LCR - Price/Strength Divergence, Bulls Resuming Control?

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Let's start with the facts ...

GGT Price increased on Wednesday by +1.13%, ending the day at $25.96.  Volume was up 15% over the 50d MA.  Rising prices on higher volume is bullish, as we all know.

The Long-Cash Ratio (LCR) FELL -2% despite the price and volume increase, which is a divergence.  Because volume is not considered in the move from LONG --> CASH this tells us that while the average price of the database increased +1.13%, the number of stocks that performed worse than their historical, optimized price levels increased.  It is possible to have a stock rise in price but not meet the optimized threshold level, thus moving it to a CASH recommendation.  This appears to be the case for numerous stocks, and points to a weak day.

The price/LCR divergence is problematic for a sustained, healthy bull, and while my crystal ball is only as good as yours, this needs to be rectified for us to continue higher.  Either we'll see LCR reverse and march lock-step with rising prices (bullish, healthy), or we'll see prices reverse and fall with a decreasing LCR.  I don't predict the future, I only watch that occurs, so stay tuned.

Despite the move upward yesterday in price, the slopes on the LCR EMAs did not move up.  Here's the status:

Note that the 8d EMA on the LCR is now below the 13d EMA.  This crossing from above is bearish for stocks on the long side and is a loud shot across the bow of USS InvestLong.  Furthermore, note that despite the large increase in prices on higher volume, that ALL of the slopes of the LCRs, from 5d to 55d are pointing downward.  OUCH.  While this may be a good entry point, it could also be a good jumping-off point.  Time will tell...

The GGT strength index moved upward from 0.528 to 0.636 on Wednesday.  This value is comprised of price, volume, and price rate of change, and the increase is in sync with prices, which I consider bullish and healthy.  The present value certainly suggests that we could move upward from here, as there is plenty of stocks to fuel a move higher, so while this is not a probability, it does say the odds are better than 50/50 that we'll move upward on a relatively short-term basis.

I haven't posted the above chart in some time -- it shows the GGT price series with the strength index.  As you can see, it's been some time since we've been below the 0.4 level, and failure of the markets to drop enough to cause this to occur suggests that there is still gas in the tank.

So, we have a divergence.  Price and strength went up on above-average volume, yet the venable LCR dropped.  We need the LCR to rejoin the direction of price/strength in order to have any confidence in the markets, so I'm still calling this a dead-cat bounce and we need to watch carefully before committing large sums of money to the long side.

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Short-Term LCR Change Timer

Yesterday saw the markets advance in the ADV/DEC line at http://www.finviz.com/ at a 4778/1473 ratio, which is very bullish.  The ST LCR change timer uses the LCR, not the ADV/DEC data, and despite the fall in LCR, transitioned from CASH (-1) to CASH-LONG (0).  It did this because the magnitude of the change in LCR was -2%, and coupled with an adaptive filter, it moved upward.

If today is an up day as far as the ADV/DEC line is concerned at 3:30-3:45-ish it could be prudent to move into a long position in VTI, QLD, or UWM.  Note though that with the divergence in LCR and price/strength this move is more risky, as these three need to work themselves out and synchronize.

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Intermediate-Term Elder Force Index Timer

FI(13) continues to be positive (column 12), which is bullish.  The slope of the FI(13) is upward, so it too is growing in magnitude away from the 0-crossing, which is bullish.  The slopes of the 13d and 34d price series are upward, which also is bullish.  Correspondingly, we have had a whipsaw in the Elder FI timer and we are fully long again.  While tempered by the aforementioned divergence and the fact that the LCR slopes are all pointing downward (database is not as healthy as we would like), we must believe our indicators and we must search for long positions to enter. 

67 securities meet the initial Elder screening criteria.  Here are the strongest ones:

DSW
EBS
TSI
UBSI

Not a very compelling list.

Here are a couple of special candidates with some commentary:

SKS -- interesting in that if it can continue upward above $10.70+, we could continue nicely.  Note that there is no engulfing pattern to the prior few days, so no apparent resistance.

LANC -- There is nothing preventing this one from moving upward as far as I can see, and it is building a nice right side to a base.

DSW, despite the double Doji the last two days we've seen some good consolidation.  I'm looking for volume higher than 700K and a positive change to enter.

RGR needs to clear $15.79 on solid volume, but watch for this one.

I'm watching PEET to move higher than $37.75 on solid volume... again, building a right side to a base.

XIDE above $5.70 on good volume looks interesting too.  The right side of the cup-and-handle is clearly visible and while we've not consolidated in the handle, we have been consolidating in terms of volume.

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The Contra Watch

With the close of TUEDAY's markets, contras signaled

1. an early FI(13) EMA moving positive,
2. a crossing of the slope of the 13d and 34d EMA lines from below,
3. a new MACD histogram going positive, and
4. a closure in the contra index price above the 13d EMA line. 

Wednesday's market action undid much of this.  Here's the chart:

This appears to be a false breakout:

• Bull power has moved negative.  The contra bears (a.k.a long bulls) are regaining control
• Both FI(13)'s are now negative
• Index price closed below the 13d EMA, which is bearish for contras (bullish for longs)

I note though that the slope of the 13d EMA is above the slope of the 34d, so we are still bullish for contras.  The MAGNITUDE of these slopes is negative, which means we're losing money in contras day-over-day, but we're doing so less fast. 

