Top 25 ETF Portfolio Master Signal Change

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Reminder:  There will be no entry on Friday and the weekend entry with the file updates will be late Sunday/early Monday, as I am traveling with my family Thursday - Sunday in upstate New York (Troy). I will attempt to update the files via remote login, but no guarantees.

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Summary

• The Top 25 ETF portfolio has signalled a reversal change, meaning all positions should be sold and contra ETF positions should be entered.  We normally would sell positions on Thursday morning, so we are lock-step with our normal calendar.
• Overall, we are still early for mass movement into Contra positions, but selected contras do look appealing.  Money management, and risk management are key.

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Top 25 ETF Portfolio

The Top 25 ETF portfolio has signaled a portfolio-wide change in sentiment.  This does not occur often, and I have only 4 signals generated since testing began a year ago this month.  There is no ambiguity in the signal -- I simply create an index of all the ETFs that are recommended since the previous evaluation period (last week Wednesday night close) and watch this basket index on a daily basis.  When the Elder FI(13) is below 0 on the basket index for three consecutive days or more, it's a problem.  Wednesday's action comprised the 3rd consecutive day.

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

In the figure above, I draw your attention to the upper right corner, specifically the Elder Force Index lines.  Note that both EMA and SMA methods are negative in value, and correspondingly, given the 3-day run, this change in sentiment means that the basket should be closed.

This is where the strategy bifurcates. 

Option 1:  Generate a new basket based on the same methodology.  The advantage of this method is that it will pick the strongest ETFs that have a GGT ranking of long.  The disadvantage of this method is that it heavily weighs momentum (continued moving in the same direction based upon where it has been) and does not take into consideration acceleration (newly emergent equities have acceleration but little momentum).

Option 2:  Generate a new basket based upon acceleration, which reflects changing sentiment.  The advantage of this method is that it has a greater chance of capturing the mood of the last week, and does not pay attention to momentum.  The disadvange of this method is that it is riskier of sentiment continues to change faster than 1 week in time frame, potentially causing a complete change in the basket NEXT WEEK.  This is significant turnover and there are transaction costs associated with this.

Backtesting of this strategy used Option 1.  Drawdown levels approached -13%.  Portfolio turnover with option 1 increased dramatically as equities rolled off the GGT LONG list and into CASH, causing rotation on a week-over-week basis (hence, little advantage over Option 2 in this regard).  Backtesting shows that Option 1 had you in the most powerful equities when the next turn in sentiment (e.g. bullish) occurred, but the issue obviously is the drawdown.  This is a large drawdown due to the leverage possible in this portfolio.  Again, this option has you long at the bottom, fully capturing the move upward when the market does eventually reverse to the upside.

There has been no comprehensive backtesting of Option 2, as my HGSI software cannot provide backtesting data.  I've done some manual spot checking at obvious turning points over the past year and if we are nimble, we can take advantage of this on the Contra ETF side and participate in the downside move of the market.  It will mean that we will miss the bottom, but it means we'll be in tune with market sentiment at the present moment, which I think is the way to go.

The next question is what equities to choose at this time.

To answer this question, I look at the weekly time frame, and I use a list of contra ETFs that have the greatest performance in terms of relative strength (compared to the Russell 2000) and that have increasing Large Effective Volume, the latter measured over the last 40 days.  Here's the list:

• REW
• TYP
• SSG
• BOM
• SOXS

Only 5 ETFs are listed -- on a weekly time frame, these are the only ETFs that have accelerating relative strength and that are attracting big money.

The next question is one of position size.  While this is the Top 25 ETF portfolio, I've heard loud and clear from you that managing 25 positions is very difficult.  Correspondingly, I'm reducing the number of positions that should be considered using statistics and volatility measurements from each of the equities being considered.

I'm using the site RiskGrades as a guide for historical risk measurement of various equities.

Targeting a 2x return on risk no greater than 2x the S&P 500, we desire a target risk grade of 2x (SPY) = 2 * 62 = 124.  Using the basket above, 9 positions achieves the desired goal (projected risk grade with 4 positions in CASH and the 5 positions above yields a targe 115 Risk Grade).  Hence, each of our positions should be 11% in size.

Given the extraordinary selloff of equities today, entering contra positions at such a high value is not in our best interest.  I intend to wait for the inevitable bounce or recovery, either later today or tomorrow.

I'm content to let the portfolio remain in cash today.

