Long across the board, waiting for pullback to enter positions

.
Summary

• The primary slopes of the Long-Cash Ratio (LCR) index are all newly positive for 2 days, which is an extremely bullish situation.
• The LCR EMAs are all aligned with the exception of the 13d/21d pair, which still is inverted with the 13d EMA < 21d EMA.  Again, almost complete bullishness.
• Short-Term LCR Change Timer is LONG
• Intermediate-Term Elder Force Index Timer is LONG

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

Let's start with the LCR Dashboard:

We now have two solid days of the positive LCR slopes, from 5d thru 65d, as shown on the right side of the figure.  On the middle/middle-left, we have the status of the LCR EMAs, relative to each other.  Of minor significance is that we have a hold-out:  the 13d LCR EMA is still below the 21d LCR EMA, but since the slopes of all the LCR EMAs are pointing upward, we're in good shape for long investments overall.

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

Here's the overall pricing/timer dashboard:

The GGT price index rose +0.51% on volume that was 41% higher than the 50d MA.  This is bullish and I prefer to see rising prices on higher volume.

The pricing EMAs, as well as their slopes, are all green, indicating that they are aligned properly (8d > 13d, 13d > 21d, 21d > 34d, 34d > 55d), and that the slopes are continuing upward.  This is bullish for long positions and there is no reason to sell anything on the long side unless it is tanking and trying to go against market flow.

The database strength fell from 1.0 on Thursday to 0.891, which I expected.  This is a very overbought value and I'd like to see it relax further prior to a massive entry into positions.

Overall, we have a very bullish condition for stock and I need to get my money deployed as soon as possible, preferably on a pullback of individual positions.  This is where the 2d Elder Force Index can help.

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

Short-Term LCR Change Timer

Presently, this timer is LONG.  I presently hold positions in QLD (-0.56% gain), UWM (-0.19% gain), UYG (+3.20% gain), and VTI (+2.36% gain) in accordance with the rules of this timer.  I will sell any position that appears to be breaking down significantly or rapidly.  At this point, if you are not in these positions, I recommend you sit on the sidelines.

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

Intermediate-Term Elder Force Index Timer

The Elder timer is long, and has been without whipsaw since October 19th, 2010.  This timer is suggesting that you can purchase stocks long.

Pullback candidates that meet the Elder 2d Force Index criteria are as follows:

KNXA

VRUS

FMCN

BAK

CIB

TTWO

TSU

CROX

CTXS

CACI

PXP

FMX

EMC

E

LSCC

TMO

NIHD

CAH

JDAS

TTI

SEAC

APT

DMND

FITB

EQT

FLO

ATLS

VVR

NIO

SYY

CL

GMR

NIO

SYY

CL

GMR

These are not recommendations for purchases.  What these do represent are those stocks that are in an uptrend yet pulled back sufficiently on Friday to allow entry today.  IF these stocks move above Friday's high AND do so on significant 10-day volume, your probabilityl of success will increase.

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

GGT Top 25

This is a new strategy that is working well.  Every week I create a list of 100 stocks from the GGT Longs that have the best performance in terms of daily gain but with lower volatility.  This list is valid until close of business Wednesday night:

GOOG

AAPL

CMG

CEO

ABV

MA

BIDU

SOHU

GYMB

LNN

DRQ

AMG

RVBD

SWM

BVN

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

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

Regards,

pgd

.
Summary

• The primary slopes of the Long-Cash Ratio (LCR) index are all newly positive for 2 days, which is an extremely bullish situation.
• The LCR EMAs are all aligned with the exception of the 13d/21d pair, which still is inverted with the 13d EMA < 21d EMA.  Again, almost complete bullishness.

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

Let's start with the LCR Dashboard:

We now have two solid days of the positive LCR slopes, from 5d thru 65d, as shown on the right side of the figure.  On the middle/middle-left, we have the status of the LCR EMAs, relative to each other.  Of minor significance is that we have a hold-out:  the 13d LCR EMA is still below the 21d LCR EMA, but since the slopes of all the LCR EMAs are pointing upward, we're in good shape for long investments overall.

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

Here's the overall pricing/timer dashboard:

The GGT price index rose +0.51% on volume that was 41% higher than the 50d MA.  This is bullish and I prefer to see rising prices on higher volume.

