Update for Thursday, March 29th - Short Term Timer Moves to Cash, Intermediate and Long-Term Still LONG

.
With the close of markets on Wednesday, March 28th, my short-term timer, which is based upon the 4d simple moving average (SMA or MA) of the Long-Cash Ratio (LCR), has transitioned to cash. Long equities (which are not contra ETFs) which were purchased since 3/26 will be closed, as the probability of their success from here is considerably lower. The GGT index performance since the last signal (3/26) is poor at -1.22% and is indicative of a weak market, but I do note that it is less than the average losing trade (count = 30 since 1/2/09) which is -1.79%. A minor flesh wound.

In my opinion (worth what you pay for it) any long equities bought since 3/13 are also candidates for closure if they are showing any form of weakness.

Here is the timer summary:

As you can see, the Elder intermediate-termed timer and the simple 5d / 65d timer are still long. The Elder timer is within a hair of triggering to Mixed conditions (a major warning) or Cash (an event marker) depending on today's action, but of course, stay in the profitable trades if you are holding longer than a few days. The 3/9 or 3/12 long signal from the Elder timer was the last transition (depending upon which signal you follow), so play accordingly.

The 1/5/12 long move in the 5d / 65d timer is still the most profitable. If you placed orders around this signal and they are profitable, this signal is telling you to continue to hold your longs. 

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

The LCR model is completely bearish across the board from the 2d EMA to the 65d EMA. The LCR dropped -11% on Wednesday, which is slightly below the average of -15%. This is not a panic-selling market. We are accelerating downward in the LCR on a day-over-day stance, which is simply telling me that this is not a time to move long in equities.

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

As you might imagine, the price-slope model is becoming more bearish, but is still holding on to some bullishness on the 13d and longer time frames. This is why it could be prudent to hold stocks on the long side in accordance with the 5d / 65d and/or the Elder timers.

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

I intend to sit on the sidelines today. Of my holdings, I am net short, but realize that I have almost 60% of my holdings in cash at the present time, so if we continue upward from here the damage is certainly recoverable. We've not made much progress in the last week and when this occurs, the sidelines are a good mental spot for me.

Regards,

pgd

Update for Friday, March 23rd -- Timers Showing Increased Bearishness, but ...

.
I am traveling today to the HGSI seminar in Palos Verdes, CA and thus, my blogging this weekend will be as time permits. Dropbox files will be updated for today and by the open Monday.  You can find my daily blogs at the Effective Volume site at http://www.effectivevolume.com, in the GGT forum.

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

A number of my indicators continue to show weakness -- as I said yesterday, it's impossible to know if this is a buying opportunity or the start of a change in market climate. Despite the following, the long-term trend is still upward.

The weakest of my indicators is the Long-Cash Ratio (LCR) slope model, which has transitioned completely negative:

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

The simple take away here is that with all of the LCR slopes negative, including the 2d EMA slope, and with all of the LCR slopes of the EMA slopes negative, buying stocks on the long side should be suspended.

The LCR fell -13% on Thursday (far left of the table image), and in terms of acceleration downward, we've had three continuous days of day-over-day decreases in momentum (each day-over-day change is bigger than the day before). 

A short-term pullback will be characterized by the far right of the table view moving positive (green). These values represent the slope of the slope, and they lead any momentum change.

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

Because of the across-the-board bearishness in the LCR, the Price-Slope-LCR Trend timer, which is a prototype and still under development, transitioned to full cash:

This timer uses the GGT price trend (now down compared to 1 week ago), the GGT 65d slope trend (now down compared to 1 week ago), and the LCR trend (down) to determine buy, sell, short, and cover signals. As you can see, this timer has issued a sell signal.

Because we can't invest in the GGT index outright, I've included data which shows what the impact is using the SPY, QQQ, and IWM. This last signal, which issued a "BUY" on 3/13, resulted in gains for the Q's but losses for everything else. Nevertheless, the model has historical validity, so I will continue to develop the rules.