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

Regards,

pgd

At a possible inflection point per the NASDAQ; some stocks look good

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There will be no entry on Friday and the weekend entry with the file updates will be late Sunday/early Monday, as I am traveling with my family Thursday - Sunday in upstate New York (Troy).  I will attempt to update the files via remote login, but no guarantees.

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Summary

• My risk/reward measurement tool is mid-scale -- buying stocks today has an equivalent risk/reward profile, e.g., 1:1.  If you purchase stocks today ensure that they are moving upward aggressively.
• The GGT price index rose 0.88% on volume that was 6% higher than average -- unremarkable.
• The NASDAQ bounced off it's 50d MA for the 6th time yesterday, which typically is bullish overall.  The test of the 50d MA was in rapid succession, which according to some only counts as 1 test, not six, so interpret how you may.  Here's a link to the chart.  The important thing here is that the slope of the 65d moving average (MA) is positive but pointing down -- the positive means that there is still fuel in the tank BUT on the present course, we're going to break the 50d MA soon.  I need to see this slope line turn upward or at least horizontal for me to have a bullish view on the markets.
• The strongest GGT industry group is a defensive group:  Health-Hospitals/Nursing.  There are 22 stocks in this group that I track, and only 1 of them is rated "cash".  The majority of them have a positive 13d Force Index as well as a positive 2d Force Index, making entry today problematic in terms of risk/reward.  You should scan the group nevertheless.

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GGT Stocks with Favorable Effective Volume

Here are the stocks that I'm reviewing today:

As with all my figures, right-click on the image to open in a new browser window or tab.  If a stock is listed above but not discussed below it does not meet my review criteria.

1. TXT continues on the list with favorable 40d Large Effective Volume (LEV) and slight accumulation on an 8d scale.  Volume was 22% above average yesterday.
2. *SYT saw an increase in LEV yesterday while the price dropped.  The 8d LEV is diverging nicely from the Small Effective Volume (SmEV), which I like to see.
3. CE continues to show LEV support on the 40d scale as well as the 8d scale.  Note that there was some LEV selling that occurred around 2:30, but overall, the change was within the norm for the stock.
4. LFT has a favorable 40d as well as 8d LEV, but note that there was some selling that occurred on the LEV near the end of day that was hidden nicely from price.  This could be a crack in the ice for LFT, but overall, it's been accumulating nicely.
5. MAS saw significant LEV buying at the end of the day while the price remained more-or-less steady.  
6. BLT is a rather new breakout (GGT New Long) and the LEV pattern reflects this, with very little 40d support but solid 8d support.  If you like new candidates, pay attention to all GGT New Long entries with good EV support.
7. *NBL saw continued accumulation on falling prices.
8. WMB saw continued accumulation yesterday while prices peaked then fell.  There was a bit of LEV distribution at the end of the day, but overall, this looks interesting.
9. *SUN saw huge accumulation all day while prices fell at the open and never really recovered.  Did I say I like this pattern?
10. *GENZ is a bit more risky but has been experiencing an amazing accumulation pattern of lower-left to upper right on both the 40d and 8d scales, with barely any pullback since 3/1.  Someone picked up a 375K share big block yesterday, spending nearly $28M in 1 minute.  Give it a look.
11. CVH continues to hold LEV levels while price falls, which is good for the stock.  SmEV is dropping, showing the retail guys moving through the exit door.
12. *AEO continued to hold LEV steady on Tuesday while prices eroded all day.  Overall, the 8d and 40d LEV patterns are very strong.

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Trading Plan for Wednesday

• TPLM is my worse holding, but LEV is remaining rock steady since my purchase of a trial position of 200 shares.  While price has dropped 8%, the fact that LEV is so strong will keep me hanging in there.  Note that I do have a trailing 2*ATR20 stop on the stock.
• DIS will be sold in the EMCF portfolio for about a +5% gain.  The stock is rapidly losing LEV support and the price is not moving anywhere.  Without institutional support under it, I don't want to see the gains erode.  Further, the Elder FI(13) test using both EMA and SMA methods has failed 2 days in a row, showing that the stock is net down in volume overall.
• I'll purchase trial positions (25%, adjusted for ATR) in the stocks above if they look strong in the markets, as measured by price and/or LEV.   I do note though that the GGT risk/reward tool is mid-scale, showing a mediocre (at best) risk/reward ratio.

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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

Position Disclaimer:  I own or influence positions the following equities:  DBA, DBC, DIG, DIS, DWSN, ERX, EXPE, FXF, GG, IGE, IGN, IXC, RJI, SCSS, TIP, TPLM, VDE, XLE, XOP.

Market Models are Confirming Move to Cash, but not Contra ETFs (yet).

