Hard selling today - March 10th close

.
Timer Table:

No changes today.  Both the short-term and intermediate-termed timers are in cash, and the long-term timer is still indicating that some equity exposure is prudent.

My target cash level is 75%.  I'm not there yet, but today helped.

Long-Cash Ratio Table:

Click on the table to open in a new tab or window.

As far as the LCR index is concerned, today was a very hard sell-off, with a 24% change lower in the index.  Out of all down days since September 2008 this one ranked at 108th, which is remarkable.

Still a sea of red on the right side of the table, so there is little chance of a major reversal on Wednesday.  This being stated, note that we've fallen quickly in a very short period of time, and we are presently entering oversold territory.  A short-term reversal up, out of oversold territory, would not be a major surprise for me.

Individual Index Cumulative Tick:

Click on the table to open in a new tab or window.

When we look at the cumulative tick on stocks that make up the individual indexes, we see that there was little confidence at the end of the day.  The S&P500, the Russell 2000, and the NASDAQ sold off (net) in the last 30 minutes, which is not a good starting position for Wednesday.

Cumulative Tick:

Click on the table to open in a new tab or window.

The cumulative tick chart shows that again, we have a large number of stocks hitting new 52-week lows, and we had a stronger down day in the overall cumulative tick.

The un-weighted white trace is well below the averaged red trace in the bottom pane -- I'm not buying stocks, period.

~~~~~~~~~~~~~~~~~~

Strategy:  I continue to raise cash to my 25% invested / 75% cash target.  I'm not buying.

~~~~~~~~~~~~~~~~~~

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

Regards,

pgd

Indices Diverge from Underlying Indicators - March 9 Close

.
This will be short.

No change in timers -- short and intermediate term are CASH, long-term is LONG.

Targeting 25-33% equity exposure -- see yesterday's blog.

The major indexes were up today, but I'm not a believer.

Case-in-point #1:  Cumulative Tick

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

Discussion:  Top trace:  more 52-week New Lows (red) than 52-week New Highs (green).  Big warning sign; certainly do not buy stocks.

Middle trace:  500 stock/min filter on the cumulative tick, ticked DOWN mid-day but was more/less flat to negative.  More selling than buying today.

Bottom trace:  The white trace is the instantaneous cumulative tick.  As you can see, it stayed flat all day.  The trends are down.  Since White Below Red, no buying.  Period.

Case-in-point #2:  LCR Table

Discussion:  the LCR FELL today, a certain divergence from the price action of the indexes.  All the slopes (on all major time frames) are negative, which is not supportive of price increases in the markets.

On the right, we see that the shorter "acceleration" measurements are trying to break out, but they are unable to (mostly red above 13d).  We need green on the right before we see green on the left, so we have a major divergence.

~~~~~~~~~~~~~~~~~~

There is nothing here that indicates we should be in the markets.  My cash target is 67% - 75% cash,   Today's 1% TSL on my selling positions was not favorable to getting out, but that's by design.  If tomorrow is a down day they will trigger and I'll be out.

~~~~~~~~~~~~~~~~

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

Regards,

pgd

Intermediate-Timer Confirms Move to Cash, Mar 6 Close

.
Summary:  The intermediate-termed timer has solidly confirmed a move to CASH.  The short-term and intermediate-termed timers are now recommending CASH status, and this indicates that equity exposure should be no higher than 25-33%, 25% if you are more conservative, 33% if you are more aggressive.

Timer Table:

LCR Slope Table:

Discussion:   The long-cash ratio fell -22% to a value below parity, or 0.969.  This means more stocks in the database are recommended in CASH compared to those that are recommended as LONG.  The trend is down, so I expect to see this get worse before it gets better.

Study the slope indications above.  All the slopes of the moving averages are now negative, meaning that we're entering a bearish period.  On the right side of the table, there is far more red than green -- and we need the slopes of the slopes to turn upward before the left side of the table will turn green.  We are not there yet, so I'm being cautious.

Cumulative Tick

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

Discussion:  More stocks hit their 52-week New Lows than new highs by a thin margin.  I do not buy stocks when this is occurring.

The middle trace shows a red line that fell throughout the day.  This is the cumulative tick, but with a 500 stock/minute filter on it -- when it ticks down, you know that on net, more than 500 stocks are being sold per minute (net).  This usually occurs in short bursts -- not like what you see above.  Many people unwound positions all day long.

The bottom trace is the ominous one.  At about 12:15 pm ET or so the cumulative tick plunged below the 10-day MA, and it never looked back.  I DO NOT BUY STOCKS when this value is below the red trace -- stocks are being sold, not bought.  If the slope of the white line is down I don't even consider buying, not even breakouts.  The headwinds are simply too strong.

