday's action was strong as far as the entire database is concerned, so it does bear watching.

Short Term LCR Change Timer

The short-term timer is waffling back and forth, and is presently giving us a cautionary sign.  It is shown in yellow in the above figure, and you see that it has three consecutive days of 0's.  This means that we are more-or-less alternating up and down days, which is the sign of a choppy market.  I AM PRESENTLY IN CASH on a short-term basis because of this timer, BUT, if MONDAY, August 30th (today) is up, it is very possible that this timer could move to the long side.

How to anticipate a move long?  Watch the main page at www.finviz.com, specifically the ADV/DEC bar in the upper left corner, and if this is clearly favoring the ADV side of the equation by 3:30 pm you have a fairly good confidence that this timer will move long.

Note that if you move long right now you are swimming up stream:

1. The raw LCR value is below 1.0.  This means that there are far more stocks that are bearish than bullish.
2. Volume sucks.  There are no major players driving up prices, so the market is languishing.  This means that you are at the mercy of surgical strikes by the big boys, as well as the folly of the retail market.  Don't bet the farm.

IF the market is up near the end of the day I MAY (my option) choose to move long.  If you had a gun to my head right now I'd say I'm content to sit on the side line, especially since I will be out of town starting Wednesday.  We'll see.  Today will have to be a powerful follow-through day for me to put much cash out there.

The Intermediate-Term Elder Timer

Elder continues to indicate a 13d Force Index below 0, which is my main gate for investing long on the intermediate-or-long term time frame.  While you can't see it in the graphic above, it is negative only by a slight margin. It bottomed hard Tu-Wed-Thurs of last week, and has now started to move up rather significantly.  I like the Force Index because it includes both price and volume, so we apparently have both for those stocks that are moving upward.

EVEN IF MONDAY DUPLICATES FRIDAY in strength, it is very doubtful that we will see the 13d FI move positive.  No need to get your shopping lists ready just yet.

I intend to sit pat on intermediate-term holdings, at least today.

For those of you who are curious, here is my view of Elder through the HGSI lens:

In the graphic above, note:

• Bull Power is terrible and flat near 0.  We want this strongly trending upward and positive.
• Bear Power is non-zero.  We want this much smaller than Bull Power (in magnitude, and it's much larger right now)
• The Elder 13d FI on the entire GGT database is PINK, which I have colored and changed from the default.  When pink, Elder 13d FI < 0, and this tells me to avoid intermediate-term holdings.
• The 13d/34d EMA slope window shows that while both are trending upward:
  a) they are both below a value of 0, meaning that the 13d and 34d slopes are NEGATIVE (losing money on these time frames)
  b) the 13d slope is LESS THAN the 34d slope, which means that the 34d slope is stronger than the 13d.  This is inverse of what we need for a bull
• Database volume is anemic, as I said above.  Remember, GGT stocks are filtered for those that have:
  a) price above $1
  b) 50d MA above 100K shares (does not include ETFs, but they are not in the graphic above)
  c) trade on the primary exchanges

Again, I intend to stay away from Elder until the 13d FI moves positive.

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Trading Plan for Monday

Easy.  Live your life, and if you can around 3:30, check www.finviz.com.  If the markets are solidly positive at  this time, as determined by the ADV/DEC bar, then I'll look carefully at QLD, DDM, UWM, MVV, etc.  These will ALL need to be up a good amount (broad participation).  If this fails then I'm sitting on the sidelines.

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Make it a great week.  I may post tomorrow, but again, do not expect a post after Tuesday until the end of Labor Day weekend.

Local Tri-State Investor's meeting on September 11th, to include HGSI.  Details have been sent by Ray; let me know if you're interested in attending by leaving a comment below.

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

Regards,

pgd

LCR Change Timer Moves to CASH

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Let's start with our dashboard:

A sea of red ...

The GGT price index continues to fall, ending the week at $22.92, it's lowest level since July 7th.  We started at $23.83, and hit a high of $24.27 on Wednesday, but the breakout was not sustainable.    Volume has been weak and decreasing all week, with the 50d MA volume now at 2.4M shares.  Falling prices on weak volume  is not a recipe for making money in the long haul, so caution is advised.

The GGT Long-Cash Ratio (LCR) continues to drop, and it ended the week at 0.456, indicating that 908 stocks have some form of a long status and 1992 stocks have some form of cash status.  This is nearly the same level that we started last week, so we seem to be hitting some form of a bottom here.  We'll see if it holds.  Nevertheless, this is a low value, and on weaker volume it will be harder for stocks to move upward.  CASH recommendations only require an erosion in price, while LONG recommendations require price and volume.