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Summary

• Investor's Business Daily Market Pulse has moved to "Market in Correction".
• Effective Volume has confirmed a 20d Money Flow "short signal" which has been confirmed by 4 high-liquidity contra (inverse) ETFs.
• Elder's 13d Force Index, using the simple moving average (SMA) method, has confirmed a move to cash within the GGT system.  The exponential moving average (EMA) method is within 0.15% of a daily move of confirming the move to cash, and is within the noise of calculations.  Color Elder in CASH for the GGT universe given other indicators.

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Contra (Inverse) ETFs

Market tops never occur on a sole day, or even a sole week for that matter.  I remember October of 2007, when the market peaked around the 12th, dipped, then went to a higher high around the 21st, dipped, and then the wheels came off the cart starting November 1st.  We had plenty of warning, but it was over a 3 week period.    Only on November 2nd or so could we confirm that "Yes, we should have moved to cash in mid October."

This was not unlike what we are seeing right now.

Of course, your crystal ball is as good as mine, and we could certainly rally from here.  Many stocks have pulled back to their 17d average, 50d average, and 200d average, and these are historically programmatic support levels.  The question is whether they will hold.  If they do, we'll see a nice move upward to previous levels.  If they do not, we'll have a nice opportunity to make money on the down side using contra vehicles.

Note that my observations are whether the supports will hold, not whether the resistance levels of new highs will be penetrated.  This is key, as it points to the risk model (actual and perceived) as being defensive.  Given this, my attention naturally moves to the status of the Contra ETF universe.

I like to start with the 3x Direxion Bear ETFs, as these are hyper-sensitive to moves.  These trade -3x to the underlying, which means that if the Russell 2000 Small Cap Index moves upward +1.0%, then the tracking ETF (symbol TZA) will drop -3.0% on the same day.  The converse is true too, which is why these are attractive vehicles.

When you combine all of the Direxion Bears into an index (I use HGSI software), we get the following presentation:

The presentation above contains a considerable amount of content, so let me go line by line.  As with all my images in my blog, right-click on the image to open in a new window or tab in your browser.

The image includes a data window, so you can see the numeric values.  Please follow along:

1. Two Elder creations, bull and bear power, are at the top of the figure.  Bull power is the height of the day's high (in this case the average high of the 16 Direxion contra ETFs) compared to the 13d moving average.  This value is positive, which is good.  Bear power is the day's low compared to the same 13d moving average.  When this number is positive (it's not), we have confirmation of a significant uptrend.  Right now, it's negative, and until we see this move positive, it should give us some pause about the legs under the present trend.
2. The next three ribbon bars are also Elder creations, each having to do with Force Index.  Force Index is a measure of the daily change in whatever multiplied by the change in volume.  The top two ribbon bars apply a 13d MA, and the bottom ribbon bar applies a 2d MA.  I've inverted the colors on the 2d MA compared to the 13d MA because you want to consider buying when the FI(2) < 0, which is green, and is transitioning to FI(2) > 0, which is the first day of red after a FI(2) < 0 green.  We see in the presentation that we have just encountered our first day of both FI(13) methods moving green, which means they are positive.  This is bullish for contra ETFs.  We also see that the FI(2) value is red, which means that it is above 0.  This means that the reward/risk ratio of entering any of these contras is worse than it was yesterday.  Hence, a move into contra ETFs today could be risky under Elder's FI system (more on this later).
3. Under the ribbons I have the MACD.  We see that we are early, as evidenced by the negative histogram value, as well s the blue MACD line being below the red MACD signal line.  Ideally, we want the histogram to be positive, and ideally, we want the MACD to be above the signal line.  Neither case is true, so we are early as far as this indicator is concerned.
4. Under this is the pricing window, and you can see I've plotted a number of moving averages.  Note that every single moving average is inverted, e.g., the 8d < 13d < 34d < 40d < 160d.  This is BEARISH for the contra ETFs, meaning that again, we are early for any consideration of moving into these on an intermediate-termed basis.

If you've followed along this far you can draw the conclusion that while the markets certainly are under pressure as far as the bull is concerned, the bears have not won convincingly (at least as of the close of markets on Monday, March 7th).  One day does not make a market change, and although we've been drifting up and down over the past few weeks, not really making progress on the bullish side, we've also not skidded off the road either on the bearish side.  We're in balance.

