My Bias is Bullish, but not all Indicators are Confirming

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Summary

• The slopes of the pricing moving averages are all positive and are pointing up, which can only be interpreted as bullish.
• My price change oscillator is at the top of the "overbought" range at +14, indicating today is not a good day to enter stocks long, as the chance of a pullback in the next day or two has increased significantly.
• The Short-Term Long Cash Ratio (LCR) change timer has transitioned LONG
• The VTI timer, which is an ETF based on the movements of the short-term LCR timer, has confirmed the movement.  Placing a position on VTI today, even though the price change oscillator is overbought, is something I'm considering.  The equity in this timer since September 2008 is at $1.52 / dollar invested.
• The Elder Force Index timer, which is an intermediate-length timer (at least 18 days if not more), is in mixed mode.  This means that we do not have strong dollar-volume participation in the market, and that while we certainly can go up from here (remember December?), the chance of gains from here are less.
• The slopes of the LCR moving averages are just starting to turn positive.  For this bull to be sustained, we need these to all turn positive.

Conclusion:  the bias is bullish, but several indicators are having a hard time confirming this bull leg.  I intend to be cautious.

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Slope Analysis

I use slope analysis of moving averages to give me an idea of how the markets are performing.  There are two key areas I pay attention to:

1. slopes of pricing averages, which tell us how we are performing on an index level from 5d to 65d in length, and
2. slopes of moving averages of the ratio of stocks with a LONG rating compared to those with a CASH rating, which tells me how well the stocks within the database are performing relative to price AND volume behavior ( I do believe to have a sustained bull that we need a few days of up prices on above-average volume ).

Here's the slopes of the pricing averages, as well as "slope of the slope" (right side):

As with all my images, right-click on the picture to open in a new tab or window.

What the image above shows, starting on the left red/green area, is that we just transitioned from a period where the shorter moving averages were all bearish, but the longer moving averages were bullish.  While the pain in your portfolio increases as the red flows from left to right, the fact that the 55d and the 65d slope indicators have remained green (bullish, positive) for the entire time of the presentation should key you in that we are still in an intermediate-termed bull leg.

The right side of the image shows us that the slopes of the moving averages are all pointing upward, and have been for the last 3 days.  In fact, Wed/Thurs a week ago showed an initial movement upward, followed by a down sequence Friday/Monday, only to be followed by progressively stronger days Tu-Wed-Thurs of last week.  This is a leading indicator, and the combination of the "all green" on the left side as well as the "all green" on the right side compels me to only consider the long side of the market at the present time.

Here's the same presentation, but now applied to the Long-Cash Ratio (LCR):

The LCR slope presentation is not nearly as bullish as the pricing presentation, but in general, it rarely is.  What is important above is that:

1. we're seeing green starting to emerge in terms of the slopes of the LCR EMAs.  This must continue for this bull leg to find it's footing
2. we're seeing strong performance in the "slopes of the slopes", e.g., they are all pointing up through the 65d period, which is necessary for the left side of the figure to continue to "grow green".

What concerns be in the above presentation is simply that we do not have the participation that we need in terms of volume.  How do I know this?  Simple -- LCR considers BOTH pricing and volume, whereas the previous discussion was concerning prices only.  Volume is lacking, and has been lacking, so this seems to me to be "artificial".  Whether this is evidence of related POMO money supply from Uncle Sugar is speculation that needs to be debated over your favorite beverage.

Conclusion:  from a slope analysis point of view, pricing signals are strong, but the underlying database is just starting to show some life.  The two are not in sync, and until they are (if they will be that is), I will be careful of this market in general.  "Being careful" means long positions in stocks that are moving to new highs on good volume.

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GGT Files

If you are a member of my GreekGodTrading Yahoo! group, you have access to files which represent detailed snapshots of stocks with respect to the GGT methodology, as well as Effective Volume.  I posted the updates for both stock and ETF files this past weekend, and there have been some subtle changes that you may find interesting.

In the file "GG_stks_21Apr2011_DashboardEV.htm", you'll see a complete listing of the GGT universe of stocks unioned with the EV universe of stocks.  Stocks listed on the GGT side but with no corresponding data on the EV side will have a "NA" indicated, simply showing that they have not yet been added to the EV universe.  Here's a summary snapshot:

Again, right-click on the image to open in a new window or tab.