The pricing EMAs, as well as their slopes, are all green, indicating that they are aligned properly (8d > 13d, 13d > 21d, 21d > 34d, 34d > 55d), and that the slopes are continuing upward.  This is bullish for long positions and there is no reason to sell anything on the long side unless it is tanking and trying to go against market flow.

The database strength fell from 1.0 on Thursday to 0.891, which I expected.  This is a very overbought value and I'd like to see it relax further prior to a massive entry into positions.

Overall, we have a very bullish condition for stock and I need to get my money deployed as soon as possible, preferably on a pullback of individual positions.  This is where the 2d Elder Force Index can help.

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

Short-Term LCR Change Timer

Presently, this timer is LONG.  I presently hold positions in QLD (-0.56% gain), UWM (-0.19% gain), UYG (+3.20% gain), and VTI (+2.36% gain) in accordance with the rules of this timer.  I will sell any position that appears to be breaking down significantly or rapidly.  At this point, if you are not in these positions, I recommend you sit on the sidelines.

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

Intermediate-Term Elder Force Index Timer

The Elder timer is long, and has been without whipsaw since October 19th, 2010.  This timer is suggesting that you can purchase stocks long.

Pullback candidates that meet the Elder 2d Force Index criteria are as follows:

KNXA

VRUS

FMCN

BAK

CIB

TTWO

TSU

CROX

CTXS

CACI

PXP

FMX

EMC

E

LSCC

TMO

NIHD

CAH

JDAS

TTI

SEAC

APT

DMND

FITB

EQT

FLO

ATLS

VVR

NIO

SYY

CL

GMR

NIO

SYY

CL

GMR

These are not recommendations for purchases.  What these do represent are those stocks that are in an uptrend yet pulled back sufficiently on Friday to allow entry today.  IF these stocks move above Friday's high AND do so on significant 10-day volume, your probabilityl of success will increase.

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

GGT Top 25

This is a new strategy that is working well.  Every week I create a list of 100 stocks from the GGT Longs that have the best performance in terms of daily gain but with lower volatility.  This list is valid until close of business Wednesday night:

GOOG

AAPL

CMG

CEO

ABV

MA

BIDU

SOHU

GYMB

LNN

DRQ

AMG

RVBD

SWM

BVN

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

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

Regards,

pgd

Reaffirmation of Intermediate-Term Bull Leg

.
Summary

• The short-term portfolio, which trades VTI, UWM, and QLD, is presently up 1.9% on this present signal.  Friday's activities will continue without change to this portfolio.
• ALL of the slopes of the LCR EMAs have turned positive, which officially signifies the start of a new intermediate-term bull leg.
• Several LCR EMAs are inverted, so we do not yet have confirmation of this intermediate-term bull leg.  Correspondingly, I intend to keep some of my powder dry.
• Thursday's action achieved an all-time high in the GGT Price Index and the Strength Oscillator

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

Let's jump right in to the dashboard, specifically starting with the LCR:

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

The Long-Cash Ratio (LCR), which is a measure of the number of stocks in the GGT universe that are appreciating (LONG) to those that are underperforming (CASH) moved up a dramatic amount with Thursday's action.  The LCR jumped +62%, ending the day at 2.878, and indicates that we have 2069 stocks with some form of LONG status and 719 with some form of CASH status.  This movement is very bullish.

The 5th column from the left indicates a major crack in the bear ice.  The 5d exponential moving average (EMA) on the LCR has now crossed back above the 8d EMA from below, which is bullish.  We still have a number of EMAs which are inverted, so we will need to see these turn green in order to have confirmation that this bull is here for the duration.  As of this morning the 8d < 13d, the 13d < 21d, and the 21d < 34d.    I personally would not commit 100% of my monies to the market at this time unless you are an aggressive investor/trader, as we want to see this inversion situation cleared.

I draw your attention to the right side of the figure above, specifically the bottom of the figure.  Whereas the left side of the figure represents the specific LCR EMAs, the right side of the figure represents the slope of these LCR EMAs.  These are (by design) leading indicators on the actual EMAs, because we cannot remove the aforementioned inversion situation unless the slopes of the LCR EMAs are positive (pointing upward).  For the last few days I've been saying that unless these all turn green that we should be concerned about the longevity of this bull leg, and with yesterday's action we have finally removed that concern.  The fact that all of these slopes of the LCR EMAs are now pointing upward reaffirms the intermediate-term bull leg and you need to participate if you are to make any money.