My Strategy:

Raising cash.  I plan to continue raising cash, as I did most of last week.  My new target is between 25-33% invested, with the rest sitting in cash.  Here's how I do it:

1) sort all holdings from worse to best
2) sell weakest positions with a 1% trailing stop loss (TSL), good-til-cancelled (GTC), effective after 9.:45 a.m ET
3) keep the sell orders in place until they execute or until we get a buy signal.  Doubtful that Monday will reverse as strongly to the upside.

~~~~~~~~~~~~~~~~~~~

You are responsible for your investment decisions, and I am not.  Do your ow diligence, and please take ownership for your actions.

Regards,

pgd

Intermediate-term timer now MIXED; raising more cash as of Mar 4 close

.
NOTE:  Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you.  It helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.  If you miss a signal this system will most likely produce sub-par results, which isn't my fault.

~~~~~~~~~~~~~~

Summary:  Today's action (close of Wednesday, March 4) shows a continuation of the downward trend I've been discussing.  The INTERMEDIATE-term timer has transitioned to "MIXED", which means internally, indicators are not in alignment to whether we are going up from here or continuing downward.  This occurs when there is not a consensus of trend.  

With the INTERMEDIATE-term trend timer now in MIXED, and not far from CASH, my new target cash level is 50%-67%, or 33%-50% invested.

~~~~~~~~~~~~~

Timer Status:

Short-term timer:  CASH

Intermediate-term timer:  MIXED (weak)

Long-term timer:  LONG

Slope Table:

Click on the image to open in a new tab or window.

Discussion:  The Long-Cash Ratio (LCR) fell to 1.300, a drop of -14% from yesterday.  This is within normal daily range for down days and is relatively unremarkable.  More importantly is that all time frames from the 2d through the 34d range are now negative in slope, meaning that stocks are moving to some form of CASH on many significant time frames.  Another day of 34d slopes being negative will most likely cause the intermediate-term timer to move fully to CASH, forcing me to drop to 25%-33% invested and the remainder in cash.

Thursday's action will be important in context of the timers; even if the broad indexes are stable the LCR will provide internal views to the overall market behavior -- to some extent ignore the main indices.

Cumulative Tick:

Click on the image to open in a new tab or window.

Discussion:  The Cumulative Tick is the only reason I'm not dropping my equity levels to 25%.  We are still in a buying market -- the solid red line indicates that net-net, people are buying stocks more than they are selling.  The solid white line, being above ALL of the moving averages, tells me that despite the major index action today (which was poor), everybody ended the day buying.  This is a fine-looking chart, actually.

Strategy:

As indicated above, my new target is 33-50% invested, and for my own personal circumstances, probably closer to 50 than 33.  The weakness of the intermediate-termed timer forces me down from just the short-term timer level, and the LCR 34d slope value being negative gives me pause.  Again, another day where the 34d and all the shorter EMAs remain negative will not be good.

The "tell" is the cumulative tick.  If the white trace were below the red I'd be heading for the doors, but it's the exact opposite.  People are stepping into this market.

I am NOT a buyer on Thursday, under any circumstances.

I have placed a 1% TSL, GTC, active after 9:45 a.m., on my weakest positions and am looking to get down to 50% cash.  NONE of my TSL's triggered today -- THAT is what good stocks do on a otherwise bad-index day.

~~~~~~~~~~~~~~~~

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

Regards,

pgd

No-change in Status, Close of Tuesday, March 3rd

.
Summary:  The Long-Cash Ratio fell another -8% to 1.510 on Tuesday, meaning that 1191 stocks are in some form of "CASH" status and 1799 are in some form of "LONG" status.  The indicator has fallen the past 5 of 7 days, hence the trend is down.

In general the LCR table is confirming bearishness on a short-term time frame.  Stating the obvious, the trend downward will continue until it stops.  For now there is nothing to do on Wednesday except continue to raise cash.

Consequently, I'm driving towards a 34% cash position.  The leaders are doing well, so this is harder than it sounds.