If you open the file in Excel, you can use the filter function in Excel to select the stocks that have the best combined statistics.  For example, a screen that I like is the following:

1. GGT Recommendation:  select only those stocks that are New Long, Aff. Long, or Long.
2. EV:  select only those stocks with a Rating >80

This gives you a subset of stocks that are historically outperforming their previous behavior (due to criteria #1), and that have favorable EV characteristics with pricing behavior (due to criteria 2).

If you end up selecting any stocks with a LER Status of "Do not buy" (unlikely if Rating > 80), simply filter those out.  Same situation for Tot EV Status of "Selling continues" -- avoid those stocks.

I can only backtest to February 17, 2011 using this methodology but I will state that the quality and performance of hypothetical portfolios of these stocks has exceeded other types of buying strategies where EV or GGT status is not considered.

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Another major change that you will see is in the "GG_stks_21Apr2011_Dashboard.htm" file.  Again, if you open this file in Excel, you can use copy/paste functions to select symbol baskets.

You'll see that there are a number of portfolios listed:

1. GGT Top25 Earnings Optimized Portfolio
2. GGT GorillaTrades Optimized Portfolio
3. GGT IBD50 Earnings Optimized Portfolio
4. GGT Dow30 Earnings Optimized Portfolio
5. GGT NASDAQ-100 Earnings Optimized Portfolio
6. GGT Stocks Guiding Higher

Here, "Earnings Optimized" means that the indicated stocks must have appreciating earnings AND that the CEO/CFO is on record over the last 90 days indicating that they are guiding earnings, revenues, or both higher than consensus.  Typically, when the CEO/CFO makes such a statement, the stocks have positive earnings/revenue surprises 80% of the time, and more importantly, the stocks continue to guide higher the following quarter (which generally causes their price to increase).

To make one thing clear -- I do not have a subscription to GorillaTrades, but it's relatively easy finding the most recent portfolio simply by doing a Google search.

"Optimized" also means that I've done a risk/reward analysis on the stocks in the respective universes and have selected only those stocks with favorable risk/reward characteristics over the past 100 trading days or so.  This isn't to say that other stocks in the Dow, NASDAQ, etc. aren't appealing, it simply says that when traded in the basket shown, the stocks presented have the best balance of risk, reward, and diversification.

This leads me to the last column on this file, which you will see indicates "Recommended Allocation".  Simply, if you trade an individual basket, your allocation should be in the ballpark of what is shown.  This will balance risk, reward, and diversification, and prevent concentration in an area that is underperforming.

Finally, at the bottom of the file, you will see an area "GGT Stocks Guiding Higher".  This is a list of GGT stocks for which I have positive guidance data in the present earnings cycle.  I don't think that I have to describe what this means.   A CONSIDERABLE AMOUNT OF WORK has gone into generating, testing, and maintaining this list, and I ask that you NOT distribute this list, period.  I pay for the data, and if I find it out in the public domain, I'll simply pull the files and use them for my own consumption.

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Stock Watchlist for Monday, April 25th

Here are the stocks that I am considering today:

This list is not a recommendation to purchase, it is simply a listing of stocks for consideration.  Please do your diligence, take ownership for your actions, and be respectful of the work and preparation that goes into producing the content in this blog.

Regards,

pgd

NOT All Indicators are Confirming LONG; We Need Followthrough

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Summary

• Yesterday's (4/20) big move in the markets added 1.69% to the GGT price index on volume that was 3% above the 50d MA.  Given the state of lower volume being normal, this was a broad move with almost across the board participation.
• ALL of the GGT price index slopes, 5d through 65d, are positive AND they are pointing upward.  This is bullish for stocks on the short-term and intermediate term.
• My reward/risk tool, even with the large move on 4/20, is only at +6, which is suggesting more upside on a short-term basis.  Entering stocks on the long side should only be accomplished if they are breaking out with significant price and volume.
• The Short-Term Long-Cash Ratio (LCR) Timer has moved LONG.  The tradeable VTI Timer, which is based on the ST-LCR Timer, is still in CASH.  This is a mixed message that needs to sort itself out.
• My Elder Force Index Timer is MIXED.  The simple moving average (SMA) method of calculation is in CASH, the exponential moving average method is LONG.  IF YOU ARE CONSERVATIVE, then you want to pay attention to the SMA method.  If you are aggressive and nimble, then you want to pay attention to the EMA method.
• Only the 5d and 8d slopes of the LCR are positive, the rest are negative.  This is NOT confirming an en masse jump into the market.  Given this, and supporting the bullish case for the aggressive investor, is that the slopes are all pointing upward, which is necessary for a bull to be sustained.