Furthermore, these ETFs that I have shown above amplify moves 3x.  They are incredibly sensitive -- far more sensitive than 2x or 1x ETFs.  If a trend change were present, either way, we'd see clear, compelling evidence of the change.  What I am seeing right now is a bull that is still very much present, albeit weak, and an equally weak bear.  In fact, I'd give the balance to the bulls as of today's date, simply because the prevailing trend always remains until we have compelling evidence of change in the other direction.

Given this state of affairs, and contrary to recommendations on other sites/blogs, I do not think that it is a prudent move to jump into contras today.  What I do think is prudent is to transition to cash and get ready to move either way depending upon market trends and conditions.

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GGT - EV Candidates for Tuesday, March 8th

Knowing that the markets could reverse and resume their upward march, the following are candidates making my watchlist for today.  All of these stocks have some form of GGT long (New Long, Affirmed Long, Long) recommendation:

1. TXT isn't moving on a short-term Large Effective Volume (LEV) scale, but it has seen significant accumulation over the longer term and someone picked up 668K shares at $26 on Friday (follow the whales)
2. SYT looks good on both the 8d LEV and 40d LEV time scales.  Small Effective Volume (SmEV) has been decreasing while LEV has been diverging on the 8d scale, which is a great setup.
3. CE was on my list yesterday and it has repeated today.  I note that LEV increased yesterday while price made new lows on the day and SmEV sold off.  
4. LFT continues the divergent LEV/SmEV pattern on the 8d chart, and the 40d LEV pattern is showing solid accumulation.  Further, the action last Thursday saw significant buying as the price fell, which is a great pattern.
5. NFX is newly emergent in terms of short-term and long-term LEV /SmEV pattern, but even with the selloff in price yesterday, LEV remained solid, e.g., no institutional selling.
6. SUN saw significant LEV accumulation yesterday at the end of the day, while price remained constant.    The stock has a wonderful 40d LEV pattern.
7. WXS sold off yesterday but LEV ended the day where it started.  Again, this stock has a wonderful LEV pattern over the last 40d.
8. JNJ has a solid 40d accumulation pattern and saw significant buying yesterday while price dropped.  @ $60 a share, $-volume in the last 15 minutes of the day was notable.
9. CVH has a constant LEV pattern over the last 8d while the 40d shows solid accumulation.  FUrthermore, price has dropped significant in the short-term in step with SmEV, showing smart money is sitting pat and the retail investor is fleeing.  This is a great setup.
10. COV is a newly diveregent LEV/SmEV pattern on both a long-term and short term basis.  Volume picked up yesterday in the last hour.
11. PLL has a great 40d LEV pattern but rather weak 8d LEV pattern.  Despite this, the last hour of buying yesterday saw LEV move upward dramatically while price remained constant.  Volume was 30% above average yesterday.
12. AGCO saw constant LEV accumulation yesterday while it sold off.  This is a great pattern to watch
13. VMED continues to experience great LEV accumulation, but someone dumped nearly $100M on Friday
14. ITW continues to show accumulation faster than price, which is a great sign.
15. AVY saw increased LEV accumulation while price dropped yesterday.  LEV/SmEV divergent pattern is strong here.
16. SBUX was on my list yesterday and made the list again today.  LEV continues to move up on the 8d scale, and the 40d is cosntant.

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Trading Plan for Tuesday, March 8th

1. I'm not making in progress in the TSP funds, which invest in the equivalent of the ETFs SPY, EFA, and VXF.  Total gains over the last 30 days are less than 1.5%, and the last few days of markets have put these gains in jeopardy.  Because of this I am transferring my wife's TSP funds to cash, effective with the market close today.
2. My position in BTI is even, and short-term large effective volume (LEV) is waining.  If I had a large gain in this stock I'd be inclined to hold onto it, as the long-term LEV is still very bullish in terms of accumulation, but any selling by institutionals will most likely result in a price drop, causing me to fall under water.  I intend to exit this position today.
3. NXY is more or less the same as BTI in terms of position in the portfolio, so I'll exit on strength today for a slight gain.
4. TPLM dropped 5% yesterday, but effective volume remained constant compared to Friday's levels.  This stock saw considerable accumulation on Friday, having attempted to close above it's 50d MA but failing.  We are only 7% into a full position here, so the hit to the account is minor, and if I see any uptick in effective volume I'll continue to enter the position and complete a full 25% level.