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

Let's look at the other area of the dashboard:

Our GGT price index jumped +1.9% on Thursday, ending the day at $27.42.  I note that this is the highest we have ever been since GGT went live in September 2008.  Volume was significantly higher, ending the day with a jump of +43% above the 50d MA.  I often write of wanting higher prices on higher volume, and we achieved this on Thursday.  The bulls are firmly in control.

The Pricing EMAs, shown in columns 4-7, are all green -- this indicates that the alignment of the pricing system is bullish.  Additionally, the slopes of these EMAs (columns 8-12) are all green, indicating that they are pointing upward.  This too is bullish.

Column 13 represents our Strength Oscillator and it is showing a value of 1.000.  This is the highest value ever recorded and indicates that in terms of price, volume, and rate of change of price, we are at the strongest we have been compared to any time in the past two years.  As I frequently tell my kids, when you're at the top there's only one way to go -- down.  It will be an interesting next few days.

Overall, the bears are hiding and the bulls control the table.  If you're sitting on the sidelines you need to stop watching and simply pull the trigger.  Wait for a pullback, e.g., wait for the two-day Elder Force Index to indicate that it's okay to purchase a specific stock.  I'll post a candidate list below of equitites meeting this criteria.

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

Short-Term LCR Change Timer

We are presently LONG in VTI with this timer, and the position is up 1.9% in two days.  We may see a bit of a pull-back today, and if this is the case, I will use the 39-minute bar with a MACD crossing in the lower half of the window to enter another position.  My general rule is not to chase this timer, as the GGT system signaled long on Wednesday (the VTI system signaled long on Tuesday), but we may be able to take advantage of general profit taking in the markets and the normal relaxation of prices.

QLD and UWM are also both candidates for entry under this timer system.

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

Intermediate-Term Elder Force Index Timer

This timer is LONG, as expected.  It has been long since 9/2, and aside from a brief whipsaw on 10/9 and 10/19, it continues to keep us on the right side of the market.

If you do not know how to read the chart above in terms of the status of the Elder FI(13) timer please post a note in the GGT Yahoo! group (subscribe by sending a message to GreekGodTrading-subscribe@yahoogroups.com, and send a message from your email account by addressing it to GreekGodTrading@yahoogroups.com ).  Note that you must be a member of that group prior to posting any messages.

Here is my candidate list of Elder equities for Friday.  These have been screened against the GGT Universe of LONG-recommended stocks and ETFs.  The list is short, because the 2d Force Index is positive for most of the LONG universe, blocking entry to extended stocks:

MIPS
FFIV
ATHN
GLBL
SSP
NWSA
SIRO
AMED
GXDX
ECT

I intend to enter these only if they are higher than yesterday's high AND they meet prorated volume requirements.  For review, my prorated volume requirements are:

By 10:00, the stock is at 12.5% of the 10d MA of Volume
10:30, 25%
11:15, 33%
12:15, 50%
1:15, 60%
2:15, 70%
3:15, 90%

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

GGT Top 25

This is a new strategy that will suggest the strongest stocks, as measured by the slope and coefficient of regression over a variable lookback period.  This list will be updated weekly, with new symbols appearing on Thursday of each week.  Enter only if price and volume are increasing (purchase strength):

GOOG
PCLN
AAPL
CMG
CEO
NFLX
AMZN
ABV
CF
AZO
MA
BAP
FCX
BIDU
SOHU
EMN
GYMB
LNN
SNP
DRQ
AMG
RVBD
MOS
SWM
BVN

For GGT, LLC members, this strategy will be added to our strategy document.

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

Remember, you are responsible for your own investment decisions, not me.  Please take ownership for your actions.

Regards,

pgd

Short Term Signal Confirms LONG; Elder still LONG

.
Summary

• Review http://ggt-tsp.blogspot.com/ if you have a TSP account or are following that account.
• The Short-Term LCR Change Timer has signaled LONG; VTI was purchased on Wednesday
• The Elder Intermediate-Term Timer is LONG
• Yesterday's action was up, but the internals are not sounding a "raging bull" horn.  Some caution is advised until we get final confirmation (all slopes of the LCR EMAs are pointing upward).