Conclusions for Thursday:  Futures are up as I write this, so we will open to the up side.  NOT ALL INDICATORS ARE CONFIRMING THIS BULL MOVE, so until they do, I will not commit monies to 100% positions.  25% trial-balloons are my focus.  Candidate stocks for review are below.

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GGT + Effective Volume Stocks

Given that the climate is supportive of long entry into stocks, the following is a list of stocks that I am screening.  The list below HAS NOT BEEN SCREENED for specific patterns of EV; it simply is a listing of the most favorable stocks in both the GGT and EV universe.

As with all my figures, right-click on the image to open in a new window or browser.  Stocks with a "New Long" or "Affirmed Long" recommendation, combined with "Buying Surges", are especially attractive.

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

Regards,

pgd

We are close to a sell signal, but are not there yet...

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Summary

• I conducted a seminar yesterday for High Growth Stock Investing; the video can be found here.  In the video I present evidence of why the markets are rolling over and why we should not initiate new long positions.
• The Elder Intermediate-Termed Force Index Timer, when applied to the GGT universe of stocks, is 0.1% above the sell line using a simple moving average (SMA) method.  The exponential moving average (EMA) method has already been in CASH since close of business Monday.  If today's action is negative (futures are down -0.25% as I write this), we will have a confirmed sell of the long portfolio.
• Effective Volume (EV) Money Flow (MF), which can be found here if you are a subscriber, is confirming a move to cash as of the close of April 11th (Monday), and if today's behavior is down, will move to a SHORT mode.

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Damage Control

I'm presently holding AA, CAT, DIS, FCG, GE, IYR, JPM, KOL, SLV and XLI.

IYR and XLI are Connors TPS trades and are performing as expected.

FCG and KOL are remainders of the Optimized ETF portfolio, and are both underwater.  FCG is down -4.18% into this morning's action, and KOL is down -2.39%.  FCG is within a Darvas box with a floor at $21.84, so it is not an outright sell on this metric alone.  Of course, the Elder and EV timers indicate that this should be unloaded.  EV on FCG has been deteriorating, so I'm seriously considering selling any intra-day bounce or the floor of the Darvas box, whichever comes first.

KOL is also within a Darvas box with a floor at $47.95, and it bounced off the floor two days ago.  Again, the timer models indicate sell, but the behavior in the box isn't a panic pattern.  Further, the EV charts, while showing some short-term selling, are showing longer-termed LEV support from institutionals.  I'm not as inclined to sell this position today unless it drops through the floor of the box and stays there on the 39m charts.

AA is being punished for "missing" sales, but in general, it's a solid stock on many fronts.  Short-termed EV has been selling, but overall, it still has considerable support over the past 40 days.  My sell price is $16.13, which is the top of the box that concluded on 3/18

CAT is another stock that is a great performer, but is being hit by perception that Japan will slow purchasing of CAT products, which is exactly BACKWARDS of what is anticipated within CAT.  It's bouncing around within a box with a floor at $97, but I can't let it fall that amount due to other money management rules that I have.  Hence, if it falls much further from the -5.51% loss that I presently hold I most likely will unload, e.g., if it falls and closes below the 50d MA on the daily it's time to unload.

DIS is a solid company that is performing well on the long term, but is not doing much of anything on the short term.  It's rattling around in a box with a floor at $41.25, which it has tested 3x, so unless it falls through the floor, I intend to hold.

GE has EV support but closed below the floor of my box yesterday, the floor being at $20.07.  Given this, I have to say goodbye to GE today.

JPM is a quality stock with a good dividend, but it got hit yesterday when Mr. D. made it public that we shouldn't look for an increase in the dividend any time soon.  Despite EV holding well, the stock closed below my sell point of $46.32, so I will say goodbye to JPM today.

I hold SLV in a speculative account and am up 12% since entry.  It appears that EV support is mostly from retail traders now, as the large folks are exiting and locking in their profits.  I will continue to hold, and my sell point is a close below $37.26.

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Contra ETFs and Shorting

I discussed contra ETFs in my video yesterday, and concluded that a few of them look attractive here, but only for trading and surgical strikes, not for any form of intermediate-length holding.

With last night's data, this position has not changed.