I also note that the MACD histogram is still positive.

Contra positions should be avoided, but note, they are firmly establishing a floor.  Don't lose sight of this because once the floor is in, there is no place to go except upward, and I plan to make some coin on this as it unfolds.

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Trading Plan for Thursday

With respect to the short-term LCR Change Timer, I'll be watching the markets about 3:45 at FinViz.com and may enter VTI if we look strong in the last hour.

With respect to Elder, you see my candidates.  I'll be watching them throughout the day for price and volume entry thresholds.

I'm shying away from contras at the present moment.

I have a number of positions with 1% TSLs, GTC, that have been riding for the last two days.  I will most likely remove these TSLs.

Note, I have moved my wife's TSP funds (http://ggt-tsp.blogspot.com/) to cash, as we had some signals to do so.  While this may get reversed over the next day or two, it is prudent to protect the 6%/month gains that we've achieved.

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

Regards,

pgd

@ Crossroads, Potential Buying Opportunity, Potential Dead Cat Bounce

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The dashboard:

The GGT price index fell on Tuesday by -2.02% on volume that was 28% higher than the 50d MA.  Falling prices on higher volume is the definition of a distribution day, to steal from William O'Neil's dictionary.   Looking back down columns 2 and 3, you can see that 10/14 and 10/15 could be classified as distribution days, but not as severe.  Three of these days within a week or so is problematic for our current portfolio, although I can't call this bull leg dead yet.

This next graph shows a nail in the bull-leg coffin:

The graph above is created by taking the daily change in the pricing EMAs (13, 21, 34) and taking the difference from day to day.  This allows us to see the slope of the EMAs on different time scales.  When the result is in the white area -- above the pink zone -- then the EMAs are gaining day-over-day, which is good for our portfolio.  When they move to the pink zone our portfolio isn't doing so well if we're in the market.

As you can see, the 13d signal has just crossed into the pink zone.  This means that the 13d EMA of price is losing value day over day, so any stocks purchased within the last 13 days are probably under pressure if they behave like the GGT database as a whole.  This is problematic to the net worth of our holdings, and indicates that shorter-termed holdings should probably be dropped if the trend continues.

This next graph shows another nail in the coffin of the bull-leg:

This graph is created by taking the 65d EMA of the GGT price series, then taking the day-to-day difference of this EMA, then doing this one more time.  Confusing?  Could be if you're not used to thinking this way, but the 65d EMA is really the perfomance over 13 weeks or 1 quarter of time.  When we take the daily difference, we get the slope of this longer-term behavior, and the units become $/day.  Hence $/day tells us the slope of the change over a 13 week period.  When we take the daily difference of THAT series, we get the SLOPE OF THE SLOPE, or whether we are accelerating upward in price or downward on the timeframe used (in this case 65 days in length).

The analogy in the mechanical world is this:  if we equate dollars as distance, then a stock is to a car as the price of the stock is to the distance a car can travel.  It's a snapshot in time.  If we then take the dollars/day value of the stock (the change in price day over day, e.g. slope of the price series day over day), we also can relate this to miles per hour of the car (the change in distance per unit time, e.g. slope of how fast the car is going or speed of the car).   If we take the rate of change of dollars per day we have a metric that tells us how fast the price series is moving upward or downward in dollars/day/day -- and if we do this for a car we have acceleration or the result of pushing the accelerator pedal, often stated in miles/hour/second.

Hence, the graph above tells us that on a 65-day basis, the price of the GGT database is decelerating because it is in the pink zone, telling us that if this trend continues, we will be in trouble on an intermediate-term (13-week) basis.  Correspondingly, any stocks purchased in this time frame will be under significant pressure.

I do not like this line to be in the pink zone, and I especially do not like this line to be lower than the previous test of the pink zone.  We are losing steam as shown by lower highs and lower lows. 

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The LCR continues to fall, as shown in columns 4 & 5 of the dashboard.  The new value is 1.827 (there was an error and the value in the dashboard shown is incorrect -- this error has been fixed but the image has not been updated but will be in tomorrow's post), and tells us that we have 1887 stocks with some form of LONG status and 1033 stocks with some form of CASH status.  This is a huge drop in one day -- nearly 50% of the stocks in the database moved to CASH with yesterday's action.

Although out-of-order on the dashboard, I point your attention to the right-most area of the figure, which I've highlighted below:

The left columns show the status of the LCR EMAs relative to each other ... we're still in alignment in that the 8d > 13d > 21d > 34d > 55d -- the world is whole.

What we have as a problem is the right columns -- the slopes of every one of these EMAs are pointing downward.  This means that IF THIS TREND CONTINUES, then we'll have the left columns turning red because the shorter EMAs will start to intersect the longer EMAs from above, nailing the coffin shut one by one.  This is bad for long positions.

All we can do is watch.

So here is the conclusion to all of this:  if you have long positions that were purchased within the last 13 days of trading, you're probably close to being underwater.  If this trend continues then there is a good chance they will never recover and you'll sell at a loss.  Conversely, if the trend reverses on a short-term basis, e.g., dead-cat bounce, then you may be able to exit for a small profit.  If the trend reverses and moves up dramatically from here (very possible, as there is a bit of money on the sidelines), then holding these positions would be good.