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

Dashboard

Here's the dashboard going into Thursday's action:

As expected, the GGT Price Index moved upward with the markets, but note it only increased +0.3% to end the day at $26.91, an increase of $0.08.  Volume was up +14% but within 1 standard deviation of the 50d MA, so I would consider Wednesday's action a ho-hum sort of day with respect to final price and volume numbers.

The Long-Cash Ratio (LCR) moved up +13%, ending the day at 1.774.  Of significance here is that the GGT Strength Oscillator barely increased from 0.779 to 0.791, which gives me something to pause upon.  The movement in the LCR is due specifically to a jump in prices AND volume; the Strength Oscillator considers several parameters of rate of change (ROC) also, so while we jumped up in LCR, we didn't knock the skin off the ball in terms of the strength index.  Both are moving upward so I suppose I'll close my eyes and look the other way for now...

Of significance is the following graph:

While we are still inverted as far as the LCR EMAs are concerned (5d < 8d, 8d < 13d, 13d < 21d, 21d < 34d), the slopes of the 5d and 8d EMAs have turned up, as shown by the new green indicators on the right half of the figure.  This is a necessary condition for the inversion to be reversed, but at this point we are still very fragile in this bull leg upward.  I do think that caution is warranted.

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

Short-Term LCR Change Timer

This timer has officially fired LONG.  Correspondingly, and because the VTI signal went long one day in advance, a position in VTI was purchased.  If you are considering following I would not wait for a pullback, as this is a fast moving/short-duration timer.

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

Elder Intermediate-Term Force Index Timer

The timer is long, as it has been for some time.  My list of possible entries for today is as follows:

TAM
RHT
WYNN
LFL
CBI
SAN
JSDA
HUM
CIG
UXG
SUI
GMCR
TDG
MTD
CP
XME
MMP
CAR
INT
ICA
SKYW
ABX
BRNC
PKG
TX
CDY
MAT
PTY
TNC
PDM
ATK
PSA
WB
GAP
SSS
GTIV
HYT
MYI
NIO
EOI
JFR
IAG
HGT
QGEN
KCG
DHY
USG
AMED

A long list.  Note that these have not been balanced against the latest GGT Longs, as the update was seriously delayed due to external internet problems last evening.  Please check your candidates carefully.

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

As always, you are responsible for your own investment decisions, not me.  Please check your work carefully and take ownership for your decisions.

Regards,

pgd

ST Timer (VTI) Signals LONG

.
Summary

• The Short Term LCR Change Timer on the VTI has moved LONG.
• The Price Index jumped, but volume was ho-hum, which is acceptable but not ideal.
• The slope of the 5d EMA on the LCR has turned up after 12 days of pointing downward (bullish); all the other longer slopes are still pointing downward (bearish)
• Strength Index has moved upward off support lines, which is bullish
• The Short Term LCR Change Timer system may transition to long if today is an up day as far as FinViz ADV/DEC indicators

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

Details

The VTI, which is the Vanguard Total Index ETF, has signaled "LONG" with the move yesterday.  This is the actionable part of the GGT Short Term LCR Change Timer, and it has been in cash for the past 28 trading days.  A move long is not a guarantee that it will work going forward, but it does indicate that conditions are such that failure to participate means that I could be leaving money on the table.

The equity curve value on this timer is $1.556, meaning that a $1 invested on 7/28/08 would be worth this amount today.

I plan to place a trade today in the VTI after the market settles out at 9:45-ish or so, buying any dip that I can find.

Let's take a look at the Dashboard:

The GGT Price Index jumped +1.32% on volume that was -2% lower volume than the 50d MA.  A major move in prices on average volume is okay, but it certainly is not a resounding "I'm a bull and I'm not ready to climb in my coffin."  I would have preferred to see volume up significantly with such an increase, so color this as the glass is half full.

The Long-Cash Ratio jumped +18%, ending the day at 1.567.  While I do not provide the daily details, this was enough for a fixed, 4d SMA line on the LCR to move to long (e.g., the LCR is now above the 4d SMA),  and this is the first time this situation has occurred in 12 trading days.  The equity curve on this simple timer is less than the VTI equity curve at $1.4022, but this is still a 17.1% internal rate of return.  Note that the Maximum Draw Down using this method is a bit higher as this is not an adaptive signal, with the MDD clocking in at 13.4%.