Database strength continues to hover in the 0.3 range, on a scale of 0-1.  This isn't overly bullish (oversold), nor is it bearish (overbought).  This is an area of limbo-land that is hard to glean a trend, and with poor volume, I'm not overly optimistic for a solid bull rise.

Short-Term LCR Change Timer

I missed this because of my work obligations/travel on Thursday/Friday, so I hope you were watching www.finviz.com and making your own choices.  Of significance is that I'm still holding long ETFs, and will place a 1% TSL on each position today.  From an equity point of view this hasn't been a good series of trades, as I'm underwater in each position (QLD, UWM, and DDM).  If today is strong I will poke my head above water and will take my pennies off the table.

Intermediate-Term Elder Timer

The Elder 13d Force Index is solidly negative, blocking any movement into intermediate-term long positions.  The 13d and 34d pricing slopes are NEGATIVE, which is the wrong direction for these to be pointing.  The 13d slope line is below the 34d slope line, and as the faster of the two, shows that we are going down in an intermediate-term, not up.  Bearish-bearish-bearish.  If you are holding anything on the intermediate-term you are certainly playing with fire.

Here is what HGSI has to say about the GGT Universe from Elder's perspective:

In case there was any doubt about Elder, observe the following:

• Bull power is presently negative.
• The 13d Force Index is PINK (my version), indicating that it is presently less than 0.  This effectively stops any intermediate-term holdings
• Both the 13d and the 34d MA slope lines are negative (the car is moving in reverse), and they are both pointing downward (we are accelerating in reverse).  This is completely the wrong direction for long positions.
• Price is trading below the 13d and 34d EMAs.  This is bad.
• Note too that volume as been vaporizing.  This indicates a lack of the big boys being present in the market.

I presently hold no intermediate-term stock holdings, and I suggest you consider this too.

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Back to the GGT dashboard....

Of the major pricing EMAs that I follow (8, 13, 21, 34, 55), only the 34d is above the 55d.  All the others are inverted (8 < 13, 13 < 21, 21 < 34), indicating that we are moving the wrong direction on those time scales.  Note that the slopes of the pricing EMAs are all pointing downward, which is bearish.

With Friday's close, the LCR EMAs ALL INVERTED, meaning that we have a wonderful setup for a bear run, as from a database point of view, every intermediate-term metric within the LCR world is pointing downward.  Note that the slopes of the LCR EMAs are all pointing downward, which is bearish.

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Trading Plan for Monday, August 23rd, 2010.

This market is relatively easy:  sit in cash.  On a short-term basis I will try to poke my head above water on my 2x long ETFs, and on a long-term basis I will sit happily in cash.

IF TODAY AND TOMORROW ARE UP STRONGLY, it is possible that we could whipsaw back to the long side with the close of the markets TUESDAY.  Watch www.finviz.com ADV/DEC lines to get a view of this.  If the ratios are close near the close on TUESDAY, then I would sit pat, as the longer-term trend is clearly downward.

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Travel Notice

I am traveling again all week, finding myself in Philly tonight (Monday) and then back to Ft. Worth Tuesday-Friday.  THERE WILL BE NO GGT UPDATE THE MORNING OF TUESDAY, AUGUST 24th, as I have a late night tonight and a very early start to my Philly meetings.  Sorry, but it's obvious that no major decisions on your portfolio have to be made today or tomorrow.

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Remember, you are responsible for your own trading decisions.  Please do your own diligence and please own your decisions to trade/invest.

Regards,

pgd

Short Term Timer = LONG, Intermediate Timer = CASH

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For the more aggressive of you out there, the short-term LCR Change timer moved to LONG yesterday.  This indicates that we should purchase stocks and ETFs which are moving upward, and yesterday I provided a scan that fits nicely into HGSI to allow you to do just that.  The signal came with the close of the markets, and we had a "heads up" of sorts -- http://www.finviz.com/ ADV/DEC was clearly on the side of the ADV stocks, indicating with high correlation that the LCR Change timer would move long.  We'll see if this bounce works.

The Intermediate-Timer is still in cash, and no amount of market movement today will move it long.  Although the 2d Force Index trend indicates that we are moving upward, the 13d FI is clearly negative, and by a large amount, so longer-term holdings should be considered off limits.