 Further, take a look at the following chart, which shows the VIX combined with a number of moving averages:

As with all my images, right-click on the figure to open in a new window or tab.

The figure shows the candles of the VIX and various moving averages.  I've placed vertical lines showing the dates when the VIX has closed above or below the ribbon.  Furthermore, you see the candles are colored red, blue, and green, which is Elder's system for buying/selling based on price action.

You can see that volatility is really low.  The VIX continues to close within a range, and overall, is not indicating a mass anticipation of increasing volatility.  This is BULLISH for the markets, NOT bearish.

I use the above chart as follows:

1. When the VIX closes above the ribbon for the first time after having been long in the markets, ensure long positions are CLOSED.  We're not there yet.
2. When the VIX closes below the ribbon for the first time after having been short in the makets, ensure that short positions are CLOSED.  Again, not applicable to our situation.
3. The color of the candles influences my decisions.  A transition from a blue candle to a green candle typically will cause me to place trial entries in contra ETFs.    A transition from a blue candle to a red candle will cause me to lock in some profits, but keep the position open.

The chart is telling me to continue to hold my longs and not enter contra ETF or short positions.

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Trading Plan for Thursday

I intend to enter Connors TPS trades as the market makes new local lows.  I intend to unload GE and JPM.  I intend to sit pat on everything else unless my mental stops are hit.

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Remember, you are responsible for your own investment decisions, and I am not.  Please do your diligence, and please take ownership for your actions.

Regards,

pgd

Continue to hold long positions; add on strength

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Summary

• Our price index fell W-Th-F, dropping on slightly-lower but average volume.  I consider this neutral to bullish, as the selling is not attracting higher volume.
• The slopes of the 5d and 8d pricing EMAs have turned negative, which is a short-term shot across the bow.  However, everything longer than the 8d is still positive going into Monday's action, which is bullish for the market.
• The pricing accumulator change tool is indicating a value of -14, which means that on a short-term basis, it is favorable to enter stocks on the long side.
• Database strength has fallen to 51%, which is an incredibly low value for a bull leg.  Typically, we need to see movement up towards 70% in short order to continue to have a bullish outlook.
• The short-term Long-Cash Ratio (LCR) Change timer has transitioned to CASH with Friday's close.  If you're holding a position in the VTI, now is the time to close it.  You're looking at a 2.21% gain if you close at or above Friday's ending price.
• The Elder 13d Force Index timer, which is an intermediate-termed timer, is LONG.  Having said this, it isn't long by much, and any continued weakness in the markets would cause it to transition.  We're at a critical crossroads in terms of the Elder timer.
• The Long-Cash Ratio has dropped significantly the past two days, falling -10% on Thursday and -22% on Friday, ending the week at 1.695.  This means that for every stock that has a cash recommendation, we have 1.7 stocks with a LONG recommendation.  The raw value isn't as important as the trend direction, so watch for continued weakness in the LCR.
• The slopes of the 5d and 8d LCR moving averages have turned negative, which shows that the database is losing steam.  More importantly, the direction of ALL slope lines is pointing down, which is bearish.  We need these to point upwards soon for a sustained number of days if we are to continue this advance.

Conclusion:  We have mixed indicators, so we need to see some strong price + volume action this week else I think we'll pull back.  This being said, there is nothing in my crystal ball which definitively says that we should not deploy capital, so I will continue to do so.

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Pricing Slopes

Take a moving average of a price.  Is it pointing upward?  If yes, the slope is positive and you're on the right side of the market.  Is it pointing upward more than yesterday?  If yes, you're making money today faster than yesterday.

This is the concept behind the following table:

On the left we have slopes of various-length moving averages, and on the right we have a measurement if the slope is gaining or losing momentum.  You can see that this Friday caused us to bleed on our sea of green -- two of our shortest-length slopes moved negative, which historically is a warning shot.  On the right you see the "slope of the slope", e.g., is the slope moving upward faster (green) or moving downward faster (red), on a day-over-day basis.  You see more red than green, so ALL of the pricing moving averages are under some serious pressure on the down side.

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Long-Cash Ratio Slopes

The equivalent analysis can be performed on the database in terms of stocks that are "healthy" (price and volume above historical levels) or "sickly" (price and volume below historical levels).

Of particular significance here is that we are seeing the same warning signs that we saw with the pricing table -- the 5d and 8d moving averages have turned negative.  The right side of the table tells us why:  the daily change in the slopes has been negative for three days running with these moving averages, hence they are breaking down.  Unless we see some reversal, this is not a good intermediate-termed condition.