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

The GGT Price Slope Model is also showing increased bearishness, but note, it is still quite bullish on the longer time frames:

The GGT price index fell -0.91% on volume that was -8% below the 50d MA. Of significance here is that the Database Strength indicator has fallen just below parity, so half the database is in an up trend and half is in a down trend. 

The 2d - 13d slopes of prices are negative. If this continues we will hurt on the long side. The right side of the table -- the price slopes of the slopes -- are fully negative and indicate that the last 3 days have not been good to us on the long side. Furthermore, the far right of the table above shows that we are accelerating downward in day-over-day price decreases, as a whole, and this is also a warning sign. We'll have to see if the trend continues. 

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

Because the 13d price slope is now negative, the Elder timer is under pressure:

As you can see, we're not negative by much, but it is there.

The "Mixed" state in the Elder Signal arises because the calculation methods -- one being a simple moving average (SMA) and the other being an exponential moving average (EMA) -- do not match. The EMA is faster, and it is negative, causing the two to give different signs (one positive - SMA, one negative - EMA). In a trending market these always resolve themselves within a week or so, but when we get mixed signals it clearly is a wake up call to watch for market reversals over the intermediate term.

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

Correspondingly, the timers are now flashing caution on the long side:

My counsel is that if you took the 12/20 or 1/3 signals to move long, then I would stay the course, as the 5d / 65d timer has been long since this time frame, and from a pure GGT index point of view, you're up over 10% since that time and can take a small pullback.

Conversely, if you got in after these signal dates, then gains are less and any gains at this point could be fragile. This is the boat that I am in and I'll take my long positions off the table which are underwater and will set tight stops on those that are above the waterline.

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

As a final comment on "my crystal ball is as good as yours", the following chart is interesting to me:

The chart is generated from Pascal's DIVA file at www.effectivevolume.com, which lists all positive and negative divergences that are developing between effective volume and price. The chart shows the net of these values in addition to the GGT price index. 

It's clear to me that as of the close of markets yesterday there was net buying on decreasing prices. Taken in isolation, this points to higher markets and a bias to the long side. This is my interpretation, not Pascal's, and this is work in progress. Nevertheless, we're not seeing huge selling at this point (as of yesterday), so the "do nothing" solution if you are long is attractive. Additionally, while there has been a decrease in Pascal's money flow relative to the last few days, the net values are still somewhat positive, which I also take as net bullish:

Time will tell.

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

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

Regards,

pgd

Update for Thursday, March 22nd (belated) -- Short Term Timer Moved to CASH

.
With the close of markets on March 21st, the GGT 4d LCR timer has transitioned to CASH:

This timer is the shortest of timers in my arsenal, and as you can see, it fires quickly. This is a long-only timer -- contra trends are not signaled using this method. 

This last signal, which was from 3/13/2012 to the close last evening, was -0.13% if using the GGT index (0% if using the SPY, +1.2% if using the QQQ, and -0.16% if using IWM). Compare this to a historical average of +3.75% average wins and -1.81% average losses per trade.

Cumulative performance since 11/25/2008 is 73.3% or 18.1% compounded. The rest of the stats for this timer are below:

These numbers are slightly different than what I've posted in the past and reflect my best estimates of past behavior with this signal as of my latest calculations and rules. 

The timer is constructed from the performance of the Long-Cash Ratio (LCR), which is unique to the GGT universe. If the 4d Simple Moving Average (SMA) is crossed from above by the LCR, we have a sell signal such as today. The signals since the beginning of 2011 are shown below:

On a short-term basis the timer is good at getting you into the markets, but because of the short MA duration, does pull you out too soon if the trend continues. Shorter-termed timers also whipsaw, and if you get frustrated by this, you need to lengthen your timer duration (e.g., this isn't the timer for you).

When this timer fires to CASH it is a wakeup call that either:

1) a buying opportunity for any pullback is developing
2) a change in overall trend (short, intermediate, long) could develop.