Yesterday's action did cause a crack in the bear-ice that has been plaguing us in terms of the LCR EMA slopes.  Here's the chart:

Of significance here is that the slope of the 5d EMA on the LCR has turned upward ("Bullish", green) and this certainly is a necessary but not sufficient requirement for any form of sustained bull leg.  We absolutely need this trend to continue as far as the slopes of the EMAs on the LCR are concerned, AND, we need the overall crossings of the 5d, 8d, 13d, and 21d LCRs to reverse.  Right now investing on these time frames is very, very risky -- the trend is clearly pointing us down, not up.

Database strength is shown in Column 6 of the Dashboard; we've jumped up a significant amount, so we're not in any perceived danger of violating the support line I've been discussing the past few days.  Here's the chart, and it shows that we've got room to move up from here:

From the perspective of the markets, we need a follow-through day to have any confidence of this bull leg.  Today's action, and some of tomorrow's, will be crucial.

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

Short-Term LCR Change Timer

Of particular interest now will be whether the system short-term timer on the GGT value will transition to long today.  We need to watch http://www.finviz.com near the end of the day, and if we see the ADV/DEC line showing a significant favoritism to the ADV side of the equation we can have confidence that the LCR has moved to the LONG side.  Conversely, if it's only within a couple 100 stocks of the DEC value, then we should not act and wait until we get confirmation from the GGT system.  Here's the indicator on their page:

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

Intermediate-Term Elder Force Index

The 13d Elder Force Index was hanging by a thread on the long status and has now a comfortable margin in terms of staying long.  While I'm not saying the bear influence is dead, some of the trends we saw in the breakdown of the FI(13) and Elder/GGT Universe have reversed, which gives me hope.

A number of the Elder candidates from yesterday did very well, storm clouds not withstanding.  Given this, the candidates for today are few and far between, because the FI(2) < 0 requirement is blocking entry on most:

CEDC
GSIT

Note that CEDC is coming out with earnings this week so is not a good candidate unless you have good risk management capabilities.

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

GGT New and Affirmed Longs

This is a new selection list that is purely all-things-GGT.  It is NOT screened for Elder criteria, it simply is my pickings of equities that we should be watching.  The list is not all-inclusive -- you can download the latest ETF listing from our Yahoo! group, and the weekend stock listing is also provided.

Here are stock candidates that hit the top of my list for today:

SKH
LF
CGNX
SNCR
ININ
VMC
AKRK
SMP
DRWI
AMSC
HRL
MUI
APT
ASCA
AUTH
CAR
CCMP
COHR
IRR
MGAM
GXG
FDM
DBA
BND
CIU

Happy Hunting!

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

Remember, you are responsible for your own actions, and I am not.  Please think before you pull the trading trigger.

Regards,

pgd

Another Storm Cloud on the Horizon, Divergences Galore

.
I've been writing the past few entries about the Long-Cash Ratio (LCR), specifically looking at EMAs (exponential moving averages) on the LCR and their respective slopes.  Yesterday's action hammered another nail in the bull coffin, so we're going to need some strong market action to overcome what I'm seeing. 

Note that the 13d EMA on the LCR has now crossed the 21d EMA from above.  We now have another bearish situation building, because:

• 5d < 8d EMA
• 8d < 13d EMA
• 13d < 21d EMA

Further note that there has been no change in the LCR EMA slopes (right portion of figure), so nothing is leading us out of this situation at the present time.

We need to see the LCR EMA slopes (right side) start to move green (bullish) to pull the nose up on what is occuring in the broad markets.  Failure to see green here is screaming "caution caution caution".

I'm almost completely in cash at the present moment.

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

The Dashboard:

The GGT price index increased on Monday by +0.27% on normal volume that was only -1% below the 50d MA.  This is normal market noise and by itself is unremarkable.

The LCR FELL on Monday by -5%, landing the day at 1.328.  Here again we have a divergence -- average price action increasing yet the underlying database telling us that stocks in general are weakening in terms of price.  This should cause you to pause -- how can the price index increase yet the LCR drop?

The LCR value is derived from the number of stocks that historically are above their optimized values for maximizing an equity curve over the last year.  When the LCR value drops, it is telling us that stocks are falling in price with respect to where they have been over the past year.  We can still have a price increase in the database, but because the LCR value is a sliding window of a lookback period, the threshold for remaining a LONG stock could actually be increasing faster than the price is rising, causing us to move into CASH for a given equity.  This is what is happening at the present time.  An equivalent analogy is that the relative strength of the database is falling, which obviously is problematic overall.