I personally hate taking a loss on a position once it has shown gains.  I typically exit weaker positions when we get to markets such as we are in now -- I set my target to cover my round-trip commissions and get out on the weaker, shorter-termed holdings.  For the longer-termed holdings, I let Elder and other metrics tell me what to do.

As a fairly conservative investor, I am exiting many of my longs, as I've held them less than 34 trading days. It simply isn't worth letting them take a loss at this point in my performance.

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Short-Term LCR Change Timer

Yesterday's action continues to confirm this timer and it is in CASH.  'nuff said.

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Intermediate-Term LCR Change Timer

Given all of the above discussion, this is where it gets interesting.  Do we enter positions or not?

The short answer is that we need to take a close look at the Elder system.

The Elder FI(13) signal is postive for the database, indicating that overall, we are okay for holding long positions (column 12). 

This being said, the SLOPE of the FI(13) is down, so the magic transition level of 0 is within reach if the trend continues (column 13). FOUR DAYS of DOWNWARD ELDER FI(13) SLOPE is deadly, and we're in day 2.

The slope of the 13d EMA on price is pointing DOWN.  For conservative investors, this would block entry into new positions.  For aggressive investors, because this 13d EMA is above the 34d value, we could use this pullback as an entry point.  The choice is yours (not mine).

There are ALOT of candidates that meet Elder's FI criteria (positive 13d FI, negative 2d FI, 13d slope positive, 50d slope positive).  Here is a list of the stronger ones:

NBIX
AKRX
FIRE
AAPL
NWY
KFY
POM
DSW
FSLR
CNL
WEC
EQR
FINL
RGR
LO
VVC
HCP
POR
ICE
PGE
WRI
EIX
TPC
CRR
ARE
PLXS
FSP
ALE
RYN
WOR
GLT
TWC
STT
WSH
SWY
OFC
TASR
NDAQ
MANT
CSL
SUPG
MCY
NYX
SONE
AMTD
LPX
RBC
ONXX
OXPS
IBKC
RTN
PLCM
SF
WCBO
GVA
GFRE
USB
MET
HPQ
LYV
AEIS
KCG
PKY
PNX
DB
CPF
ERII
CVO
GXDX
UTA
NEE

Before you yell at me and say the list is too long, simply copy and paste the list into a watchlist that you can update in real time and watch for the stocks that are up on the day on good volume.  If you are aggressive, any stock breaking above yesterday's high could be a good candidate for entry for intermediate positions.

And to really confuse you, take a look at the contra ETF composite:

I note the following with respect to contra ETFs as a group:

• Bull power just turned positive.  This is bullish for contra ETFs
• The Elder FI(13) EMA signal just turned positive, but the Elder FI(13) SMA signal is still negative.  This is a mixed signal, but because of bull power, the bias is to the bullish side for contra ETFs.
• The MACD histogram just moved positive.  This is very bullish for contra ETFs
• The slope of the 13d EMA just crossed the slope of the 34d EMA from below.  Although both of these levels are negative (the car is driving backwards), the fact that they are pointing upward tells us the car is driving less fast day-over-day than a few days ago.  Yes, contras, as a group, are still losing money on the 13d and 34d time scales, but they are doing so less fast.
• The price index of this contra basket has closed above the 13d EMA.  This is bullish for contras.

While we may see a dead-cat bounce today (Wednesday), contra ETFs are showing life.  The strongest ones can be determined from the GGT universe posted daily:

While many of these are thinly traded, you can see some powerhouses.  The base on these appears to be in so hedging your long positions may not be a bad strategy.

My leveraged / inverse ETF watchlist is as follows:

TMV - meets all of Elder's criteria
EDZ - early
ERY - early
FAZ - early
DTO
DZZ
TBF- meets all of Elder's criteria

DOG
SH
TBT - meets all of Elder's criteria

SMN - early
SCO - early
DXD - early
EUO
GLL
SKF - early
MZZ - early
BZQ - early
EEV
EPV - early
DUG - early
TWM - early
ZSL - early


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Trading Plan for Wednesday

With respect to the short-term timer, I am doing nothing as it is in cash.

With respect to Elder, I like many on the list I provided to the long side.  If they move aggressively upward today on substantial volume I may enter.

With respect to Contra ETFs, we are still very early as a group, but on an individual basis, many look very attractive.  I may add 20% positions of the strongest contra ETFs if they show any strength today.

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Remember, you are responsible for your trading decisions, not me.  Please do your homework and do not rely upon me.

Regards,

pgd

Head's Up: LCR Diverging from Price and Volume

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Let's start with the dashboard.

GGT Price rose +0.5% on Monday on volume that was +6% over the 50d MA.  Rising prices on solid volume is bullish, although we've only had 5 days of up volume.

The Long-Cash Ratio (LCR) moved against the price action, which is a divergence.  The LCR is the ratio of the number of stocks in the database with a LONG recommendation to those with a CASH recommendation.  A stock gets a LONG recommendation if the price AND volume are above a historical, optimized level for the individual stock.  A stock gets a CASH recommendation if the price falls below this historical, optimized level for the individual stock (I ignore volume for CASH recommendations).  Hence, the GGT database rose on price by +0.5%, but the LCR fell, indicating that while prices rose, that many of these stocks are right at threshhold.  This is a decreasing margin between the GGT price index and this magical threshhold level, and it's not good. 

