Short and Medium Term Timers are Now Long (2-12-2014)

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With the close of markets on Wednesday, February 12th, my medium-termed timer has transitioned to "Long" status.  The short-term timer moved to "Long" with the close of markets on February 7.  My long-term timer is still in "Cash", and is indicating caution.

With the Long-Term timer still in "Cash" I do not plan on jumping in with both feet.  This timer is a safety net, and when it's in cash, conditions simply are not favorable for long positions.

So let's look at the Long-Term timer a bit closer.

This is a brutally-simple timer.  Most of you could implement this yourselves; the only distinction that is different is that this uses my GGT index, which is comprised of about 3000 stocks with 50day average volume greater than 100K shares and prices above $1.  The index is adaptive, so your actual results may vary.  In fact, I'm sure they will vary.

You can see that the TREND of this timer is such that the difference between the 13d MA and the 65d MA lines is going more positive.  The 13d is still below the 65d, but the difference is almost 0.  When the 13d crosses the 65d the difference will be positive, as opposed to slightly negative, and away we go for another long signal.

It's important to note that this is a very long timer.  It withstands market gyrations, and is designed to keep you in the markets, or, alternatively, out of the markets.  Because of this, you can also give up gains, but that's the risk with being fully invested, isn't it?  Please don't complain to me that it's too slow.  It's not designed to move fast -- as I said, it's a safety net.

The performance of this timer, in isolation, is noteworthy.  It has provided 6 signals since November 2008.  5 of those signals have been winning signals, with an average trade of nearly +19% gain and winning performance of nearly 24%.  The exposure is nearly 70%, e.g., it has you in the markets 70% of the time since November 2008.  Also in this time if you invested in the GGT index (think IWM or the Russell 2000) you'd be up nearly 155% or a CAGR of 19.63%.  Your worse trade in this time would have been about -6% (it's slow) and your best trade about 60%.  Here are the stats for those of you who like to understand such things:

My usual disclaimers apply, but suffice to say, with only 6 trades in the past 5+ years, the sample size is small and you need to be careful.  The wheels could come off the wagon at any time.

The problem with this timer is drawdown.  Drawdown is realizing a paper gain, being really, really happy about it, then watching it vaporize.  As I've discussed privately with many of you, I think drawdown is the number one reason why we panic and lock in losses.  We watch gains disappear, and rather than stay the course, we exit.  Here's an example of this comparing my medium-term timer with the long-term timer:

The long-term timer is showing in puke-green; the medium-termed timer is purple.

Study the graph and you can see where things hurt you with this timer, but also note that since 1/1/2009, when these were set to "1.00", the LT timer outperforms the medium timer.

You have to be willing to take more risk if you want more gains.  Market exposure is greater risk, and you'd expect more gains with greater risk.  It shows here.

So, what to do here?

I plan on taking the medium-term signal and moving long in my positions, with the understanding that this signal could reverse and we could be headed south at any time.  Futures are down sharply as I write, which is actually a good thing, as it will allow us to get a good entry if we so choose.

If you are inclined to move into and index ETF, the GGT system is performing most like the SPY (S&P500) over the past 100 trading days using a simple Pearson correlation (Rsquared = 0.952).  The IWM is close at  0.951, so it probably doesn't matter.  One strategy is to simply buy the SPY and be done with it.

On the matter of how to enter:

I do NOT plan to buy weakness.  For those of you who know me, I buy strength.  How do I do this?

If a stock is in an uptrend, then the markets pull back, the uptrend is intact on longer time frames on the first day of the pullback.  As long as the uptrend continues we'll be good.  So I typically set an order for stocks that is a penny or two above the previous day's high.  This is a BUY STOP order.  If the stock takes off, the stop price will be exceeded and the order will be filled at the market price a tick or two after it exceeds my buy stop price.  I make the order GTC (good to cancel, or several months in general), so that it carries the next day.  If the stock does not take off, I reduce the BUY STOP to be the high of today, so as the price drops day over day, I'll get a better price when it finally does trigger.  Here's a graphical example:

So I placed an order on the 2nd day of the series, shown as the red cross on the left (2nd bar from the left).  On the 3rd day of the series, which was an up day, the high of that day DID NOT EXCEED the high of the 2nd day, so my order did not fill.  In this case I did not have to adjust my BUY STOP, since day 2 and day 3 were equivalent highs, but you get the idea.  On the 4th day the stock took off, and I filled where the little blue circle is.  The stock has moved upward, and as a safety net, I've placed a stop order below the low of the next day.  This is where I am at today.