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Price Accumulator Oscillator

The following graph shows us that buying when the oscillator is in the "green zone" can give us a better chance of entry and price appreciation.  Conversely, buying contra ETFs when the oscillator is at the top of the "red zone" can also have a good impact on our portfolio.

We are presently well within the green zone, and if the markets intend to move higher, this is a good time to buy stocks.  This being said, this indicator cannot be used in a vacuum, so I intend to enter stocks only if they are breaking out and the broader market is doing the same.

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Candidate Stocks

Given that we're in a buy zone for stocks, we have to be prepared to enter candidates if they move higher.  The following is my RAW watchlist for Monday; I have not screened these to meet further entry requirements, so you'll have to do your own work there:

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

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Trading Plan for Monday, April 11th

I'm presently holding AA, BAC, CAT, DIS, FCG, GE, GUR, HD, IBM, IDX, JPM, KOL, SLV, and XOM.  Here's a short view of what I'm seeing with these; note that ALL are in some form of GGT-long status:

1. AA reports after the close tonight, and traditionally kicks off earnings season.  Effective volume looks good on the 8d and 40d scales, and overall price action has been bullish in this breakout.  Total volume is slowing though, so it bears watching.  It has typically held the 8d MA since this breakout occurred so I'm looking so see this maintained.  Adding to the position could be prudent if it clears Friday's high of $18.47.  
2. BAC is struggling in terms of effective volume, and I may not tolerate any downside movement in this at all.  In review I should have never entered this position, as it is not performing to my standards.  I will exit the position today at $13.53 or above.
3. CAT has just pulled back to the 17d and is on probation, and EV is holding relatively poor on the short-term scales as well as the longer-term scales.  What is does surrounding the 17d MA is important from here.  CAT reports in 18 days.
4. DIS just closed below it's 17d and 50d for two consecutive days, which is not a good sign.  Longer-termed LEV is poor.  I will most likely unload it if it continues to break down.
5. My buy point with GE was poor, but overall, I like how this one is performing.  I'd like to see LEV continue to increase from here.
6. HD is gaining slowly but has poor LEV characteristics.  I'd like to see it move aggressively up from here, but it is not showing any strength. 
7. IBM cleared a Darvas box that closed on 3/29 but hasn't moved upward since then.  It's very close to my mental stop loss of $162.74.  Volume appears to be waning, and LEV sponsorship is poor.
8. JPM looks solid on may fronts and is a keeper.
9. XOM looks solid in price and volume action, although LEV is relatively poor. I'll most likely unload it and wait for LEV to support the price movement.
10. I hold SLV in a separate account and it is performing well, setting new highs daily and showing increasing volume.  Institutional support seems to be decreasing and retail support increasing, so my stop loss will keep moving up on this.  $37.26 is my floor.
11. FCG continues to perform well in terms of price, and institutional support is growing.  A warning sign is that volume is dropping off, so this one bears watching.
12. GUR continues to perform well on all fronts.
13. IDX continues to perform well, but volatility is increasing, which is a warning sign.
14. KOL has great institutional support and is pulling back to it's 17d MA.  I'd like to see it hold the MA and keep the LEV support; we'll see what happens.

If I see any breakouts that have good LEV support, I'll most likely move 25% into one of those positions.

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

Regards,

pgd

GGT Price and Momentum are Lofty; Staying the (Long) Course

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Remember, I'm traveling today through Sunday in Knoxville.  Blogs/analysis will occur as time permits.  Due to my travels, there is NO face-to-face meeting this weekend.  Please log into one of the GGT Yahoo! groups and answer the poll to which day(s) are best for you to participate in an evening presentation.