When we have a divergence, one of two things MUST happen in relatively short order:

1) price action must follow the long-cash ratio.   Since the LCR is dropping, price must drop.
2) the long-cash ratio must follow price action.  Since the price action is moving up, LCR must reverse.

As sustained divergence simply isn't possible.  Obviously, if 1) is the path, then we'll need to close our long positions.

The GGT strength index fell from 0.796 to 0.771.  Not a great decline, but it does indicate that there is underlying "relaxation" or "resetting" of the stocks in terms of price, volume, and rate-of-change (ROC).  While we certainly could go up from here, the lack of the strength index being in sync with the price movement tells me that there is more validity in the strength and LCR directions than the database movement.  I think we need to be very prudent in our money management at this time.

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Short-Term LCR Change Timer.

The LCR dropped, confirming the movement of the short-term LCR Change Timer.  Correspondingly, we are in cash, and because investment in the VTI is linked to this timer, we are in cash.

I intend to do nothing with the short-term timer.

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Intermediate-Term Elder Force Index Timer.

The Elder FI(13) is positive (column 12).  The slope is upward (column 13).  The slopes of the 13d EMA and 34d EMAs are pointing upward.  According to this timer, we are LONG in the market (column 16). 

I consider the following risky trades, but they meet my Elder criteria so I feel obligated to post:

CNAM
STV
CREE
EMC
MCCC
UEPS
RDC
TEVA
TLR
ZEP

Out of 137 possible candidates, these are the only ones that have a positive-sloping 13d and 34d EMA.  This is a very low number.

It is important to note that the contra ETFs that I watch are continuing to show preliminary strength in terms of the "slowing of the bleeding".  Early, but certainly worth watching:

Note how the 13d and 34d slope lines have just crossed, which is an initial requirement for strength.  Prices are trading below the actual 13d and 34d EMAs, which is bearish, but overall "we're driving backwards but the car has just hit maximum reverse speed". 

Candidates here are:

SKF
DTO
SCO
FAZ
SH
DOG

TBF (meets Elder's criteria)
TMV (meets Elder's criteria)

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Trading Plan for Tuesday

I will continue to protect my gains and my holdings that are within 1-2% of break even will have a 1% TSL placed, GTC.

I intend to do nothing on a short-term basis, as this timer is in cash.

I intend to do nothing on the long-stock side with Elder, simply because of the price/LCR/strength divergence I wrote about above.  Too dangerous at this point.

I will set a stop-loss entry on the ETF positions above, so that if we move above yesterday's high I will enter a 20% position.

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

Regards,

pgd

Weekend Update, Part 1, and Part 2

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I've been watching the Contra ETFs lately -- those are the ETFs that move inversely to whatever the opposing long side is doing.  There are 83 of these in my GGT Universe, and as you would expect, they've been bleeding for some time.  Despite this, we now have 6 of the 83 that have some form of long status, and this number has grown by 5 ETFs this past week.  We should understand what and why. 

 

Here's what the GGT method has to say about them, through the close of last evening:

 

 

Three new ones appeared Friday:  SKF, TYO, and TBF.  TBT and TMV flipped earlier in the week (Tuesday), and with the solid "L" in each of the blocks since they flipped, they keep reaffirming their call to the long side. SMB has been long for some time and trades within a very narrow price range, hence it's hard to make any money with that one.  Let's look at each of the other ones through my Elder lens:

 

SKF:

 

 

GGT has signaled New Long for SKF, the ProShares UltraShort Financials, and sure enough, this is also validated by the following:

1. the Elder FI(13) (EMA and SMA) moving positive on both Thursday and Friday. 
2. the MACD histogram is now positive as of Friday's close, also showing that this could have strength. 
3. In the 13d/34d EMA slope pane we see that the 13d EMA slope has just crossed the 34d EMA slope from below, which also is bullish.
4. Dropping to the bottom, we see that we've had two days where the volume has been above the 50d SMA of volume.

On the negative side for SKF, we are early.  Very early.  This breakout has no internal confirmations.  For example:

1. In the pricing pane we see that the 13d EMA on price is well below the 34d EMA on price.  This is early and entering now is far more risky.
2. In the pricing pane we see that the price has just crossed above the 13d EMA but is still below the 34d EMA
3. If we look at the raw value of the slope of the 13d and 34d EMAs, we see that the raw slopes are still -$0.02/day and -$0.04/day respectively.  We are still losing money on these time frames.

TYO:

 

Given the analysis above, I'll provide a screen shot for your review.  If you have HGSI, you should build this screen, as I find it very useful and full of good information:

 

 

 

Please post your analysis of TYO at our Yahoo! forum by sending an email to GreekGodTrading@yahoogroups.com if you are a member, or first by subscribing by sending a message with an intro to GreekGodTrading-subscribe@yahoogroups.com. Let's see if you've been following along ...