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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

Possible trades for Monday -- you should review

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Here are some candidate stocks that have better-than-average GGT specs and have been filtered for Effective Volume as well as favorable active boundaries:

• JNJ has been meandering the past few days, but overall, has held up well the past few days.  Long-term accumulation is strong; ATR20 is only 1%, and it is slightly less volatile than the SP500.
• SBUX is nearly 2x more volatile than JNJ and it too has good long term as well as short-term accumulation.  Although not shown in the Large Effective Volume, there were some large down blocks of significant $-volume throughout the day.
• SYT saw steady accumulation over the past week while prices fell, and the diverging LEV from Small Effective volume is a setup that I like
• DIOD also has a nice divergence between LEV and SmEV, and Tuesday was the start of this move.  Accumulation has been getting better over the longer term, so perhaps this one is turning the corner.  Volume was 104% above average on Friday.
• NYT surprised me, but while price tanked Friday LEV skyrocketed all day.  Volume ended the day nearly 70% above average.  This one is very interesting.
• JNPR generally fails on short term accumulation, but over the longer haul, LEV is steady and strong.  Why I mention this is that while Friday was a wild day in terms of volatility and price, the end of the day saw a skyrocketing LEV, all in the last 15 minutes.  JNPR has a 45 AB rating from Pascal, so it is less than favorable.
• Give ITW a look.  It too ended the day on a ski-jump of LEV accumulation, AND, it's been under steady accumulation for awhile.
• AVY traded above average volume and is experiencing the divergent LEV/SmEV pattern over the last few days, which I like.  
• DSW reports in 7 days or so but LEV is diverging nicely, and there have been some big-block purchases over the past week that are notable.
• HAS has an amazing short-term LEV pattern and is noteworthy of your time.
• LFT is another stock with a serious divergent LEV/SmEV pattern, especially when prices dropped last week and LEV continued higher.

The following stocks are either GGT LONG or GGT CASH rated, and have everything going for them except volume.  I find that there are early stocks in this bunch, simply waiting for a blast in volume to push them higher.  

• FTI has been bumping around and is largely unremarkable, except for the HUGE LEV accumulation on Friday.  We had this in the GGT, LLC account until last week, and I may re-enter.
• APC has been under good, short-term accumulation as of late, and the long-term is solid.
• EZPW looks terrible on the long-term, but the last few days have meen quite remarkable.  This looks like a stock that is basing nicely, with new accumulation.
• I have no idea what caused COV to skyrocket in LEV last Monday late, but LEV has never looked back, and neither has price.  This one is moving out.
• AGCO saw buying volume at the end of Friday which was amazing, as well as duplicating the action with Thursday's close.
• SMTC looks very nice in terms of LEV behavior.
• CAVM, a competitor to SMTC, is also experiencing good LEV as the days roll on.
• AAPL, over the past two days, is just coming back into the GGT picture.  Volume remains low, but LEV is remarkable enough that it meets my scan.  Give a good look at the end of Friday's LEV action -- this is not the signature of a stock that is expected to drop significantly.
• GFA is an infrastructure play that is impressive -- the LEV is newly emergent and looks very compelling.
• MSM has my characteristic divergent LEV/SmEV pattern, with growing accumulation during Tuesday of last week when price was dropping.  Very nice.
• Russia has been doing better lately, and MTL shows it.   Definitely worthy of your review.
• MPEL is showing steady accumulation in both time frames, and this could give you some diversification.

If you downloaded the Stock and ETF zip file from the Yahoo! group, you found that the stock dashboard had a number of industries that were at the top:

1. Utilities - Gas (20 stocks in group)
2. Energy - Coal (11)
3. Energy - Oil and Gas International Explo. & Production (12)
4. Health - HMO (13)
5. Comm - Fiber Optic (6)
6. Energy - Oil and Gas Services (26)
7. Energy - Oil and Gas International Integrated (15)
8. Apparel - Footware (8)
9. Machine - Farm (4)
10. Energy - Oil & Gas Drilling (15)

Me thinks you should be looking within the Energy complex for a play or two, and diversify in the other groups as capital and risk allow.

A listing of the stocks in each group can be found in the "By Industry" file that is included in the zip.

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

Regards,

pgd

March 5th Weekend Update, Part 1 ...

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I plan to make multiple entries this weekend, hence the Part 1, Part 2 titles...  These will be separate entries so check back or better yet ...

Please "Subscribe" using the tools at the left so that you get automatic notification, via Google Desktop, Google Reader, or your selected subscribe method.  I've been getting a number of notes from folks asking how they can get notified of updates and this is the easiest way.

There is NO face-to-face meeting in March; I'm obligated with family-centric things on our normal weekend.  I will be conducting a WebEx sometime during the month, so stay tuned.