On the intermediate- and long-term time frames, we are still trending upwards.  I plan to keep 50%-66% invested in the market until the intermediate timer triggers to CASH.  This could occur as early as the close of business Wednesday if the day is down hard.

~~~~~~~~~~~~~~~~

Regards,

pgd

No Change to Status, Monday, March 2nd Close

.
Summary:  Despite the positive action today (Monday) systems are relatively unchanged.  The Long-Cash Ratio moved up +3% to 1.646, which is barely notable.

The short-term timer remains in CASH status.  The intermediate and long-termed timers are unchanged in LONG status.

Monday's action was positive -- not many of my TSL, GTC selling orders filled.  This means that when they do execute I'll most likely get a higher price than if I had simply pulled the trigger at 9:45 am or 10:00.

I'm still raising cash to a level of 66%-75% invested (25%-33% in cash).  I am expecting a short-term drop in the next week or two.

Of course, the short-term timer could reverse here and we could move higher -- your crystal ball is as good as mine.  If this occurs I will

1) cancel all pending TSL orders
2) move aggressively to get 100% back in the markets

Your actual mileage may vary.  Do your own diligence.

Dropbox files are updated.

Regards,

pgd

Short-term Timer Transitions to CASH - Feb 27 Close

.
NOTE:  Please subscribe to this using the "Follow by Email" link to the left.  Nobody gets your email except me, and I promise that I won't email you.  It helps me see the number of folks reading this as well as ensuring you get the signals on a timely basis.  If you miss a signal this system will most likely produce sub-par results, which isn't my fault.

~~~~~~~~~~~~~~~~~~~~~~~~~~

Summary:  the short-term timer has moved to a CASH status, requiring that exposure to equities be reduced.  Cash target levels are 25% - 33% (66% - 75% invested).

Timer Status:

Short-term Timer:  New Cash
Intermediate-termed Timer:  Long
Long-termed Timer:  Long
Long-Cash Ratio:  1.602, falling for 4 of past 5 days

Here's the Timer Table:

Commentary:  As stated above in the Summary, the transition to "New Cash" in the short-term timer suggests a short-term defensive stand.  The transition is from 100% invested to no more than 66% (if conservative) or 75% invested (if more aggressive).   If you are really conservative there is no reason that you couldn't raise 50% cash, but until the other longer-termed timers transition, I wouldn't go any lower than 50%.  The "Long" status of the intermediate and long-term timers suggests that we are still in a rising market, but this could easily change if the short-term trend downward continues.

The falling LCR is normal once we have achieved a local top and is indicative of digesting recent gains.

Long-Cash Ratio Slopes:

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

Commentary:  The -10% drop in the LCR on Friday, February 27th is notable in that it's the largest one-day drop since 1/30.  I have no idea if we will continue lower from here -- your crystal ball is as good as mine -- but the drop is notable in that it caused the 2d-13d LCR slopes to all transition to negative.  This is what triggered the short-term timer to a CASH status and should not be ignored.

You can see that the right side of the table has a good level of red -- we've been decelerating for a number of days, and the action last week simply confirmed what was going on.

Cumulative Tick:

Right-click on the image to open in a new tab or window:

Commentary:  For all intensive purposes we're still in a buying market.  I base this statement on the solid red line that goes from lower left to upper right -- this is a day-over-day buying on the NYSE.  If you're not familiar with what a "tick" is you can read about it here and about the cumulative tick here.  This red line is a simple moving average of the cumulative tick and it shows that more stocks are being bought than are being sold.  The solid white line is (generally) above all the other moving averages, so they are being pulled upward.

Until the cumulative tick indicator reverses there will not be a clear confirmation of the downside.

With the LCR pullback, and the cumulative tick lower-left/upper-right, we have a weak pull-back and this suggests that we should remain in the markets, at least for Monday, March 2nd (and probably longer).

Strategy:

As I indicated in my webinar that I conducted today (Sunday, March 1), I intend to sell positions that are 1) underwater, from the weakest to the strongest, until I have raised at least 33% cash, and if I exhaust those prior to reaching 33% cash, then 2) the weakest positive-performing holdings.  Whether you choose 25%, 33%, or 50% is up to you, but my rules suggest that raising some cash would be prudent.

My underwater positions only total 9.2% of my portfolio.  Hence, I need to cut into my winning positions.

Selling positions is tricky, so here's what I have done to take the emotion out:

1) It does not make sense to sell portions of positions -- the bookkeeping becomes a royal PITA.  Hence, sell the full positions, which makes basis calculations a bit easier.
2) For the positions that are underwater, I have placed a 1% trailing stop loss (TSL), good-'til-canceled (GTC), effective after 9:45 a.m. ET on Monday, March 2nd.
3) For the positions that are above the water line I have placed orders for a 1% TSL, GTC.

If all orders execute Monday then I'll be almost to 34% in cash.

We'll look at Monday's action and determine what to do on Tuesday.  As I write futures are up slightly but the Nikkei is down -0.4%, so don't try to guess the markets.

I have no intention of buying any stocks on Monday, period.

Orders are placed, so there is nothing to do for Monday.  I doubt that I'll check the markets except for curiosity ...

~~~~~~~~~~~~~~~

Thanks to those who attended the webinar today.  The recorded video is in the Dropbox folder.

~~~~~~~~~~~~~~~

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

~~~~~~~~~~~~~~~

Regards,

pgd