The list of stocks I like right now, in decreasing order, are these:



PNFP
QIHU
NFLX
KORS
NPSP
CBM
FB
JAZZ
MPWR
NTCT
PCLN
CHTR
FLT
GMCR
OMCL
BLDR
CYBX
EPAM
JNPR
NUVA
DORM
HTHT
DL
JAH
SBNY
ABTL
HURN
EBS
TRN
ADS
AWAY
TSN
WDR
YY
ULTI
TESO
UA
ICLR
XRS
GMED
HF
HIMX
GIVN
VIPS
MANH
CADX
OZM
WX
HEES
PKG
ACHC
ATTU
INFU
MGIC

These are all good stocks so if any break out they are worthy of consideration.  Note that I presently have positions in BRD (not on list), DL. ILMN (not on list), PKG, and XRS.

What you do from here is up to you, obviously.

If you take the medium-termed signal and move into the markets, do so with an itchy finger as long as the LONG-TERM timer is in cash.   If you choose to sit on the sidelines cash is a very good position.

Your crystal ball is as good as mine.

Regards,

Paul

New Long Signal for Thursday, December 19th

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With the close of markets last evening my timer systems are indicating a "new long" condition for stocks:

The challenge that I have here, which makes this a weak signal, is that we did not get a "full confirmation" from the intermediate timer system, which means that although yesterday appeared strong, it really wasn't as strong as in the past (relative to other times the timer has switched).

For this reason I'm cautious, and will only be looking at stocks that are breaking out on higher volume, as measured intraday.

None of the Effective Volume (EV) Divergence (www.effectivevolume.com) stocks pass my screening for potentials to the upside, but as many of you know, my screening time frames are much longer than those used by Pascal, the administrator of that site. This being said, the following stocks have good price/EV behavior over multiple time frames and are all in some form of GGT-long status:

ITT
EBS
OMCL
EVR
FNGN
UA
BWS
GMED
GNTX
HOMB
PEGA
WETF
AMTD
CLB
DORM
TW
ADVS
EJ
HEI
HIMX
PACW
PBH
PVTB
AYI
HTHT
HURN
SFUN
WX
HZNP
SAVE
AFFX
PRFT
GIII
PII
HF
IGTE
NUS
DDD
LIOX
MA
PCLN
WDR
MANH
SWIR
VFC
WIT
CONN
GA
JAH

Better EV stocks, with respect to timing, are at the top of the list.

Regards,

pgd

GGT Intermediate Timer Signals Move to Cash 11-8-2013

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All,

With the close of markets last night on November 7th my intermediate timer has signaled a transition to CASH.  I'm unloading all positions that are underwater and that have reverted to a "New Cash" basis.  My holdings after these are cut free are:

DDD (+19%)
FSS (+6%)
GEL (-2%)
HZO (+11%)
ILMN (+13%)
PDFS (+30%)
SAVE (+3%)
USAT (-6%)
XRS (+21%)

GEL and USAT operate under different rules and I'm precluded from selling them until they transition to a GGT "New Cash" status.

This overall signal has been marginally profitable -- with today's sell I should be up only +0.98% with the closed positions.  Of course the remaining holdings will boost the final values, and if I closed everything today we'd be up about 9% on this last signal in total.

I'm raising cash to limit the damage, and you should consider doing the same.

Remember, do your own diligence, and remember that you are responsible for your actions -- I am not.

Regards,

Paul

Back long into the markets on 10/15/2013

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A quick note to say that I'm moving back into the markets.

My long candidates can be found here.  All of these stocks meet my "green screen" criteria; ask if you have questions:

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

Note that this is a partial list and is limited by screen capture/display.

All of these stocks are also "GGT Long, Affirmed Long, or New Long" in recommendations.

My strategy will be to buy stocks that are breaking out above yesterday's highs and that also show strong intra-day volume.

Happy hunting.

Regards,

pgd

Moving to Cash Effective Tuesday, October 8th

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Good evening all,

My Long-Cash Ratio (LCR) timing system has indicated a move to cash. Since my crystal ball is as good as yours, I'll be liquidating weaker positions on Tuesday, October 8th and will effectively be manually-managing what is left.

My LCR table is here: right-click on the table to open in a new window or tab:

The Elder timer section is on the left and you can see that it flashed a warning on 10/3, appeared to resolve itself on 10/4 in preparation of a deal in Washington, and today was quite poor.