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Summary

• Despite the primary markets falling yesterday on average volume (Dow down -0.72%, NASDAQ down -0.50%, and S&P500 down -0.74%), the GGT price index rose +0.15% on volume +9% above the 50d MA.  I take this as more bullish than bearish for the markets.
  
  I attribute the difference between the GGT price index and the major indexes to the fact that GGT stocks are more encompassing than the three primary indexes, giving us a broader view than a few industrials (DJ30), technology (NASDAQ), and financials (S&P500).
  
  I also attribute the difference to the fact that the GGT index is equal-weighted, whereas the primary indexes are market-cap weighted (the bigger their market cap, the more influence they exert).  This gives the smaller-cap stocks as much say as the larger caps, and smaller-capped stocks have been outperforming the market since late January / early February.
• The GGT Price Accumulator Change tool, which is an oscillator that measures the short-term overbought/oversold basis of the GGT database of stocks, is back down to -14, it's lowest possible value, and is telling us that on a reward/risk level, it is okay to consider entering stocks on Monday.   Correspondingly, I'll perform an EV analysis on Long GGT candidates sometime this weekend.
• The GGT Short-Term Change Timer, which typically holds for only a few days, has indicated a move LONG for Monday.  To play this timer, one should enter the stock early in the morning after the timer signals a move long.  The timer, when applied to the GGT index, is at 16.3% ARR since inception in September 2008.
• The VTI timer, which is the actual trade (Vanguard Total Index ETF) that can be performed that closely resembles the performance of the GGT price index, is confirming the GGT Short-Term Change Timer move to the long side.  This timer, when applied to the VTI, is at 18.4% ARR since inception in September 2008.  Consider entering your position by 9:45 a.m if it is moving upward.  If it is moving downward, use intraday pivot analysis to determine the support levels and enter at the intraday support.
• The Intermediate-length Elder Force Index timer is still in mixed mode, and this results because the two methods used to calculate the output are not confirming.  This is cautionary for the intermediate term.
• Of significance is that the Elder Force Index timer, using a simple moving average (SMA) method in the calculations, has been in CASH since the close of Thursday's markets. This is significant because this timer last entered two-consecutive days of being in cash on 11/16/10, and emerged from this state on 12/2/10.  This is cautionary for the intermediate term.
• The bears that arose on 2/22 are under increased pressure according to the GGT Long-Cash ratio.  This means that on a short-term basis (5d, 8d), the database is expanding in terms of stocks entering "New Long" status, which is bullish.  The fact that the slopes of longer-duration moving averages are pointing down is not to be ignored and hence, I'm cautionary over the intermediate term, but with a bullish bias.

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GGT Price Accumulator Change Tool

This is a metric that I developed over the past few months and released in February.  Here's the chart:

As with all my charts, right-click to expand in a new window or tab.

The chart shows an oscillator that moves between -14 and +14.  When it is in the green zone, below -5, this typically has presented a good buying opportunity on a short-term basis.  When it is above +5, this typically has been a poor buying period, as we've typically pulled back within a day or two.  Correspondingly, when we move into the green zone, it's been a good time to pick up stocks, as measured by the solid red line, which is the GGT price index.  Note that purchases in the red area typically are followed by a drop in the GGT price index, but purchases in the green area typically precede rises in the price index.

My recommendation is to buy good stocks in the green zone.

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Short Term Timer

Here's the latest dashboard of the short term timer that I follow:

As you can see, the VTI has just signaled long, enabling entry on Monday.  This is a short-term timer -- on the order of a few days (as you can see), and as such, you need to be nimble.  As you can see, the VTI timer equity curve hasn't moved either way in nearly three months, but overall, since inception in September 2008, it has appreciated 52%, or 18.4% per year.  Here's the actual equity chart:

The chart above presents 4 traces:

• Equity w/ No EMA filter is simply buying/selling the VTI according to the short-term timer signal.  When we don't apply the 150d EMA filter to this method you can see that we can seriously draw down our equity, and further, it takes longer to get back.
• Equity w/ 150d EMA filter is exactly that -- we can only buy when the price is above the 150d EMA of price.  This results in large improvements to our equity, hence, we'll be more inclined to go with a method like this if we don't see that our equity balance is under the starting level.  Where the red line is flat is where we were in cash.  You may miss some moves upward with this rule, but you're trading with the long-term trend which I've proven is more lucrative.
• The VTI price is shown in green -- you can see what the price has done since inception in September 2008.
• The VTI 150d EMA line is shown, and you can see that we are significantly above the line.