 

TBF:

 

Next in line is TBF:

 

 

 

 

Like TYO, please post your analysis of TBF at our Yahoo! forum by sending an email to GreekGodTrading@yahoogroups.com if you are a member, or first by subscribing by sending a message with an intro to GreekGodTrading-subscribe@yahoogroups.com.

 

 

TBT:

 

 

 

Like TYO and TBF, please post your analysis at our Yahoo! forum by sending an email to GreekGodTrading@yahoogroups.com if you are a member, or first by subscribing by sending a message with an intro to GreekGodTrading-subscribe@yahoogroups.com.

 

 

 

TMV:

 

 

 

 

There's obviously a theme here:  with the exception of SKF, all of these are contra on the long bonds, and what is notable, is that they are all flashing long. 

 

In order to play these I plan to wait for the Elder FI(2) signal to go negative, and then enter as the price clears the previous day's high AFTER the FI(2) goes negative.  For me, it's hard to ignore that the 13d EMA of price is about to cross the 34d EMA of price from below, and for TBF, TBT, and TMV, we already have positive slope values that are trending higher.  This certainly is bullish.

 

Again, your analysis is solicited.  Please post your comments in our GGT Yahoo! forum.

 

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Part 2, The Macro View and What to Do About It.

Let's start with the familiar dashboard:

For the past two days the GGT Price Index has slipped, finishing Friday at $26.07.  The peak of the week was achieved on Wednesday at $26.19.

Volume has been extraordinarily high the last three days, which for me has piqued my interest.  Wednesday was 26% above the 50d MA, Thursday was 23% above, and Friday was 33% above. 

Falling prices on higher volume gives me pause, and it should do the same for you.  If nothing else, it is time to start paying attention.  Continued failure to hit higher prices while volume is high is a major warning sign and indicates churning.

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The Long-Cash Ratio (LCR) fell -10% on Thursday to 4.237 and -9% on Friday, ending at 3.852 (columns 4 and 5).  2319 stocks are in some form of long status and 602 stocks have some form of cash status.  It is refreshing to see that the price index and LCR are in sync, e.g., they both are falling at the same time.  Aside from the significantly increased volume I consider two down days in price and LCR as normal behavior for the markets.

I draw your attention to the following graph:

Take a piece of paper and scan left to right, covering the information to the right.  Pull the paper to the right.  As you uncover new highs in the LCR index, you see that we typically pull back after the local peak.  Not always within a few days mind you, but generally this is true. 

We *just* hit an all-time high of the LCR, compared to the entire GGT history from 9/9/2008.  We have had two days of successive pullback in the LCR.  While the graph suggests that it may take a week or two to significantly reduce the LCR from the previous peak, it generally always occurs.

Of course, your crystal ball is as good as mine.  But given past market psychology at and after LCR peaks, and given that we just hit an all-time high in the LCR, I think it prudent that we watch for a significant pull-back.

How will we know we're starting a pullback, significant or not?

I draw your attention to the next graph:

The graph above is the daily change in value of the 13d, 21d, and 34d EMAs.  It is constructed by taking the data series (in this case the LCR), taking the 13d, 21d, and 34d EMAs, then calculating the daily difference in each of the EMAs.  When this daily difference is positive we are not in the pink zone above, and whatever we're measuring is going up on those 13d, 21d, and 34d time frames.  Conversely, when it is negative, we're in the pink zone, and we're dropping in whatever we're measuring on those same time frames.

This latest bull leg is characterized on the above graph by all the ROCs moving from the pink area to the white area on or about 9/1 - 9/2.  We've had two dips of the 13d below 0 into the pink zone, but because the 21d and 34d did not confirm, these actually became great buying opportunities (there is a lesson here that we should note).

Of particular note is that when the ROCs are falling, prices typically fall.  After peaking on Wednesday, the ROCs have been falling for two consecutive days.  I would expect a bounce to a lower high in LCR, then a continuation of a drop if we are losing steam across the board.  

Hence, I think that the LCR ROC graph will give us some insight as to the strength of any rally from here.

Finally, here is another graph which I think is important:

The above graph is simply all the major Fib EMAs of the LCR plotted together.  Note that we are at an all-time high in the 13d and 21d EMAs -- but the 34d and 55d are below other peaks.  We've risen fast this time, and while we could go further, we could also pull back a bit.

Note that the above graph is related to the LCR ROC graph that is above it -- the ROC graph shows the daily difference in the LCR EMAs above.  We clearly peaked two days ago in the ROC graph, and in terms of the graph above, this means that we're peaking now.  Since the ROC graph is in the white area -- positive -- the LCR EMAs will continue upward, but as long as the ROC graph points downward, the peak in the LCR EMAs will start to top out and eventually fall once the ROC graph transistions to the pink area.

If this isn't clear then please ask, as I think this relationship is important in order to understand the underlying database.

One final graph/table pertaining to the LCR:

The data above generally appears in the dashboard, but I rarely draw attention to it.  The first 4 leftmost colored columns show whether a particular EMA is above the next longer Fib EMA, e.g., is the 8d > 13d, 13d > 21d, etc.  You can see that as of Friday we're all green, which is intermediate-term bullish.

The next columns are related to the slopes of the LCR EMAs -- are they pointing upward or downward.  As you can see, the slopes of the 5d, 8d, and 13d have lead the crossing of the LCR EMAs, giving us a further "early warning" system.