The short of this is that price action and LCR must align.  We cannot sustain increasing price movement but decreasing LCR -- eventually the prices will have to start dropping to align with the falling LCR, or the LCR will have to reverse and move upward.  I still maintain that this divergence has us at a crossroads and until we get significant movement either way, caution is advised.

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

Strength Index

Column 6 contains our strength index.  I discussed derivation of the strength index yesterday; our artificial support line is intact so we can interpret this as somewhat bullish.  Of some concern is that the price index moved upward but the strength index moved down -- this divergence is like the LCR divergence and again, the two must align.

Crossroads indeed.

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

Short-Term LCR Change Timer

With the LCR falling 12 of the last 13 trading days, it is no wonder that the LCR Change Timer has remained in CASH since 10/15.  The GGT price index on 10/15 was $26.07, and yesterday's close has it at $26.48, or an increase of +1.6%.  While it would be nice having this gain over 13 trading days, we've been all over the place ($25.67 on 10/19, a loss of -1.53% and $26.48 on 11/1) so I'm not overly concerned about the efficacy of this timer.

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

Intermediate-Term Elder Force Index Timer

Columns 12-16 highlight the intermediate timer that I follow.  Bottom line is that Elder is still positive, so is indicating that we can purchase stocks long.

Cross-correlating GGT and my home-spun tools with the HGSI package should give us some additional insight:

The view above is my Elder screen, this time applied to all of the stocks in my GGT universe, as of the close last night.  You can click on the image (as you can with all my images) to see a larger view.

In this graphical view I calculate the Elder Force Index using two methods:  the top ribbon bar is via the EMA method (more weight to what happened yesterday than what happened 13 days ago), and the ribbon bar under it is via the SMA method (what happened 13 days ago is just as important as what happened yesterday).  Both methods have their merrits and detractors.

What we see is that the 13d SMA method has moved to CASH with yesterday's action, which is not a good sign.  Look at the numerical window in the lower portion of the figure -- the SMA method is clearly negative, and by a good amount.  Contrasting, the EMA method is clearly positive, so this indicates yet a further divergence and should have us pausing at any new long investments.

In the MACD window, we see that the MACD histogram is clearly negative, and you can see this raw value in the numerical window.  The MACD and MACD Signal Lines are clearly downtrending, and this too tells us to be prudent and to lock our profits.

Under the MACD window is my favorite slope window -- I watch the 13d and 34d EMA price slopes like a hawk.  While these are both clearly positive in value (look at the numerical window, the 13d is gaining price at $0.4299/day and the 34d @ $0.5527/day), the fact that the 13d is under the 34d slope is not a good sign (loss of momentum), and the fact that they are both pointing downward is further indication of loss of momentum ("the car is driving forward but is slowing"). 

Finally, I've added the artificial red box around the pricing series.  We see that we simply are not moving anywhere, and have not been for a number of days.

So while the GGT Elder system is telling us that we can buy stocks long, a further graphical analysis of the GGT Elder system says "Yes, but ...."  I certainly would not move anything more than a 20% position in anything that was looking attractive, especially given that the day is Election Day and that we have FOMC clouds looming.

For the daring:

GBG
ARUN
JBL
AVGO
FTE
CNW
TMK
ITC
CME
TWTC
GSI
ATVI
FCF
SXCI
WBSN
FLIR
CPA
VLTR
AMCC
DGIT

Ensure that you are entering on strength and appropriate volume for the time of day.

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

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

Today is voting day.  I gave 8 years active duty, 21 years total in the U.S. Navy so that you have the right to choose your leaders.  It is your obligation to vote, so please take the time an exercise your right and demonstrate to the world that a free nation is the strongest form of government.

Regards,

pgd

LCR is Bearish but Has Upside Room, as does Strength Index ...

.
GGT Price went up Friday, ending the week at $26.41.  This isn't much of a week-over-week increase; Friday the 22nd saw a price of $26.23 and the week before that a close of $26.07.  We're obviously in a horizontal trend with fairly well-behaved excursions, so price simply isn't going to tell us much.

Volume continues to hold a steady-state, trading within a very tight range since the 50d MA Volume bottomed around 10/8.  Only two of the last 14 trading days have seen a volume below the 50d MA, and the volatility has been quite tame.