The largest drawdown with the 150d EMA filter added to the timer is from 4/15/10 to 4/27/10 where the VTI equity curve moved from $1.4342/dollar to $1.386/dollar, or a drop of 3.36%.  This gives us a reward/risk level over 2.5 years (also known as the Calmar Ratio) of CR = 18.4%/3.36% ~ 5.5, which is a very, very good statistic.

The rules for this timer are simple:

1. The VTI (or equity) must be above it's 150d EMA
2. An adaptive EMA is calculated on the change in the GGT Long-Cash Ratio.  If the change in value of this adaptive EMA is positive, then it's okay to purchase the VTI.
3. If the change in value of this adaptive EMA is negative, then it is time to sell the VTI.

You can trade other stocks/ETFs with this timer, although I've only tested a handful.  Send me a note if you want the list and the details of performance.  I generally announce the changing status of this timer in this blog.

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Elder Force Index Timer

Here's the table for the Elder Intermediate Timer:

We're right on the fence with this timer.  As you can see, the output right now is one of a "Mixed" recommendation.  This means that if you are long, stay long.  It also means that if you are in cash, don't go 100% long in equity on Monday -- be very selective about your entries.  

If we get a "Cash" signal then all long positions should be sold.

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The Long-Cash Ratio ... are the Bears Going Away?

I use this next table to keep track of the slopes of various EMAs on the Long-Cash Ratio.  The LCR is a measure of the number of stocks in the database with a recommendation of LONG -- they are above their historical threshholds for doing well -- to those that are recommended as CASH -- those that are below their historical threshholds.  When I plot various lengths of EMAs of the LCR, we get an idea of the ebb and flow of stocks in terms of the trend.  Here's the table:

Of significance here is the recent "thawing" of the bearish areas, melting into green "Bullish" indicators.  These are the shortest EMAs on the LCR, and they need to generally move first to the long side before everything else (not a 100% requirement, but when we see this, we need to pay attention).  As an example of this look back to the 2/1 timeframe, which was the start of the most recent up leg.  Hence, it can be worthwhile to start moving long when we see this type of behavior (with other indicators confirming, of course).

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Based on the above, we need to be cautious, but there are indications that the long side of the market is still very much alive and active.  I'll discuss some stock and ETF ideas in my next entry, most likely tomorrow (Sunday).

Regards,

pgd

Top 25 ETF Portfolio at Collective2

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I'm pressed for time today so this will be abbreviated.

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Summary

• The tool I use to determine whether I should be buying stocks is telling me that entering stocks today has a terrible reward/risk ratio, so in general, no buying for me today.  Correspondingly, I'm not providing guidance on opportunities today.  Check back over the weekend for a detailed analysis.
• Many of you have complained that Marketocracy does not allow you to see the trades or performance, only the equity graphs.  Given this, I've created a Top 25 ETF portfolio at Collective2, which will allow you to see the trades, statistics, and equity graphs.  The URL is http://ggt-top-etf.collective2.com/.  If you want to see the trades in real time, with real time notification, you'll have to subscribe, else you can see the trades on the page 1 day after they are performed.  I expect that the portfolio will take a hit here within the next couple of weeks, simply because we're near all-time highs, so be forewarned.  The original Marketocracy portfolio was created the week of Thanksgiving 2010, and we had a nice leg up from 12/3 onward.  I do NOT anticipate the same performance over the next three months for the Top 25 ETF portfolio at C2.  The Marketocracy portfolio, as well as my own personal account, will continue to run, so we'll have 3 data points to review as we go forward.

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Happy investing.  

Regards,

pgd

Top 25 Portfolio Update for Thursday, March 3rd

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Please "Subscribe" using the tools at the left so that you get automatic notification, via Google Desktop, Google Reader, or your selected subscribe method.  I've been getting a number of notes from folks asking how they can get notified of updates and this is the easiest way.

There is NO face-to-face meeting in March; I'm obligated with family-centric things on our normal weekend.  I will be conducting a WebEx sometime during the month, so stay tuned.