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Trading Plan for Wednesday

Short-term:  continue to purchase stocks and ETFs that are above their 200d and those that have a 13d and 50d EMA of the price slope that is  upward-pointing.  You must be nimble, and protect profits daily.

Intermediate-term:  sitting in cash.

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Please take ownership for your own trades.

Regards,

pgd

A Pending Bounce? Perhaps, but Price and LCR Diverge

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I can't do graphics today (iPad) so you will simply have to be content with reading ...

GGT price moved UP +0.38% to end the day at $23.83.  Volume was anemic -- on Friday it was down -26% from the normal 50d MA, and again on Monday it was down -30%.  These are well outside the standard deviation (22%) and suggest great uncertainty in the market in terms of both the retail players as well as the institutionals. 

Elder's 13d Force Index is NEGATIVE, which is precluding any intermediate-term investments.  After bottoming on Friday it did turn upward on Monday (less negative but still is below 0), so while the more aggressive of you may think that this is a great buying opportunity, it is dangerous to your financial health to purchase stocks for the intermediate-term at the present time.  I'm not even scanning for intermediate-term holdings using HGSI because this indicator is blocking me.  I've shown in the past that failure to acknowledge this simple gate will erode your gains, so I simply do not make intermediate-term purchases when this value is negative.

The Long-Cash Ratio FELL slightly on Monday, in contrast to the price moving upward.  This is because the  LCR requires price AND volume to get a New Long call, and it simply wasn't happening on Monday.  So while prices moved up, the LCR continued to fall, and this divergence is a flag on the pole for us.  Either:  1) prices will reverse and will fall with the LCR, or 2) the LCR will reverse and lock-step with prices.  Given the "oversold" nature of the database right now (GGT strength = 0.36 on a 0-1 scale), I would say there is greater likelihood of a short-term bounce upward than a continued knife-edge drop to the down side.  Remember though -- your crystal ball is as good as mine.

It is a rare occurance when the LCR falls but the GGT Short-Term LCR Change Timer moves upward.  It did so on Monday, simply because we've been floating around the LCR level of 0.449 for the last few days (Wed = 0.66, Thurs = 0.53, Fri = 0.45, Mon = 0.45).  This timer says to "get your short-term long ETF list ready" if the day is up.  I measure the "day is up" by looking at http://www.finviz.com/.  In the upper left corner you will see an ADV/DEC line -- if this is decisively on the ADV side by 3:30 EDT then we can assume that the ST LCR Change Timer will transition to +1 (LONG) and that we should move into long ETFs.  If you decide to do this, I strongly suggest you pick ETFs that are

1. greater than $1 in price (most are)
2. greater than 100K 50d MA volume
3. are above their 50d MA in price

This is an easy filter for HGSI and you should have built it by now.  If you haven't, do so or ask questions on how to do so.   I even go a step further and require that the 13d Force Index on the ETFs be positive and/or that the 13d and 50d slope lines are postive, but many of you may find that too restrictive.

With Monday's action, the intermediate-term does not look promising.  The 13d price EMA has dropped now below the 21d price EMA, and this is the wrong direction.  The 8d LCR EMA is below the 13d LCR EMA, and this too is problematic. ALL of the major slopes of the pricing EMAs are downward (8/13/21/34/55), and this is simply bad for a bull.    ALL of the major slopes of the LCR EMAs are also pointing downward, and again, this is very bad for the intermediate term.

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Trading Plan for Tuesday

Short-term:  I intend to watch http://www.finviz.com/ at the end of the trading day and if this is moving decisively in the ADV favor, I will purchase strong ETFs that meet the 1-2-3 criteria above.  I prefer leveraged ETFs.

Intermediate-term:  I intend to sit pat.  The Elder 13d Force index is negative.

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Please, do your own diligence and take ownership of your decisions.  I cannot be held responsible for what YOU decide to do.

Regards,

pgd

Intermediate-Term = Cash, Short-Term Oversold?

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I think that the following graphic let's you know how I feel about the market overall:

A number of indicators in the graphic above, which is the summary of the 2700+ stocks of the GGT universe, should be giving you a pause at the present time:

• GGT bull power is below 0
• GGT bear power is moving more positive
• Elder's 13d Force Index is PINK, which means that it is below 0.  This is our primary gate for staying away from stocks at the present moment.
• The slopes of both the 13d EMA and 34d EMA are negative (in dollars per day, they are losing money on this time frame)
• The 13d EMA slope is below the 34d EMA, which means we haven't yet turned up.  This means that it could get uglier.