Your crystal ball is as good as mine at predicting which one of these cases is actually in the works. Pascal's Real-Time Money Flow gives us some insight -- here is the chart over the last 5 days:

Overall, we've returned to the levels of 5 days ago, and since the sell-off mid morning this morning, we've stabilized and money flow is balanced. Unless we see a major influx of money into the markets in the remaining time today, I do not think the 4d signal will whipsaw.

I will not enter a position under this timer until the 4d LCR average is crossed from below.

Remember, you are responsible for your own investing/trading decisions, and I am not. Please take ownership for your individual actions.

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

Regards,

pgd

Update for Friday, March 9th

Yesterday at the EV site (www.effectivevolume.com) I showed a chart from EdgeRater of Ian Woodward's %B * BW for the US Markets. I like continuity so here's the updated chart:

The obvious visual queue is that this sell off may be "all there is" and it's time to go long again. Well, history isn't as clean cut as you may like to infer:

This is the same application of the template back into the Sept/Oct 2011 time frame. Note that we kept high on the NASDAQ but the other markets flashed negative for a few days, we recovered with a terrific day on 9/27, only to retest bottoms a few days later. 

I intend to let the market dictate my actions but be aware, dropping again would not be unprecedented.

There are other events in the past that behave just like the above, so while it may be prudent to put some long positions on, I would not do full positions. Note that GGT is indicating to remain in CASH or on the short side until a clear signal is derived.

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

The GGT price slope model has resumed a bullish stance with all of the slopes and all of the slopes of the slopes positive for the price series. We put prices in the bank and nothing else, so we have resumed our uptrend on multiple time frames. Here is the price slope graph:

Note that we've achieved higher levels of short-term price slopes relative to the past two weeks -- I'm looking for continued behavior of higher highs and higher lows with respect to the price slopes as a confirmation that the short-term trend is intact. If you're holding longer-termed holdings with gains I would continue to hold them.

The Long-Cash Ratio had it's first up day in 9 trading days, which isn't a record but it's enough to be notable. While the gain was only +6%, we're near the balance in the database where the number of LONG recommended stocks is nearly par with those rated CASH. A snapshot in time, but historically, this could easily set the stage for a move up from here, as there is plenty of fuel to move higher now.

Of interest to you should be the solid 2 days of the LCR slopes of the slopes all being positive. This has caused the significant drop in the LCR to reverse and start moving upward, which is bullish. The Slopes of the Slopes precede any positive action on the LCR slopes (make sure you understand why), so we are setting up with the proper conditions to move long in the market.

Here are the slopes of the LCR:

My timers are unchanged. The short-term timer is in cash, the intermediate-termed timer is in cash, and the long term timer is long. I'm waiting for the LCR 2d, 3d, and 5d slopes to transition positive before I re-enter the markets on the long side with any passion.

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

As an aside, I watch the action of the 5d and 8d LCRs, as this has indicated (in previous times) what "could be". Of course your crystal ball is as good as mine. Take a gander at the following chart and I'd be interested in your thoughts -- the chart seems to portend some further weakness for a short duration, then perhaps it's off to the races again. You decide.

You can see where we are at with the orange horizontal line; you can also see that during periods of strong bull markets we're nearly an area where the probability of reversal increases.

Regards,

pgd

GGT Timer Systems

The blog is not on hiatus; it can be found (almost) daily at www.effectivevolume.com, in the "GGT" forum.  You'll need to register, but access to all of the blogs is free.

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

GGT Timer Rules

I've been working with my colleague Bob Wilson in quantifying various aspects of GGT.  As many of you are aware, GGT employs three timer systems:

• Short-term:  uses a simple 4-day moving average to cross the Long-Cash Ratio (LCR) value, which is calculated daily.  Buy when the 4d crosses the LCR from below, and sell when the 4d crosses the LCR from above.  You cannot calculate the LCR but I can, and either Bob or I do it every day and post the results at my GGT forum @ Effective Volume.
• Intermediate-term:  based on Dr. Alexander Elder's Force Index (FI) methods, this timer uses the slopes of the 13d and 34d EMA of the GGT prices, in addition to the sign (+ or -) on the 13d Force Index.  Buy when the FI(13) is turning positive AND the slopes of the 13 and 34d GGT prices are (turning) positive; 
• Long-term:  a basic, keep-you-out-of-trouble timer based upon the 5d and 65d crossing of moving averages.  Buy when the 5d crosses above the 65d from below, and sell when the 5d crosses the 65d from above.  It's that simple.  Not optimal, but quite simple.

Like all timers, each of these has their benefits and detractors.  Benefits are getting you into the market, as well as out, as the markets dictate.  Detractors are simply that they lag, and they may whipsaw from time to time, and more importantly, they do not always work.

Here's the current status of the timer system:

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

Shown above is the last 2.5 months of signals.  The short-term timer is on the left, the intermediate-termed timer is in the middle, and the longer-termed timer is on the right.

You can clearly see that the short-term timer moved to cash on 2/9, forcing a sell at the open or early on 2/10.  The intermediate and longer -termed timers have remained long, so it's important to choose what your period of comfort is.  Typically, the longer your timer, the less worried about intra-signal drawdown you are.

Looking back over time, you can see the impact of the different time frames on the different timers.  You can also see the impact of the shorter time frames and the concepts of whipsaw -- look closely at 12/8.

There are benefits to having multiple timers.  The end result is that you often have equities in play, satisfying some deep urge to play the markets at times when it probably is more prudent to be on the sidelines.  As long as you entered at the correct time, leaving positions on, based on the time frame that you are focused upon, is most likely the smart approach.

Market Entry

For all my systems, the key entry is when the 5d slope of the LCR turns positive, and the 2d and 3d are either 1) already positive, or 2) are turning positive on the day that the 5d turns positive.

Where does this (seemingly) obscure entry rule come from?  Here's the results of some testing that I did concerning the best time to enter the markets:

It will take you a bit of time to understand how to apply this table.

Let's say that the markets have been in a tail spin, heading south.  Everything (LCR slopes) is negative.  Let's further say that the markets stabilize for a couple of days, turning the slope of the 2d EMA of the LCR  positive.  Since 2009 if you would have entered the market the next day near the open and sold at the close of that day (unrealistic), you would have turned $1 into $1.56.

If you wait until both the 2d and 3d slopes turn positive you would be at $1.67.

Finally, if you wait until the 2d, 3d, and 5d slopes turn positive you would have turned that $1 entry into $1.86.

So, where are we today?

Here's the LCR slope table:

There's other things on this table -- simply look at the columns that say "Slopes of LCR EMAs".

As you can see above, all of the slopes through the 55d slope are negative (red), and the 65d is super close to moving negative.

In the context of the table, which I'll annotate below, we have a situation where ONLY the 65d is positive:

IF, and this is a big if, the 2d moves long on Monday 2/27, then historically, with ONLY the 65d being long, we've only gained 12% on that entry (early Tuesday, 2/28) over the past 3+ years.  If the 2d and 3d both turn, but the 65d is the only other long, then we increase that value up to 17% edge.  You see where I'm going with this.  Playing late stage signals, while certainly profitable, is not nearly as profitable as being early in the game.

Given the present scenario, I have no expectation of having the same edge as the beginning of a cycle.  This goes to reason -- at the beginning of a cycle the markets are typically oversold, and at the end, when ONLY the 65d is still green (positive), the markets are overbought.  

So, how does TIMER entry work?

IN ALL CASES, we need to have the slopes of the 2d, 3d, and 5d EMAs all positive at the end of the day, whether simultaneously or sequentially (it doesn't matter):

• If concentrating on  the short-term timer, then buy at or near the open of the market on the following day.
• If concentrating on the intermediate-termed timer, then review the status of the intermediate-term timer.  If LONG or MIXED, then buy at or near the open of the market the following day.  If in CASH, you are "enabled", but you must WAIT until the intermediate-termed timer moves to a LONG or MIXED state before entry.
• If concentrating on the long-term timer, then review the status of the long-term timer.  If LONG, then buy at or near the open of the market the following day.  If in CASH, you are "enabled", but you must WAIT until the long-termed timer moves to a LONG  state before entry.