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Summary

• There are no changes to the GGT-TSP portfolio.  Stay the course.
• The Elder Market Capitalization Favoritism (EMCF) Portfolio will sell QCOM at a 8.8% gain today because it has failed the Elder FI(13) tests as of the close of markets on 3/2.
• Our Price Change tool is sitting at +14, the highest reading possible, and is telling us that purchasing stocks today is doing so in a high risk/low return environment.  The time to purchase stocks was yesterday, when the tool indicated a value of -14.  There really is little exception to this, so if you play today, ensure you have strong momentum behind you to boost your 1-day gains.
• The GGT Short-Term LCR Change timer transitioned to CASH with the close of markets yesterday. 
• The Elder 13d Force Index timer is giving a MIXED (neither CASH nor LONG) reading.  This results because of a mismatch between using different calculation methods to arrive at the same result -- when they do not match, we need to pay attention.
• The Long-Cash Ratio (LCR) FELL yesterday, indicating that the database is not participating in this expansion.  It is not a good idea to purchase stocks when the LCR is falling, period.
• The strongest GGT industries that are appreciating in STRENGTH (not necessarily price) are:
  
  Enrg-O&G Drilling (15 stocks in group)
  Health-HMO (13)
  Enrg-Coal (11)
  Enrg-Other (4)
  Enrg-O&G Services (26)
  Enrg-O&G Refining (21)
  Enrg-O&G Equip (16)
  Comp-Heath (8)
  Media-Book/New/Mag (9)
  Retail-Major Chains (6)
  
  To determine which stocks are in each group, log in to the GGT Yahoo! site and download the most recent "ALL" files (presently February 28th upload), and go to the "By Industry" group page.  Note that the industry group above corresponds to what is provided in Quotes Plus / HGSI.
  
• I note with interest that as of the close of Wednesday's market, Precious Metals, as determined by $DJGSP, has confirmed a LONG trend on the weekly chart.  Gold, Silver have already confirmed a few weeks ago, and Palladium is about to confirm.
  
• I note with interest that as of the close of Wendesday's market, the Financials, as measured by a couple of ETFs, most notably FAS (the 3x Direxion ETF), has confirmed a downtrend.  Pay heed.

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Top 25 ETF Updates

The Top 25 ETF Portfolio, which is now the Top 22 ETF portfolio, continues to perform well in this market.  Here are the following actions for today:

Buy:

EFV

FCG

IGN

IJJ

JJG

RJI

Sell:

DAG

IEZ

IVE

IYE

MVV

RJA

UYM

Hold:

BGU

DBA

DBC

DIG

DRN

ERX

IEO

IGE

IXC

OIH

SSO

UPRO

URE

VDE

XLE

XOP

In terms of holdings and strength, here are the gains/losses for each position, going into the market on Thursday:

Some positions are not listed above because they were sold as they moved to "New Cash" recommendations over the past week.

The portfolio has a beta of 1.6 (60% more volatile than the S&P500).  The portfolio is up 12.2% since inception on 11/26/10, and is outperforming the S&P500 by +2.42% over the same period.  I've not calculated Calmar Ratio nor I have calculated mathematical expectation.

The ranking of the top 25 ETFs, from strongest to weakest (which is still very strong), is as follows:

Here are the color codes:

• Yellow:  unchanged from the previous week
• Bright Green:  moved up in relative ranking compared to last week
• Red:  fell in relative ranking compared to last week
• white: new addition to the top 25 list compared to last week (not in last week's top 100)
• dark green:  was in the prior week's top 100 and transitioned up into the top 25.

If you are not participating in this portfolio I would not jump in right now with the levered ETFs, but the 1x ETFs should be all right.  I'd wait for a day of pullback before entering.

I am trading this in a personal account with $30K, since 1/14/11, and the account is up $700.37 in locked-in gains (positions that have been sold) and is sitting on another $324 gains in open positions.  The positions that will be closed today have the following gains/losses going into the open Thursday morning:

• DAG:  +7.56%
• IEZ: +0.91%
• IVE:  already sold
• IYE:  already sold
• MVV: already sold
• RJA:  +4.88%
• UYM:  already sold

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Trading Plan for Thursday

I'm sitting defensively in the GGT, LLC portfolio, with positions in Gold & Silver (GG, GLD), a bond fund (TIP), Oil & Gas (NXY, DWSN), a travel company (EXPE), tobacco (BTI), and the Swiss Franc (FXF).  EXPE has the worse stats, but the Large Effective Volume (LEV) is impressive and diverging from price, so I'm going to hang in there unless it hits my 2ATR stop.

I intend to move ETFs around according to the changes in the Top 25 ETF portfolio listed above.  I do not use stops in this portfolio, due mainly to the wide diversification.

Although futures are up almost +0.80% as I write this, I do not intend to move into new long positions in the market at this time, but may add to existing positions if they continue to show strength.  I take this action due mainly to the GGT Price Accumulator Change tool indicating that the reward/risk ratios are poor for entry today.

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Remember, you are responsible for your own trading decisions, and I am not.  Continued following of my blog indicates your acceptance of the "Disclaimer", found on the masthead at the upper left of this blog.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd