Signal Change as of Close of Markets on October 16th

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With the close of markets on 10/16 the GGT indicators have moved long on all measured time scales. While this is somewhat suspect during OpEx week, I'm compelled to move long as my timers are better at performance than is my discretionary trading.

The short term timer has moved long due to the slope reversal in the Long-Cash Ratio on the 2d, 3d, and 5d moving averages:

The transition of these 3 time frames from a negative slope to a positive slope has historically signaled a good entry (today), and consequently, with the Elder Intermediate timer already long (see yesterday's post) as well as the already-long longer-term 13/65 timer, we have three confirming signals.

Suspect is OpEx week, longer timers already long (in the tooth) compared to the short-term timer, and a rocky election pending in 21 days. Nevertheless, I'm moving long in AAPL, IWM, QQQ, SPY, and VXF in various accounts, and will look closely at different stocks from the DIVA list  (those that are showing accumulation in the face of falling prices).

Regards,

pgd

Models are in Cash: 10/10/12

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Although there was buying in the last minute of the day on 10/10 (Wednesday), it was not enough to keep my models on the LONG side.  Correspondingly, I'm exiting all positions in my personal accounts and although IWM is still holding on by a thread, we've given up almost all the gains in this position and I'm not overly optimistic that it will end positive.

Overall, my timers look like the following:

The short-term timer continues in a CASH mode and is the result of a contracting Long-Cash Ratio.  You'll see that below.  The Elder Intermediate timer has signaled two consecutive days of CASH, and when this occurs, this is a clear sign to move to the sidelines.  The long term timer is still showing LONG status, as the 13d is well above the 65d, so on a long-term perspective, we are still in an up trend, although the slopes of the 13d and 65d are trending downward and are converging (meaning that this signal is in danger if the markets to not change).

The LCR slope mechanics show me that we are in a period of database contraction (N = 3131 stocks) and that more stocks in the database are in some form of CASH status than are LONG (LCR = 0.896).  As you can see below, we've been in this area of contraction on all time scales since 9/26, so aside from the minor issue that I was out of the country from 9/19 through 10/4 and nobody was watching this table, there has been ample indication of a slowing market.

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

In the end, I am not a buyer of stocks today.  I am specifically waiting for the intermediate-termed timer to transition to a LONG state from either CASH or MIXED mode, and it will take a significant market event for that to occur today.

As always, do your own diligence.  You are responsible for your own decisions, and I am not.

Regards,

pgd

Update for Friday, September 14 - Method of Stock Selection and Entry

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For those of you with Dropbox access, you will note that in the stock file has 166 New Longs and the ETF file has 26 New Longs. 

I've not listed the number of Affirmed Longs but they are even greater in numbers.

With so many equities firing long or reaffirming their long status, how to evaluate which ones should be in consideration?

The Dashboard tab of the stock file can provide some guidance. 

The stocks on this tab are selected based upon what I would consider "quality" data:

1. The stock must be well above the 200d, 150d, and 50d MAs of price
2. The stock must have each of these MAs in an up trend (slope is positive)
3. Year over Year revenues must be > 2% and must be accelerating over a minimum of 2 quarters
4. Year over Year earnings must be > 2% and must be accelerating over a minimum of 2 quarters

Provided the above is true, I then integrate the list with Pascal's repository file which contains EV data for each. I then sort based on the EV Rating, which combines numerous EV values into a single indicator that ranges from 0 to 100.

Many of the stocks at the top of this list are already extended well above their 10d EMA, which means they have been running faster than the day-over-day gains of the last 10 days. It is noteworthy to add these to a short-term watchlist, and review these for possible pull back and entry on the pull-back.

I'm a big fan of Dr. Elder's Force Index, not necessarily because it makes sense to multiply volume with change in price, but because averages and change in averages of these values can give us some confidence with what is going on in general.

Key criteria that I look for on entering a stock is to determine the status of various Dr. Elder parameters. On the day of entry I specifically want:

1. The slope of the 13d MA of the equity to be positive
2. The slope of the 34d MA of the equity to be positive
3. The 13d Force Index of the equity to be positive
4. The 2d Force Index of the equity to be negative

The first three in this list ensure that the stock is on a sustained up trend path and the last criteria means that it has pulled back in a local consolidation.

The trigger entry for me depends upon whether I'm aggressive or conservative:

• Aggressive: the real-time stock price has taken out the previous day's close (price > close)
• Conservative: the real-time stock price has taken out the previous day's high (price > high)

Looking down the EV list on the Dashboard page, if I select only those stocks with a Rating > 50, and apply the Elder criteria going into the open today (Friday, 9/14), I get the following list:

EW
FISV
VSI

Everything else is over-extended.

Whether you like these stocks or not is subjective; they are on my radar list for possible entry today if they move above my trigger points.

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

Make it a good Friday, and enjoy the weekend!

pgd

Update for Wednesday, September 5th -- GGT Combo Timer Issues Long Signal

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With the close of markets on Tuesday, Sept 4th, the GGT combo timer has issued a long call (right click on the image to open in a new tab or window):

Positive attributes are that we are

1) above the GGT 200d simple moving average (long-term up trend)
2) positive slope on the 65d SMA (not shown, but also a long-term up trend).
3) volume was the strongest in some time, appearing at -4% below the 50d MA of volume (folks are returning back from vacation, e.g., there are buyers and sellers)

Statistically, the signal has a positive expectation:

These stats are calculated using the GGT index, which looks very much like the ETFs VTI or IWM, depending upon market conditions. Right now the IWM most closely resembles the GGT index on a 34d, 65d, and 100d look back review, so I will consider moving into IWM based on these stats.

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The GGT Price Slope Model is fully bullish, with two major price accelerations over the past two days (right click on the image to open in a new tab or window):

Note that the database strength index, which is a composite value made up of price, volume, and price rate of change, has moved up quickly from 0.46 to 0.64, and while it may pull back a bit, has considerable room to move upward. The fact that the 65d slope on price is positive and the latest round of negative slopes on shorter time frames did not extend to the longer time frames tells me that the trend is intact.

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The GGT LCR Slope Model has a wrinkle in it, but only slightly at the 13d level (right click on the image to open in a new tab or window):

Again, the 2-day acceleration in LCR gives me some confidence, and the fact that all slopes except the 13d are positive also gives me confidence at the longer-termed trend.

I note that the 4% and 10% gains of the LCR over the past two days are not "knock the skin off the ball" gains (I would have rather seen some massive volume and movement in the entire database), so we certainly can test the trend. I intend to buy small positions on pullbacks and reversals upward.

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With respect to entering a core IWM position, the money management looks like this:

There was some accumulation in IWM during the afternoon trading session yesterday, so some big boys have left footprints (right click on the image to open in a new tab or window):

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Make it a great day! I am traveling tonight and tomorrow and will post as time allows. With respect to signals, obviously, you are responsible for your own trades and are obligated to do your own diligence. Please take ownership for your actions.

Regards,

pgd

Update for Friday, August 10th -- Combo Timer Signals LONG

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I'm always conflicted when a timer fires long at the top of a local peak. We have this situation as of the close of markets on Thursday, August 9th -- the GGT Combo Timer, which is comprised of an intermediate-termed timer and a long-term timer, has signaled that we should be long in the market on longer time scales.

A couple of items are notable:

1) we are above the 200d MA. It will be critical to stay above this level if we are to see the long-term trend remain intact.
2) we whipsawed this signal in November 2011. That situation was a bit different, as the 200d was resistance, not support, and we never cleared the 200d in the time leading up to the signal.

Overall, this timer combo is my best performing signal over the long haul. Here are the stats:

Just because it's the best performing does not mean it cannot fail. 6 out of the 20 total transitions have failed, so keep that in mind. Had you invested in the GGT index, your worse trade would be -2.41% and your best trade would have been 19.6%, so keep that in mind too.

20 trades is a weaker number than I like -- but it runs back from 9/2008 and when this timer does go long, it typically keeps you long for a period of time, contrasted with shorter-termed timers (e.g. Pascal's MF, etc.)

In terms of all the timers I track, the performance since 9/08 is solid:

Of course, you need to do your own diligence and make your own decisions on what you want to do as next steps.

For me, I'll most likely open a 0.5% position in the major index ETFs and add to them on a pull-back, for a maximum of 2% exposure in each. I expect that the markets will pull back here in the next few days, giving my Elder-entry methods a chance to work.

As far as stocks -- and this is what bothers me -- although we have some solid leaders, they have been leading for some time, we appear to be hitting some resistance overall, and I expect that we'll have a pullback. Additionally, I've been traveling, so I've been watching ETFs more than stocks and need to take some time this weekend to start an in-depth review. 

It is highly unlikely that I will move into stocks today, intending only to review the broader ETFs at this time.

Regards,

pgd

Update for Thursday, July 5th -- Short-Term and Intermediate-Term Timers LONG

Last Friday northern Virginia experienced a severe weather event that knocked power out at my home from Friday to late July 3rd. I'm back on line, and as luck would have it, GGT detected a simultaneous entry into the markets with Friday's close that I didn't discover until later on the 3rd. I don't chase signals, so I intend to wait for a pullback to enter at this time.

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With Friday's close (6/29), both the 4d LCR (short-term timer) and the Elder (intermediate) timers moved long. GGT is up 1.66% since this time if you entered at the open Monday (I obviously did not since I could not run my analysis), so this may be a haircut that I simply have to endure. Note that the long-term 13/65 day timer is still in cash, which is holding my portfolio mostly in cash. We are still days away from a "all-clear" signal to enter the markets en masse, although it certainly is possible that selected stocks should be played to the long side.

A number of stocks look interesting to me at the present time:

ALXN
CATM
CHDN
CPHD
DDD
ECHO
GPX
HCII
INWK
ISRG
MIC
SEM

Another list that I'm looking at screening in terms of EV is this:

AKRX
AME
ARSD
AUXL
CHDN
CSTR
CXPO
CYNO
DLR
DRH
LDL
LKQ
MIC
MWIV
SWI
SYPR
TGH
TITN

There may be some overlap between the two lists, as they are derived by different criteria. Certainly not a recommendation to buy; do your diligence. What is most important here is that these have favorable fundamentals and technically, have good set ups. 

The broader ETFs are slow to the party, with IWC, SSO, TNA, and SPXL being the only ones with a "long" type of status. Note that the short/contra ETFs clearly signalled their exit with Friday's action. You can review these ETFs in the Dropbox file folder that many of you receive.

My plan for today is to watch for good stocks offering good entry points and to enter between 0.5% and 2.0% risk positions in the candidates. If I do not have MAE data available, I intend to use 2 * ATR(20) as my MAE / stop level from my entry. I'm not loading up here, due to the long-term timer being still in CASH, but I'm interested in getting some initial positions in play.

Here are the charts:

Regards,


pgd

Update for Tuesday, May 29th -- Short Term Signal Moves Long

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Effective with the close of markets on Friday, May 29th, GGT models are indicating that a short-term long entry into the market is warranted.  This is based on two key indicators:

1) the 4d average of the Long-Cash Ratio has been crossed from below by the daily LCR, and
2) the slopes of the 2d, 3d, and 5d exponential moving averages of the LCR are now positive.

When we get this type of signal we typically can enter on the long-side as close to or below the closing price on the day of the signal.

Overall, statistics for this signal are okay at best but not the best of the GGT systems:

There are a fair number of trades with this methodology -- 66 -- and there are favorable independent metrics such as the System Quality Number (SQN), the Mathematical Expectation (ME), and Pessimistic Return Ratio (PRR).  We want these values to be above 1.7, 0, and 1.0 respectively, and as you can see, PRR is on the threshhold.  Nevertheless, all show a positive edge.

Note that if using the GGT index (close proxy is the ETF Vanguard Total Index, symbol VTI), the worse signal of the 33 losses is a realized -7% and the best trade of 33 wins is + 12.5%.  Median is 0% so the tails are balanced -- this is truly a balanced system.

The evolution of the SQN tells me how the system has been behaving recently:

The number of trades is listed across the bottom and the SQN is on the y-axis.  The system seems to bounce between 2.00 and 2.65, which is higher than the recommended level of 1.7 and indicates a better-than-chance edge at long-term success with this model.

Working against me is that the intermediate-termed timer as well as the long-termed timer are both quite negative and are indicating CASH:

This means that we are swimming up stream with this signal, and when trout swim up stream, they tend to get eaten by the bears.

In terms of familiar price and slope charts, here you go:

Note that the 5d EMA slope of the LCR is now positive, and note that it is on an upward trajectory.  Any failure of this below 0 will cancel our short-term buy signal.

Somewhat disconcerting to me is that we have a significant narrowing of the price slopes for all time frames. We can break up or down from here -- up is good/bullish, down is not good.  Note how these have fallen back below the zero line or are right at thresholds -- it's never good to buy at thresholds because of potential whipsaws.

Time will tell.

I intend to enter a 1% @ risk position in VTI near the open on Tuesday morning, with a stop loss at -7% below by entry point.

Regards,

pgd