Refer to the timer summary above, specifically on 12/21.

On 12/21 the short-term timer fired long.  You would have placed orders for positions early the morning of 12/22 under a "short-term" strategy.  You also could have placed orders for positions early the morning of 12/22 under the "intermediate-term", because of the "Mixed" status of the Elder timer.

On 12/27 the long-term timer moved long.  You would buy your anchor positions early the morning of 12/28 under this timer.

On 12/30 the intermediate-termed timer moved to CASH.  You would have sold early the morning of 1/3.

On 1/3 the intermediate-termed timer whipsawed back to LONG.  You would have BOUGHT early the morning of 1/4.

On 1/30 the short-term timer moved to CASH.  You would sell your short-term holdings early the morning of 1/31.  If investing in an index such as GGT (looks like the ETF "VTI"), you would have a gain of nearly +6% for the signal.  You would continue to hold your intermediate and long-term positions.

On 2/1 the short-term timer moved LONG -- another whipsaw.  You would enter early the morning of 2/2.

On 2/9 the short-term timer moved to CASH.  You would sell your short-term positions the morning of 2/10 for a gain of around 2.1%.  You would continue to hold your intermediate and long-term positions.

As of this writing the short-term timer is in CASH, effectively blocking entry to the markets.  I'm waiting for the 2d, 3d, and 5d EMA slopes to move positive.

Timer Performance

With the rules established, what is the performance of the system since 1/1/2009?  Here's an equity chart, applied to the GGT index, which again, looks like the ETF "VTI" from Vanguard:

It should be evident what you are looking at here.  The yellow highlighted area shows last year's period where trend following simply sucked -- there is no other way to describe it.  Using trend following methods the markets did not work last year, and in general, the 5d/65d timer suffered the most.

Overall though, you can see that these timer methods all produce very good gains and keep you in the markets when you need to be in the markets, which is important.  Here are the statistics for each timer:

As you can see, and as you saw from the equity graph, the timers all manage the down side adequately.  The 5d / 65d method has more losers than winners (6 compared to 3), but the winners are stellar compared to the amount lost, on average (30.23% vs. -4.16%).

From a cumulative performance perspective, the Elder FI timer has the best overall stats to date.  Next in line is the 4d LCR, followed by the 5d / 65d timer.

Summary

I've presented a methodology to use the GGT system timers to positively impact your portfolio.  Purchases were made into the GGT index as the example benchmark -- investing in stocks with a beta higher than the Vanguard Total Index (VTI) would obviously change your individual performance.  Over the past 3 years waiting until the 2d, 3d, and 5d EMA slopes of the LCR moved positive had a significant impact on entry edge.  Depending upon your risk tolerance, and depending upon your time frame, three timers are available (for free!) that work well overall in trending markets.

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

Regards,

pgd 

.
Summary

• The price slope model improved. Not across the board, but it obviously made some advance due to the movement in the markets on Monday. Despite this progress there is no compelling signal to jump in with both feet. Tip your toe in, perhaps, but don't jump in.
• In a nutshell, volume continues to significantly lag. This is poor performance for a "breakout" day and makes the rally suspect from the git-go.
• On a positive front, the price acceleration model railed at the highest possible delta -- 14 -- and indicates that within reason we moved about as much as we realistically could for the day. We need several days of +14 values to dig us out of the holes created since November 1st.
• The LCR slope model is not nearly as optimistic. The LCR moved from 0.213 to 0.289, hardly a resounding sea-change of stocks from the cash side to the long side.
• The aforementioned LCR change was the 58th strongest change to the positive since September 2008, and reversals/breakouts in the past had MUCH stronger levels. To put this in perspective, we normally see changes on new trend days in the 2+ and 3+ standard deviation categories -- this was within 1 standard deviation of average and is a *yawner*. I don't like it ....
• Further, the LCR Acceleration, which is a weighted composite of all the moving averages of the LCR day-over-day change, only budged 2 points on a possible movement scale of +14. TWO POINTS. Not a resounding "xmas rally started Nov 28" signature. I hope I'm wrong and a rally does begin but we need some SERIOUS follow through for it to be real. We're not there yet.
• Make sure you read Pascal's commentary on the 20d MF signal.
• My Elder intermediate-termed and 5d/65d timers are all in CASH. We are quite early on this one folks, caution is advised.