The LCR slope indicators have been negative since Thursday last week, and even Friday's action appeared to be window dressing. With three consecutive days of falling LCR values on all measured time scales, the signal is clear that we should move to the sidelines.

The overall timer over the last month is here:

For those of you who are not familiar with my system, the performance has been relatively steady over the past (almost) 5 years:

So, to the sidelines I go, at least until I get a reversal in signal.

Stocks that are on my watch list are included in the following file:

https://www.dropbox.com/s/3pcau45upfnjlkz/13OCT04-CombinedLeaders.txt

All of these stocks have favorable EV characteristics, as well as meeting my "green screen" (see previous posts).

Post your questions if you have any.

Regards,

pgd

Early signal to enter - 13JUL01

Good morning all,

With the close of markets on Monday, July 1st, I have a conditional entry signal for the long side. Conditional entries arise when not everything is confirming, but the primary timer system indicates that we should move long. This is the case.

The Long-Cash Ratio (LCR) system is my primary timer. This system ranks, on a daily basis, over 3000 stocks in terms of their performance relative to adaptive moving averages. The system has been in play since September 2008 and is an intermediate to long-term timer system. 

Here is the most recent LCR table:

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

Of significance here is that we've had three consecutive days of buying stocks, causing the slope of the LCR line to turn positive on a 2d, 3d, 5d, and 8d basis. Although the normal signal is to buy when the slope turns the 5d and 8d positive (e.g., this past Friday), this was the ONLY timer to indicate long this past Friday, and I feared another whipsaw. Monday's action was a bit of follow-through, and a number of internal indicators that I employ also started turning long (-ish), although this isn't a resounding "jump in with both feet". 

Let me re-iterate that -- not everything is moving long on the same day. We have a gradual thawing, but nothing to get too excited about.

The timer status table, which indicates a short-term, medium-term, and long-term timer state is below:

The short-term timer fired a few days ago when the thawing started to occur. I rarely follow this timer as it's too short for my liking.

The intermediate-term timer is just (conditionally) moving to the long side. The "mixed" state indicates that not everything that comprises this time is indicating long -- and indicating some caution. 

The long-term timer still indicates that we are in a bullish period.

I've updated my thrust list (see earlier thread) and the best stocks, relative to an EV-weighting methodology that I've developed, are located at the top. Nevertheless, ALL these stocks meet my "green screen" criteria and are candidates for longer-termed holdings.

As with all my musings, you are responsible for your own actions and I am not. Please take ownership for your decisions.

Regards,

pgd

Gotta Love Whipsaws -- Confirmed Move Back to Cash June 20

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With the close of markets on June 20th, my models have whipsawed completely back to the cash side.  I knew this signal was suspect, but as I indicated in my previous entry, I'm compelled to take every signal.

The damage has been quite light overall.  My underlying methodology when a new signal is generated is to do the following:

1) Update all candidates in terms of my "green screen".  I've presented the details elsewhere in this blog on what I look for -- I simply remove any stock that is not indicating "green" in my TradeStation scan and add new ones that meet this criteria.

2) I take this new list of "leaders" and I use a proprietary method of ranking 5d, 10d, 15d, and 20d Effective Volume.  I want EV to be indicating new buying in the stock, so 5d > 10d > 15d > 20d with all values positive.  This gives me a list from the best EV candidates to the "worse", although "worse" hasn't been proven as these are all good stocks from my list.

3) I ensure the stock is a GGT "Long"-rated stock:  New Long, Aff. Long, or Long.  Rare exceptions will allow me to review a CASH-indicated stock.

4) I buy on strength.  I typically place a BUY STOP order for the previous day's high price + 0.1%.  So if the stock was $20 high as of yesterday, I place a BUY STOP for $20.02.  If it was $150.00, the BUY STOP is $150.15.  The duration is for the next trading day only.  If the stop never triggers yet the stock is good as far as GGT is concerned I lower the BUY STOP and the process repeats, as long as my macro indicators are still showing an expanding market.

The last point is where we are now.  My macro indicators, namely the LCR (Long-Cash Ratio), have all moved negative in momentum.  I'm not buying stocks, I have no pending orders, and I'm exiting my holdings as GGT indicates.

Damage has been quite slight using this method.  I still have substantial gains in some of my positions, keeping the accounts above break even.  Nevertheless, I'm seeing the tides change, so I expect to be moving to Contra ETFs very soon.

Regards,

Paul