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Summary

• The GGT price index rose +0.29% on volume that was -5% below the 50d average.  << Yawn >>
• The slopes of the 5d through 65d pricing moving averages are all positive and they are pointing upward, which is bullish for our bank accounts.
• The Price Accumulator Oscillator moved from +4 to +6, indicating that we have more risk in the markets than the previous day by a slight amount.  Of larger concern to me is that we're incrementally creeping up, and the longer we stay at incremental change levels, the greater the chance of a larger move either way increases.  Since the oscillator is inching upwards, my hat is tipped towards a downside move, but of course, my crystal ball is as good as yours.  +6 is right at that threshhold where you don't want to enter new longs and new contra/new short positions start to become more attractive.  Remember, this is a SHORT-TERM (almost day-over-day) indicator.
• The stocks in the database are about 80% of their strongest levels in terms of pricing and volume.  There still is room to move upward from here, e.g., there are a number of stocks that could move higher, causing this value to increase.
• The short-term Long-Cash-Ratio Change Timer is indecisive, and is holding at LONG-CASH (0).  All it will take is one down day to trigger this to cash.  Conversely, an up day will most likely move it back LONG (+1), resetting it.  We're on the fence post with this one.
• The intermediate-termed Elder Force Index Timer is LONG.  I intend to only purchase equities on the LONG side.
• The slopes of the 5d through 65d LCR moving averages are all positive and are pointing upward, indicating that the database is converting to LONG-rated stocks faster than the bears can convert to CASH.  This too is bullish for our bank accounts, and indicates that we need to be on the long side of the market.

Conclusion:  Stay the present course on the long side.  As a whole, prices are moving upward and are accelerating, and on a day-over-day basis the GGT universe is converting more to LONG-rated stocks than it is converting to CASH-rated, which means it is easier to pick winners.

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Momentum

I don't normally discuss the following chart, but we're nearing such lofty levels that it warrants attention.  As with all my images, right-click on it to open in a new window or tab:

The chart shows the GGT price index in red, and something called the GGT momentum index in blue.  I've artificially colored the areas on the chart where momentum was decreasing from a local peak to a local minimum, to make it easier to see where different periods influenced price behavior.  Of course this is all done in hindsight.

The first thing that should be evident is that price momentum can be waining yet prices can continue to move higher.  This is because we can still be moving upwards in prices, but doing so on a slower, day-over-day basis.  Again, using an analogy from yesterday, if I throw a rock upwards, it is losing momentum as it nears the apex of the arc, but it is still moving upwards until it hits the apex.  Same concept here.

What I find interesting is that during periods of consolidation in price, momentum is waining.   The converse is not necessarily true, but if we see momentum falling, it certainly is a warning flag.  Presently, we are continuing our increase in momentum, which bodes well for the present market.

I've artificially colored a zone at the top of the figure yellow.  This represents an area that is between the two largest momentum peaks of the past, and while we certainly can move higher than the last peak, we're entering an area that we historically have reversed within a few weeks.  

I watch this indicator daily, and if I see a reversal in momentum, I would view this as bearish on the intermediate term.  It doesn't mean sell, it simply means that locking in profits with tighter stops, or taking some off the table would most likely be my most prudent path forward.

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GGT and Effective Volume Candidates

I received a number of notes yesterday about my methodology on using GGT and Pascal Willain's Effective Volume.  The short answer is that I screen for all GGT stocks with a LONG rating, then I apply EV screens from Pascal's "Pascal(A)" that he has on his web site.  I then look for the strongest active boundary, EV, LER, and thrust stocks that are common to GGT.  From here, I individually screen each for specific EV patterns on new accumulation, using both an 8d interval as well as 40d interval.  I use TradeStation, so I'm able to see very detailed, intra-day views of stocks.

Here's the dashboard watchlist for April 6th:

I've NOT screened this beyond what is described above; you'll need to do that work yourself.  As always, do your diligence, be responsible, and take ownership for your actions.

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Trading Plan for Wednesday

I'm traveling today so my trading will be limited to a few hours in the morning.  I wasn't as successful as I wanted to be yesterday in deploying capital.  By the time I was able to get to my desktop, the market had already dipped and moved higher than the open.  I don't chase signals, and yesterday is a good reason why I don't -- the markets gave up most of their gains by the end of the day, which would have resulted in losses across the board for me.

I'm holding positions in AA, CAT, DIS, FCG, GE, GUR, IDX, and KOL, and all are looking solid.  Given the present status of the Price Accumulator Oscillator (+6), I'll most likely NOT add to these positions today.

No further discussion required.  :o)

Good luck trading/investing for the remainder of the week!

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Regards,

pgd

Play the Long Side, Possible (very) Short-Term Consolidation, be Ready to Re-Enter

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Remember, there is no face-to-face meeting this week, as I will be traveling to Knoxville on Wednesday - Sunday.  Please check the Yahoo! group poll and let me know the best dates for an electronic meeting, either next week or the following week.