**** Tipping your toes into the market at this time may work for a short period, but on the 13/34 intermediate time frames that Elder plays, the market is quite dangerous.

As many of you know, I liquidated my intermediate-term portfolio this past week, and I'm happy to have missed the collapse of the markets on Wed/Thurs/Fri.

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Short Term LCR Change Timer

The short-term LCR change timer is clearly in cash, and there is nothing on Monday's docket that will change that.  The Long-Cash-Ratio, which is a measure of how many stocks in the GGT database have a LONG recommendation to those with some form of CASH recommendation, fell sharply on Wed/Thurs/Fri, having ended the week at 0.456.  This means that we've dropped from over 1678 stocks long on 8/4 to 851 on 8/13, almost a complete inversion of cash/long recommendations. 

By itsself, the LCR Change Timer is saying avoid stocks on a short-term basis.  There is somthing thought that is possibly challenging that:

An internal measure of strength within the database is possible using the GGT strength indicator.  This indicator is an oscillator, moving from 0 (completely oversold) to 1 (completely overbought).  Right now we have had three consecutive days of strengths hanging tightly in the 0.27-0.34 range, which gives me reason to believe that for the more aggressive of you, you may want to consider looking at some opportunities on the long side.

This timer is normally traded with long ETFs, and there are a long list of 2x ETFs that look relatively good.  I'll leave it to you and HGSI to work on the filter details and identify the candidates.  As a hint, keep an eye on leveraged ETFs that

• are above 200d MA
• have short-term slopes in an up-trend
• have long-term slopes (65d) in an up trend
• have been oversold hard the last few days (significantly below their 7d but above the 17 or 21d)

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I will be traveling for the next three weeks but will do everything I can to have timely posts in the morning.  Note that starting September 1st, through the end of labor-day weekend, I will not be posting, as I will be climbing Mt. Whitney (look it up) with my 11-year-old son.  I doubt seriously if they have internet coverage there ...

There will be a combined GGT / HGSI meeting on September 11th.  Details pending, so check back.

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

Regards,

pgd

Elder Intermediate-Term Timer --> Cash????

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As predicted yesterday, the Elder intermediate timer, when using an exponential moving average on the 13d Force Index, has signaled a move to cash.  It was expected, as all we needed was average volume and a 1% decline in the GGT price to take the timer into cash.  The impact on the intermeidate portfolio was significant and deep, with the intermediate-term portfolio now down -2.3%, or a loss of -4% in a day.  In accordance with my standard liquidation rules I have placed a 1% TSL on the stocks before the open and will let the winds take them where they go.

Before any of you get critical on the Elder timer, I remind you of the following periods where it signaled long and the GGT index prices:

• 7/14/10 to 8/11/10:  $24.94-$24.82, loss of $0.12
• 6/24/10 to 6/29/10:  $23.85-$23.10, loss of $0.75
• 6/11/10 to 6/22/10:  $24.35-$24.30, loss of $0.05
• 2/16/10 to 4/28/10:  $22.83-$26.30, gain of $3.47
• 1/25/10 to 1/29/10:  $21.94-$21.53, loss of $0.41
• 11/13/09 to 1/22/10:  $19.16-$21.74, gain of $2.58
• 10/13/09 to 10/26/09: $19.36-$18.97, loss of $0.39
• ...

You get the idea.  I have data back to 9/11/08.

Point here is that we have to play to win, and over the longer term, this timer does keep us on the right side of the market when the stars are aligned.  I'm not taking a -2.3% loss in this portfolio as any indication of a problem, nor should you.

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HGSI Elder view of the GGT Universe

The graphic above shows my Elder view of the GGT database.  The Elder signal has moved to cash, as evidenced by the "pink" area in the ribbon bar (Elder 13d Force Index < 0).  This signal whipsaws, but overall, it is a great indicator to see if we should be long or short. 

Money management 101 -- live to fight another day.

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Trading Plan for Thursday

With the Short-Term Timer in Cash, I'm happy that I pulled up a chair on Friday and was able to watch the carnage from the sidelines.  I will continue in cash.

With the Intermediate-Term Elder Timer signalling a move to the sidelines, I have placed a 1% TSL on my positions and will let fate take them where they go.

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Remember, you are responsible for your own trading decisions, not me.  Please take ownership of your decisions.

Regards,

pgd