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

Here are the obligatory charts. Post questions if you do not know how to interpret.

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

My trading plan is opportunistic. I am 6% in AGG today and the rest of my accounts are all in cash. My stock candidates have been posted here. My position size is ATR(20) adjusted AND I'm only going to put in 10% positions of that adjusted full size, as I'm not a believer yet but I must participate. Downside risk is quite limited as we have a good floor reference within 3-5% on most of these stocks.

Regards,

pgd

Update for Monday, November 28th

Summary

• The price slope model (PSM) is bearish and has been in a sustained contraction since 11/16.
• The Database Strength model has hit another local minimum. This new low has occurred because of falling prices and higher volume on a day where market volume was 65% below the 50d MA. This is quite remarkable, and indicates that there was broad selling into the Thanksgiving weekend. Historically, when we have hit the lowest levels, we have an opportunity to enter on the long side with good R/R.
• Prices continue to accelerate to the down side.
• The Long-Cash Ratio (LCR) slope model continues to indicate bearishness with more stocks accelerating to cash/short status. Avoid long positions in general.
• The Elder Force Index timer that I employ is solidly bearish. Avoid long positions with an intent on holding for the intermediate term.
• The 5d / 65d timer that I employ on the GGT system is indicating cash is king. This being said, bonds are attracting some attention here.

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

"[Be] fearful when others are being greedy and [be] greedy when others are fearful” -- Warren Buffet

For the GGT system to signal buy, we need stocks to start to reverse their drop. Over the last 7 trading days we've had a fairly steady drop in prices, often on higher volume within those stocks that are dropping, and this does not necessarily bode well for moving long for the long term.

But what about the shorter term? We are at incredibly low levels here in the strength index. I conducted a study where I ranked the top 100 oversold levels in terms of performance if we were to have bought the GGT index the morning after we had hit the oversold condition. Here's the results for every dollar invested:

Across the top are the days since hitting the low, and obviously, you can see the average, standard deviation, minimum value, and maximum value. 

In the case where I take the top 100 days, on all measured time frames we have had a positive average, but clearly, the standard deviation (68% probability) shows that we could end up slightly below the water line at any time during the first 9 days. Also, you can see that the minimums are extremes -- 2 * the standard deviation amounts is a 95th-percentile probability and most of the extremes on the down side are outside of this range. We're in wild times, but in general, buying when we hit these extreme lows has worked in the past for the majority of cases, sample size = 100.

Let's do the same thing with a sample size of the top 50:

More of the same here. Average return drops slightly, volatility increases slightly, but the extreme min/max levels are about the same. This is encouraging.

Let's do the same test for the top 20. Note that Friday's action places us within this group.

The data here suggests a further increase in volatility as well as a reduction in average gains. At the same time, note that the minimums are actually higher, and the maximums are nearly equivalent to the previous tests. This data does not convincingly tell us that we should move long at the open on Monday, but it does suggest that we are within a zone where historically, downside is limited and the upside has been quite favorable.

Whether or not you choose to go long Monday for a short-term pop, we are oversold in the markets and I am expecting a short-term bounce some time this week.