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Summary

• We are in a confirmed up trend.  I am working hard to deploy capital, and today's pullback will be another opportunity to enter the market.
• The GGT Price Index was up +0.26% on volume that was weak at -22% below the 50d MA.  I'm not so hung up on volume (remember December?) but I'd like to see strong participation from both price and volume.
• The slopes of the pricing moving averages are all positive, which tells us that we're in an uptrend and that we should be playing the markets long ONLY.
• The Price Accumulator Change Oscillator moved from -14 on Friday to +4 yesterday with the close, saying that the reward/risk levels of entry are a bit poorer.  The way to play this is to enter a trial position of 10-25% when the end-of-day readings are below -5 (Friday's close was -14), then add to those positions when the market pulls back (today, if it continues lower, would be another day to enter another traunch, simply because we know the oscillator will move downward by the end of the day into the value zone.)
• The Short-Term LCR Change Timer has moved from LONG (+1) to LONG-CASH (0).  This means that the markets are weaker in terms of the Long-Cash Ratio of the database.
• The Intermediate-Termed Elder Force Index timer is completely LONG.  
• The Long-Cash Ratio (LCR) has just completed it's 12th consecutive days of gains, albeit yesterday was only a 1% change to the upside.  Putting this in perspective, we did 12 consecutive days in February 2010 and 13 consecutive days in March 2009.  I think we're due for some profit taking, so like I wrote yesterday, I'm not surprised to see a bit of consolidation occurring.
• All of the slopes of the LCR through the 65 moving average are all positive.  The database is expanding in terms of LONG-rated stocks, on time scales less than 66 days.  This means that it is okay to purchase stocks long (swim with the current).
• Despite the slopes of the LCR all being positive, I'm showing "peaking" activity in the LCR, e.g., yesterday could not close higher than Friday's value.  The analogy is a rock that you throw upward.  Yes, it's moving upward, but as it reaches the peak height, it actually is slowing.  We are at the "peak height" point in this analogy as far as the expansion of the database is concerned, and this means that we need to be prepared for some consolidation.

Conclusion:  buy stocks on the long side and avoid stocks on the short side.  I'm intending to enter stocks on a pullback, and will be watching today for a characteristic "V" pattern in the broad markets ... sell off early, bottom, then reverse towards the upside.  If I don't see the "V" then I most likely will wait to the very end of the day to enter positions.

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Confirmation of this "Up" Leg

Take a look at the following chart (as with all my charts, right-click on the chart to open in a new window or tab):

This chart is constructed by plotting the GGT Price Index along with the 65d moving average of the Long-Cash Ratio.  If you recall, the GGT database is comprised of stocks that

1. have above-average $-Volume (typically > $1Msh), 
2. trade on the three primary exchanges, 
3. have 50d average volume > 100K shares, and 
4. all have share values > $1.  

Additionally, the Long-Cash Ratio is literally the ratio of stocks with a LONG recommendation to those with a CASH recommendation, with this recommendation being assigned nightly.  If we apply a 65d moving average to this value, then measure the slope of this average, we have the plot above.

What the 65d moving average does is help us understand the intermediate-trends within the GGT database of ~2400 stocks.  Note that this is NOT price, this is the amount of stocks changing from LONG to CASH and CASH to LONG on a given day, averaged over a 65 day period.  This tells us more about the ebb and flow of the markets in terms of sponsorship rather than the price appreciation, which while important (it's what we bank), is only part of the picture.

The graph above shows when the slope of the 65d MA of the LCR has confirmed moves, as well as some other key dates that are fresh in your head.  When the value clears above the pink zone, the day-over-day change is positive, e.g., the database has more stocks entering LONG-rated recommendations than CASH-rated.  This is important -- we want to move to the long side when this value is positive, and generally, we want to be 100% invested on the long side when this value is clearing from the pink zone (below 0) to above the pink zone (above 0).

A few observations that I found interesting:

1. On 3/15/11 the slope of the 65d LCR hit a minimum.  Of course, we would not have known this until it cleared into positive territory on 3/30, but we certainly would have seen the positive nature of the move between 3/15/11 and 3/29/11.  This, in fact, combined with other indicators, gave me confidence about this move.
2. It certainly is possible to move upwards in price with the 65d slope line below 0.  What is more telling is that as the slope line is moving downward, from any region, there appears to be a direct correlation between price declines in the database as well as a decrease in the LCR slope value.  We obviously would not want to purchase stocks while this 65d LCR slope value was dropping.
3. Once the slope value stabilizes after falling, at any level, it appears that we have an opportune time to enter the market long.  Psychologically, this would be hard, because we've been falling and nobody knows if the present stabilization point is a pause to more decline or a reversal, but at this level, it would be a good opportunity to enter 10-25% of a position as a trial balloon, and ensure that good money management techniques are employed.
4. Look at the values of the 65d LCR slope line the past two days -- we've seemed to have peaked at a local high.  Given that futures are lower as I write this, I expect to see some form of pullback today in the 65d LCR slope line.  The magnitude of the pullback in the markets will determine whether the 65d LCR slope line only drops a bit or a significant amount, and we won't know this until the market closes tonight.

Conclusion:  while the Price Accumulator Change Oscillator is indicating a +4 (a tad more risky to enter the markets than this past Friday), the overall trend is upward.  The slope of the 65d LCR average is telling us that we've hit a local peak, and that we can expect a short-term pullback.  We should be prepared to enter further positions on this pullback, and because the 65d LCR average is in positive territory (with other indicators, of course), we should attempt to deploy as much capital as possible on the long side of the market.

To address the question of which stocks to consider, my raw watch list, for consideration today, is a mixture of strong GGT stocks as well as strong Effective Volume stocks.  Here's my dashboard:

(Right-click on the image to open in a new window or tab).

Of course, I make no representations of the above watchlist to your particular situation, so as always, do your diligence, take ownership for your actions, and be responsible with your capital.

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Trading Plan for Tuesday

I'm presently holding AA, CAT, DIS, FCG, GE, GUR, IDX, KOL.  If I see the characteristic "V" shape in price action during the day I'll continue to add incrementally to these positions.  With no "V" I'll most likely wait and see what the market does near the close of the day.

I've filtered the GGT/EV watchlist above to those stocks with favorable LEV patterns (not shown above, you'll have to do this yourself).  I'll be watching for the characteristic drop in price throughout the day but increasing LEV sponsorship, showing accumulation on price weakness.

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Regards,

pgd

Abbreviated Summary for Monday, April 4

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There is no face-to-face meeting this week, as I will be traveling to Knoxville on Wednesday - Sunday.  Please check the Yahoo! group poll and let me know the best dates for an electronic meeting, either next week or the following week.

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Summary

• GGT volume seems to be returning, compared to the 50d MA.  Last week we observed trading volume at -20%, -19%, -9%, -6%, and -2% on the day-over-day basis.  I does appear that participants are rejoining the party, albeit slowly.
• The slopes of pricing moving averages are all bullish on time frames from 5d through 65d.  This means that day-over-day and on multiple time frames you are making money in your accounts.
• Surprisingly to me, the price accumulator change oscillator moved DOWN on Friday to -14, it's lowest possible reading.  This indicates that reward/risk levels are favorable for entry on the long side of the market for Monday.
• The short-term Long-Cash-Ratio Change timer, and it's sister the VTI timer, are both long and have been since 3/18.  It's too late to chase this signal, so I would wait.
• The intermediate-termed Elder Force Index timer is long, and has been since 3/21, although it hit a rough patch on 3/22 and 3/23 and took some time to sort itself out.  Overall, it is safer to purchase stocks on the long side -- shorting will just get you in trouble right now.
• The Long-Cash Ratio closed Friday over 2.0, the highest level since 2/18.  This is bullish overall.
• The slopes of the Long-Cash Ratio moving averages are all bullish on time frames from 5d through 65d.  The database is expanding in terms of the numbers of stocks with a long recommendation, and this is a much better time to buy stocks.
• A bit of a crack in the bull ice is simply that the strength oscillator is at 86.9% and indicates that fuel is running out.  I wouldn't be at all surprised at some form of a pullback this week, but today probably isn't the day it will start.

Stay the course on the longer-term, and on the shorter term, simply be mentally prepared for a bit of a pullback for a day or two while folks lock in profits.  I already did on Friday ...

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Trading Plan for Monday

I raised cash on Friday given uncertainty of holding over the weekend (Japan, oil, Middle East), banking over 1.5% on my portfolios for the week, so I'm looking to get back into the market.  I'll enter positions that look attractive and are breaking out but will retain 50% cash in my portfolios, allowing these new positions to move upward yet pullback sometime this week, which will permit another entry.

Regards,

pgd