The 5d has developed a dowward slope, so we must watch this.  I will report on the slopes of the LCR daily until we have all red or all green back in our world.

Bottom Line:  The LCR bull is getting tired, although it is still advancing.  We need to watch for it reversing, and this ability to determine when this occurs is clearly indicated by the two graphs and the GGT dashboard above.

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Short-Term LCR Change Timer

Alas, we whipsawed again with Friday's close, this time from cash to long and now back to cash.  THE SHORT-TERM LCR CHANGE TIMER IS IN CASH (-1).  The impact on our test GGT portfolio was a drop in equity from $1.5971 to $1.5838, so not too severe.  Note that we peaked on 9/20 at $1.6333 so we've dropped -3.0% if we followed this timer.

Contrasting, the VTI, which is based on the signal generated with the GGT price index, has been in cash since 9/23, where it was worth $1.5564.  This equity curve peaked too on 9/20 at $1.5821, so the loss is -1.0%.  The VTI signal is in CASH.

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Intermediate-Term Elder Force Index Timer

Refer to the GGT dashboard.  

• The Elder Force Index 13 day EMA -- FI(13) -- is above 0 and this is LONG (column 12). 
• The slope of the FI(13) has been downward for the past two days (column 13).  Two days is not a dangerous occurance, as we are significantly above 0.
• As I indicated above, the 13d and 34d slopes are positive, which is bullish.

The Intermediate-Term timer is LONG, but with the caveats above.

My actual portfolio performance is as follows:

EWO, +8.5%
FXI, +7.67%
BKF, +7.37%
EWH, +7.32%
GXC, +5.68%
PID, +4.65%
SATC, +2.24%
KOL, +2.06%
IAU, +1.48%
XLB, +1.13%
IGE, +0.54%
GMO, +0.28%
AES, +0.19%
XME, -0.27%
JASO, -4.33%

JASO, which was purchased on 10/11, simply has not worked for me.  Furthermore, the Elder FI(13) EMA has transitioned NEGATIVE, which is an automatic sell signal.  I have placed a 1% Trailing Stop Loss (TSL) on this equity, Good til Cancelled (GTC), and cast it to the wind.  Here's the chart:

You can see in the figure above (JASO) that the top red/green ribbon is now red, indicating that the FI(13) is negative.  Even though the price may hold off the 13d EMA, this is a clear sell.  Also note that the MACD histogram is virtually zero, so there is nothing here to hold onto.

• AES is struggling and values below $12.21 on higher 10d volume are problematic.  The highs of Thursday and Friday have failed to close above Wednesday's high, which is translating to a loss of momentum.  Furthermore, we've had three consecutive days of lower lows, which makes this a marginal hold.
• EWH is another one that is on my watch list, and values below $18.91 on above-average volume could cause me to dump.  We had a doji on Tuesday, a new high on Wednesday, and again, we've had three consecutive days of lower lows.
• IGE seems incapable of clearing $36.91 and hence values below $36.23 on higher volume may cause me to close.  Again, we've had three consecutive days of lower lows.
• XLB is showing the same weakness, and the slope of the 34d EMA is in the single-digits and pointing downward.  Again, a marginal hold, and higher volume with prices below $34.13 could be a good reason to dump.
• XME had a huge volume day on Friday; unfortunately, it was on a significantly down day.  With three lower days of lows the only redeeming value here is that it closed above the 13d EMA, but the tail is below.  Values below $55.16 are problematic.

As I alluded to above in Part 1, the Contra Treasuries are signalling entry.  I gravitate towards the leveraged ETFs, and TBT is calling me.  I'll wait for the FI(2) to open up so that I can enter.

For those of you who are more risk tolerant, give a look-see at the following:

AMZN
CMCSA
TWO
MON
DGP
VWO
CDNS
FXA
FTR
LINE

I simply think that we're too toppy in equities and I'm looking to protect my profits at this time, although I may move on something within the list if it rockets out of the starting blocks.

=======================

 

Please note that you are responsible for your own trades, not me.  Please do your own diligence and please understand the logic of what you are reading above before you commit real monies to trading or investing.

 

Regards,

 

pgd

LCR All-Time High; ST Timer has transitioned LONG. Elder continues LONG.

.

Quite a day on the markets.  Of note is that the LCR has hit an all-time high -- 4.721 -- and shows that 2403 stocks are some form of long and 509 are in some form of cash.  This is a lofty level and taking some profits here would not be a bad idea.

The GGT strength index has also hit an all-time high, and has been assigned a value of 1.0.  Where you're at the top there is only one way to go, so action the next few days will be interesting.

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Short-Term LCR Change Timer

Wednesday was obviously a good day.  http://www.finviz.com/ is reporting that 4669 stocks advanced and 1545 declined on much heavier volume.  The primary indexes were all up, so rising prices on increased volume can only be interpreted as bullish.

The LCR movement caused the short-term timer to move LONG.  This suggests that a position in the VTI, UWM, and/or QLD is prudent, accomplished early in the trading day, e.g, between 9:30 and 10:00 or in the pre-market if you're registered to do this.  UWM took the 1st place price on Wednesday, up 2.81%.  QLD was next at 1.55%.  Both of these are 2x leveraged ETFs.  The VTI was up 0.78%, and since this is a 1x ETF, it relates on the same performance as QLD.