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

The GGT Price Slope Model continues to exude bearishness, and has done so convincingly since 11/16. This being said, there are some indications that show some slowing in the drop:

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

I've changed the presentation slightly. Specifically, you can see where I've taken away the bullish/bearish tags and inserted numerical values. This change will give us the ability to see an overall trend of the slopes, which is useful in determining whether a change is underway.

Specifically, take a look at Friday's action with respect to the slopes, shown on the left portion of the figure. While negative (red), we see a local minimum on the 5d MA, but the 3d and 2d are respectively higher. Hence, there is some abatement of the rate of plunging in the GGT price index, although the negative values of the slopes still show a net loss day-over-day (slope units are $/day). You can see many times in the past where this more-negative value in the 8d/13d/21d region has shown that a reversal is imminent (note too there are times where no "ripple" occurred yet we had a reversal -- it's all related to the strengths of the slopes of the slopes, on the right side of the figure).

On the right, you have the Slopes of the Slopes (SoS'). These are failing at convincingly moving us out of this territory -- we see that last week gave us 2 attempts to reverse a declining SoS but we were only partially successful. Of interest here though is that the 34d/55d/65d SoS are at a value of nearly 0 -- horizontal -- and this means that they could move either direction with any positive move in the markets. 

In looking back at reversal dates such as October 4th, it's pretty clear that the SoS values were not horizontal -- they had some positive or negative magnitude -- and more importantly, they changed decisively with positive (or negative) action on the overall markets. This will be an important tell going forward -- a gradual slip into "green" on either side of the chart will not be a compelling signal to move long, statistics above notwithstanding.

Below is the LCR slope model:

Same changes here -- I've placed the magnitudes within the cells as opposed to the "bearish/bullish" monikers that I've used historically. You will also see the addition of a new column entitled "Daily LCR Change Rank". This is exactly what it sounds, I've ranked the day-over-day changes in the LCR for all of GGT history (799 trading days to date). Color coding is as follows:

• Red text/white background: LCR change was NEGATIVE, and it was within 1 standard deviation of the historical average. *yawn*
• Green text/white background: LCR change was POSITIVE, and it was within 1 standard deviation of the historical average. Again, *yawn*
• Lightest of red (almost pink): LCR change was NEGATIVE, and the change is between 1 std dev and 2 std dev. This places the move between a 5% and 32% probability of occurring, and is notable.
• Lightest of green: LCR change was POSITIVE, and the change is between 1 and 2 standard deviations. Same comment as above.
• Medium red (e.g., 11/9/11): LCR change was NEGATIVE, and the change is between 2 and 3 standard deviations. This places the move between a 0.3 and 4.6% chance of occurring, and is quite interesting.
• Medium green (e.g. 10/6/22): LCR change was POSITIVE, and the change is between 2 and 3 std dev. Same comment as above.
• Bright Red (e.g., 11/1/11): LCR change was NEGATIVE, and the change is greater than 3 standard deviations. These are rare events, with a probability of happening less than 0.3% of the time, so we need to PAY ATTENTION.
• Bright Green (e.g., 10/4/11): LCR change was POSITIVE, and the change is greater than 3 standard deviations. Pay attention folks ...

There have been some pretty clear indications that we should move long/short in the markets based on the overall magnitude and direction of these LCR values. In this latest downwave the 11/1 signal (4th strongest change down in the LCR since September 2008) we should have exited our long positions at this time. On 11/9/11 we had another bow-shot, with the 14th strongest change down, and this could have easily been a signal to move to contra ETFs. 11/21 and 11/23 have both signaled further selling, compelling us to ensure that we are not holding long positions. This being said, remember my comments above concerning being oversold -- we are clearly there and the succession of these down 'markers' in the LCR tell us just how powerful this wave down has been.

With respect to the remainder of the figure, note the same inability of the LCR SoS' to move decisively above 0... we're abating in the drop, and we need to see strong magnitude changes from here.

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

My trading plan for Monday is to mostly sit pat. None of my indicators are telling me to enter the market on Monday, and available stocks to choose from are few.

Regards,

pgd