Given the mid-term elections and the FOMC meeting this Tuesday/Wednesday, I'm expecting more of the same at least through Tuesday.  What happens beyond Tuesday is pure guesswork for obvious reasons.  Let's see if we can present both sides of an argument:

LCR

The Long-Cash Ratio (LCR) continues to drop, and has done so on 11 of the 12 past trading days.  Even the February 2009 bearish collapse didn't see such a run, so this streak is remarkable.  In terms of raw numbers 1638 stocks have some form of LONG status and 1169 have some form of CASH status, resulting in a value of 1.401, down -1% from Thursday.  Those are the facts.

On the bullish side, there are a large number of stocks available from the CASH pool to provide a movement that could take the LCR upward.  We are below "midpoint" if you take a view of "where have we been prior to this?"; here's the graph:

The solid black line is a 4d SMA on the LCR values, since we started publishing values back in September 2008.  We've recently fallen from dramatically high all-time levels, and certainly, we could power upward from here.  Indeed, I can see at least two or three reversals that have occurred from this zone in the past, so there is a non-zero probability of this occurring and we must always be open to such behavior.

Another good sign is the left-most section of the graph below:

The data starting in column 5 above is simply the status of the LCR EMAs, e.g., are they aligned "properly" to sustain a bull.  The short answer is "somewhat".  Note that although the 5d EMA < 8d EMA, and the 8d EMA < 13d EMA, all the longer ones (columns 7-9) are still properly aligned.  While the markets have not been rocketing upward, they certainly have not been losing much ground.  Hence, if we do reverse from our present levels on Tuesday/Wednesday and beyond, looking for confirmation in the 5d > 8d and 8d > 13d would certainly add to the bullish argument.

There's always a converse.

The data in right-most columns shows the slopes of the LCR EMAs.  The slopes are REALLY important -- if they point down, then the data on the left side (LCR EMA crossings) will start to bleed more than it is.  Conversely, if these slopes turn up, they will LEAD THE BULLISH CROSSINGs -- they have to (make sure you understand why).  

I went back over the last two years+ of data to see if we had any other occurances like we are experiencing at the present moment with respect to the LCR EMA crossings and the slope, and the only other period that I have data is below, which is the 2nd quarter of 2009:

MAKE SURE THAT YOU REVIEW THE DATES ON THE LEFT IN THE FIGURE ABOVE -- THIS IS LAST YEAR'S DATA.  What we have here is somewhat of the same situation, and what followed was periods of peaks but also of dips.  We made money if we played the markets when the slopes were "green" and we moved to cash when they turned "red", which is the same situation as present.

To put this into another view, observe the following:

This view is constructed by taking the LCR RMAs and plotting the slope values.  Note how we're in the pink zone, which means that on these three time scales (13d, 21d, 34d) that we are losing LCR value at about -0.1 of full-scale per day.  Since there are 2807 stocks in the database right now, we're losing about 280 stocks per day on these time scales to the CASH side of the equation -- e.g., the database of available LONGS is shrinking this amount each day.

So, for the present moment, until the traces on the right side of the chart above move to the white zone (positive), you're better served by taking profits and sitting on the sidelines.  The pool of appreciating stocks is getting less day over day, hence you need to have IMPROVING skills to pick winning stocks.  

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GGT Strength Oscillator

When I take an individual stock and evaluate it in terms of price, volume, and rate of change, I get a value describing what I call the strength of the stock.  When cast between 0 and 1, we have a 0 being completely "avoid" and 1 being "buy me buy me buy me".  It's easy then to average the database and see where we are presently sitting.

Last week I wrote about the artificial trend line that was forming from the lows of the strength index.  Believe it or not, we bounced off the lower support, and as you can see in the figure above, this suggests that there is plenty of upside room available for a continued bull leg.  Hence, guess what, since we haven't yet penetrated the support line, my bull-meter has to lean more in favor of an upside bias than downward.

Correspondingly, I'm looking for the LCR ROCs and the LCR slope graphs to indicate bullish tendencies.  Failure to have the Strength Index, the LCR ROCs, and the LCR slopes (the latter two which are more or less the same thing) show us that conditions are improving would be a serious case of "Katie, bar the doors ..."

Stay tuned...

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I have parent-teacher conferences this morning and will continue my entry mid-morning after the markets open.  Check back before noon Monday for further thoughts ...