I'm placing an order for UWM early in the morning on Thursday.

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Elder Intermediate-Term Timer

The timer is long, as you might expect.  The FI(13) is positive, and the values/trend on the 13d and 34d are positive and upward.

My list of Elder candidates is the following:

YMI
MNRO
CPL
NWY
MYN
WIW
AIV
C
VSH
CIK
KBE
XLNX
IAT
CHS
ATHR
AMD
MPWR
ERII
CBC

Obey price action requirements (above previous day high) and prorated volume requirements as a function of time and you'll have good entry positions.

My positions for this portfolio are doing ok with today's action.  Here are the totals:

EWH, +7.83%
EWO, +7.84%
BKF, +7.52%
FXI, +6.6%
GXC, 5.17%
PID, +4.71%
SATC, +3.23%
KOL, +2.03%
IAU, +1.86%
AES, +1.82%
XLB, +1.81%
XME, +1.54%
IGE, +1.06%
GMO, +1.02%
FDO, +0.33%
JASO, +0.29%

I'm worried about FDO and will most likely sell it on Thursday with a 1% TSL.  When stocks move upward on a strong day it basically leaves the weaker ones exposed for pruning, and FDO isn't worth holding at the present time when the others all moved up at least 1% (FDO lost -0.11%). 

I've got about 3.5% unrealized gains right now.

I sold CMS @ $18.4807 today, for a loss.  With the close the FI(13) EMA transitioned to CASH.  Here's the chart:

In the graphic above, note that the top red/green ribbon is now red.  That's the FI(13) EMA.  Also note that the MACD is rolling over, that the slope lines are dropping and converging, and tha tthe price is sitting on the 13d.  It may reverse off the 13d (simply look at the past), but the Elder signal will prevent me from entering.

======================

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

Regards,

pgd

Divergence and Potential Topping

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Greetings again from Spokane.  This is a wonderful place of the country.  I'm headed to Michigan later today, back to the area I grew up a few moons ago.

===============

The dashboard:

Today's data is on the bottom line.

GGT price moved upward on Tuesday by +0.35% to $25.91 (column 2).  Volume was barely above the 50d MA average by +3%, which is in the normal noise (column 3).  Rising prices on solid volume is bullish and we should believe in the trend.

The GGT Long-Cash Ratio (LCR), which is one of the most important indicators of the database, moved upward 6% to end the day at 3.522 (columns 4-5).  This is a lofty amount but certainly shows that price and volume of the constituent stocks is moving upward.  We now have 2268 stocks in some form of long and 644 stocks in some form of cash.  The LCR trend is decidedly bullish.

I'm a firm believer in following the trend but I also want to show you something that was eye opening for me:

Simply look at the peaks above -- the light blue is the raw LCR value and the black line is a simple 4d moving average.  We are very close to historical peaks.  Certainly, we can go higher, but I think the likelihood of doubling from here is very poor.

The graph below also should put the present market in context of our past over the last 2 years:


Here, we see that exponential moving averages (EMAs) on the LCR are clearly in an uptrend AND that we are hitting lofty levels.  While we certainly could move up from here, I think we have to be watchful of a rapid breakdown. 

Column 6 in the dashboard is the database strength index. The strength moved from 0.81 to 0.86, again showing strength in price, volume, and rate of change, which clearly is bullish. Again, we certainly can remain at these lofty levels, but the likelihood is increasing that this will reset.


There was also a divergence within the database that I must point out.  This is a bit technical, but the gist of it is that I calculate TWO strengths -- one is the strength of the database (column 6), and one is the strength of the database without volume.  This latter one, the one which omits volume, DECREASED in value on Tuesday.  THIS IS INCREDIBLY IMPORTANT ... it is telling us that stocks are not necessarily increasing in strength because of price, but are doing so because the volume number is above their historical optimized levels.  Please stop and think about this -- prices aren't advancing, but volume *is* advancing.  This is the classic definition of churning and I think it indicates that we are topping.

Given the action yesterday, and given where we are at in general on the markets, we are clearly in a bull leg and we should be aligned accordingly.  I continue to purchase stocks and ETFs long, and will continue to play this side of the market.  Note though that we must be aware of a potential reverse in the overall markets and be prepared to exit our longs at the first sign of weakness.

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Short-Term LCR Change Timer

The Short-Term LCR Change Timer is still sitting at CASH-LONG (0), and if today is an up day as far as the LCR is concerned, will transition to LONG with the close of the markets.  The VTI and UWM look attractive; QLD not so much in terms of momentum.

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Intermediate-Term Elder Force Index Timer

The raw FI(13) is positive (column 12).  The slope of the 13d EMA of price is above the slope of the 34d EMA of price.  These three indicators certainly tell us that we are long and in my opinion, anybody who shorts for anything longer than a day trade is simply throwing money away.

My holdings are doing ok, but underperformed yesterday, which I take as a warning.  Here's the chart:

The strengths are

• Bull power is very positive
• Bear power is positive
• Both the EMA and SMA calculations of FI(13) are very positive
• The FI(2) is very positive
• The MACD and MACD Signal lines are properly oriented and very linear/uptrending to the right (positive histogram)
• 13d and 34d slopes are positive and positively trending

The weakness is that the price performance did not clear Monday's action, although volume was upward relative to Monday.

Possible Elder entries are

ATI
AGN
AMX
AVY
ABX
CII
CELL
C
CLF
GLO
CNSL
DVN
DWA
DSW
ETM
EVEP
EXM
XCO
FDX
FRG
FTO
GNK
GFIG
GRZ
IMO
IEO
EWH
GSG
LH
LNC
MERC
MFLX
NM
NAT
NOG
NUE
OIS
OSUR
PKY
DGP
RRD
RSTI
SWN
GLD
GXC
TAL
TGH
BX
EGY
WERN
WPRT

====================

Remember, you are responsible for your own trading decisions, not me.  Please do your diligence and please take ownership for your executions.

Regards,

pgd

LCR FELL Monday; Intermediate-Term Elder Timer is LONG

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Greetings from Spokane, WA.  I'll be traveling all week so entries will be on an "as possible" basis.

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The dashboard:

GGT Price moved up on Monday on very low volume due to the Columbus Day holiday.  We can largely discount this action.

The GGT Long-Cash Ratio (LCR) FELL on Monday, despite a 200-stock difference in the ADV/DEC line at http://www.finviz.com/ which favored the ADV side of the equation.  As I've indicated in the past, when the ADV/DEC numbers are close to each other, then we have to err on the side of the status of the LCR Change Timer.  The ADV/DEC is NOT the same as the LCR, but they are highly correlated.  Monday's action was a day that this correlation was not 1:1.

The GGT strength index fell, relaxing some of the overbought feeling in the market.

Overall, with the markets down today, I am of the opinion that this is normal market behavior and that we're in no immediate danger (e.g., today).

=================

Short-Term LCR Change Timer

The timer has remained in CASH-LONG (0) status, and if today is an up day, will transition to LONG (+1).  Given where we are in the actual markets right now this is unlikely, but we could reverse this afternoon.  The NASDAQ just moved positive as I write this, so we may transition.

Given this, if the markets show major strength in the ADV/DEC line at 3:30-ish, clearly in favor of the ADV by at least 20-30% more stocks on the side of the ADV balance, I'll move into VTI, QLD, and/or UWM as I see fit.  In general the NASDAQ is performing poorly (see below), so my moving into QLD right now is tenuous at best.  UWM and VTI appear to be good candidates if we move higher.

===================

Intermediate-Term Elder Force Index

The Elder 13d Force Index -- FI(13) -- continues to be positive by a substantial amount.  This is bearish for intermediate and longer-term holdings.  The slopes of the 13d and 34d EMAs on price are positive, which means we're making money on those time frames, and they are pointing upwards, which means that we are actually accelerating (making more $/day than yesterday).  Hence, our Elder signal is long going into Tuesday.

This being said, this leg is looking tired.  The NASDAQ COMP MACD is rolling over with the MACD signal line, effectively squashing any view of investments in technology.  The doji it printed on Monday does not bode confidence for me as well.  The NASDAQ-100 has already rolled over and is pointing downward on many indicators (MACD is below the MACD signal line, forcing a negative MACD histogram, the slope of the 13d EMA of price is BELOW the slope of the 34d EMA of price), so if you're holding anything that is considered tech, you may want to evaluate closely.  The DOW30 also printed a doji, so the big dogs are pausing with some indicision.

The Russell 2K and the S&P600 Small Cap are still leaders, relative to the other groupings.  Note too that the R2K printed a big, fat doji also, so the pause is across the board, even with the leaders.

I check the health of my personal holdings by placing all of the equity symbols in a list and letting HGSI equal-dollar-weight their performance.  Here's the chart:

As you can tell by the above graphic, overall, I'm holding equities that are in fairly good shape.  I do note that the slope of the 13d EMA of price has been decreasing for two days after peaking last Thursday, so the portfolio is losing steam.  The slope of the 34d EMA is still pointing upward, so the portfolio is still making money at a faster rate, day over day, on this longer time frame.  No reasons to panic.

When I dive in individually, JASO, IAU, FDO, EWO, GXC, EFA, PID, and IGE are all slowing, leaving XLB, XME, VXF, FXI, KOL, GMO, CMS,  and EWH to carry the water.  This is normal action and none of the holdings appear to be in any difficulty.

As I indicated in yesterday's entry, I sold IDCC near the open because it was showing weakness across multiple days.  Of course it went up through the day, which is par for the course.

Yesterday, I picked up positions in CMS and JASO.  They are both underwater, as they did not move much higher than my purchase price and pulled back throughout the day as it advanced.

The following equities are on my list for today:

ISLN
ACPW
RDEN
SATC
GEL
CBT
BSBR
CBG
LXP
NKTR
EE
CBST
DENN
IVC
EBF
FWF
MMT
HIX
GLDD
GSG
IPSU
PEG
EOS
ACTI
NWS
MITI
MELA
TBI
ARB
SMA
IVAC
PMI
UMC
ISIS
HZO
MBLX
PPHM
EK
RDN
SGMO
RP
GSG

====================

Remember, you are responsible for your own trading decisions.  Please do your diligence and take ownership for your trades.

Regards,

pgd