Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

CGTS WEEKEND: STILL BULLISH BUT SWEATING -- THE IMPORTANCE OF SELLING; AND THE RELATIVE UNIMPORTANCE OF CALLING A MARKET TOP

|Includes: Apple Inc. (AAPL), IGT, SOXL, XME, YELP

FRIDAY

3/23/18

THE IMPORTANCE OF SELLING; AND THE RELATIVE UNIMPORTANCE OF CALLING A TRADING TOP IN THE MARKET

It is painful to watch.  We are off about 18% in the last week.  This causes us to reflect.  Being "right" about the market tops is or at least seems today less important than taking regular trading profits.  Our BUY SIGNALS seem to be working quite well.  But we need a more rigorous, disciplined SALE SIGNAL SYSTEM.  And so we have gone about discovering or creating what we are calling a UNIVERSAL SELL AGENT.  Sounds high-fallutin' -- yes.  What we want is a UNIVERSAL SELL TRIGGER that will work with all of our systems.  A systemic dog collar.

We don't want to repeat the CORRECTION EXPERIENCE, watching a hard-earned profit slide back to Ground Zero because we saw what we wanted to see.

UNIVERSAL SALE AGENT.  What is it?  It is an overriding SELL SIGNAL for all our systems.  Of course, PROP1 is a universal sale agent.  When PROP1 breaks below -7, this is a long-term SELL SIGNAL.  What about a UNIVERSAL "TRADING" SELL AGENT?  COUNT1 works very well as a TRADING SYSTEM.  What if we combine COUNT1 with our new M5, which measure relative OB/OS levels.

Currently M5 fluctuates between 4 (Relatively OVERBOUGHT) and 1 (Relatively OVERSOLD).  The problem with M5 (or M2F ALT, or ANY valuation measure) is that it is NOT a timing mechanism.  Yes, when a stock hits M5-4 i is RELATIVELY OVERBOUGHT, but it can stay at that reading for a long time, and gain much more ground before faltering.  As the chart below shows, AG 2016: M5 hits 4 and then the price continues up a lot longer.

Introducing a TIMING AGENT does not make it perfect, but it helps.  In the chart above, the TIMING AGENT is COUNT1.  When COUNT1 hits 2 (TRADING SALE) and M5 is 4, we have a UNIVERSAL TRADING SELL SIGNAL.  Again, this is NOT perfect.

What if we change the M5 formula so that it SCREAMS OUT when our SELL SIGNAL criteria is met?  If M5=4 and COUNT1=2 then M5 read "5".  It is giving 2 readings now, 4 for M5 and 5 for M5+COUNT1 = 9.  We can search every day for M5New>5, and we will get a list of SELL SIGNALS.  This will allow us to search rigorously for SELL SIGNALS in the same way we search rigorously for BUY SIGNALS.

We have had a LOT of selling this week.  But amazingly, our system has remained remarkably stable through it all, SO FAR.  Our COUNT and PROP systems are very much like snow massing on a roof; when the roof can't take any more weight, it will collapse.  So far, the snow content, while great, has NOT collapsed a lot of roofs.  The roofs are designed NOT to collapse during an ordinary correction.  COUNT1 has a foundation of PROP1 so it is no surprise that COUNT1 has held up so well -- it is because PROP1 has held up well.  How much selling can PROP1 take without collapsing?  That is the million dollar question.

We hammered out a new trading system, C1M5 RIGOR.  BUY when C1 Spin =1 and M5New<=2.  SELL when C1 Spin = 2 and M5New>5  (M5OLD>=3); SHORT when C1 Spin =3 and M5New<=2 and COVER when C1 Spin =4 and M5 New<=2.  Backtesting seems reliable.  We ran a report

The amazing thing about this report is the LACK OF PANIC in the report.  (All of us investors felt a bit of panic last week; and dread about the coming week.)  Let's look at a few pictures:

When M5 Plus New breeches 5, we sell.

Wish you would have sold ORCL last week?

OK.  Want to BUY AAPL?

Even better timing, want to BUY IGT, International Gaming Technology?

What happens when COUNT1 flips from 1 (LONG) to 2 (TRADING SELL) and M5 does not confirm a SELL -- i.e., when M5 remains oversold at 1 or 2?  Good question.  THEN WE DON' SELL.  We have a couple examples today, in fact.

CLF, CLEVELAND CLIFFS: don't sell.

VVUS, VIVUS, don't sell.

Repeating, we want to be as RIGOROUS with our SELL SIGNALS as we are with our BUY SIGNALS.

How much SELLING do we still have to endure?  Magic question.  Every day we show our favorite indexes (NDX, UDOW, SPY) with our SHORT TERM M2F ALT.  What does our INT TERM M2F ALT look like?

NDX is only now hitting OVERSOLD with the M2F ALT ITERM.  If we link our INT-TERM M2F ALT with COUNT1 SPIN (in a similar way we do with M5 -- BUYING  M2F ALT INT-TERM OVERSOLD with COUNT1 SPIN =1, we see that NDX is still in a long-term BUY position.  COUNT1 SPIN has not flipped negative (for several years).

Either his market is remarkably resilient OR my system does not react quickly enough to change.  I am hoping, of course, that it is the former.  How does UDOW look?

I have been saying that MAX NEGATIVITY peaks in 2019.  Look at the internet and one sees negativity (war and trade-war fever nearly everywhere, animation for conflict, civil war, economic "experts" warning us that THE WORLD IS ENDING).

My claim is that the WORLD IS ENDING and it is not, at the same time.  We are on the verge of a RE-CREATION OF THE WORLD, which comes every 36 years, as the Sun-Principle (GROWTH, WARMTH, HEAT, ENERGY) wakes up.  The WEST worships the SUN because the SUN saves the WEST from DARKNESS (and water and COLD); THE EAST worships the MOON because the MOON saves the EAST from the oppression of HEAT.  Too much HEAT kills; and so the Night saves the East from the oppressive SUN and DAY.  The WEST is oppressed by the MOON, the NIGHT, which is the enemy of the Day and of the Sun.  In 2019, the SUN will be reborn.  This will be a subtle occasion -- not necessarily a subtle occasion in terms of the outward manifestation of SOLAR ENERGY but subtle in terms of its connection to the Sun Principle.  But the current CHAOS of the WEST will be overthrown by a new order and a new discipline.  Lao-Tse wrote: "When the world descends into CHAOS do nothing and the world will be transformed of its own nature."  That is, the transformation happens inside of all of us, and is an atomic process; CHAOS will be organized inside of us all, and a new direction and vision will re-order the chaos.  Watch what you see happening inside yourselves and be sensitive to the changes of focus and optimism and vision.  The Sun organizes; the Moon (the primary agent of ENTROPY) Dis-Organizes.  (Dante writes about DIS as being a city in Hades.  Hades is Pluto, and governs the astrological sign of Scorpio -- the sign of death and descent into the Winter.)

I have a MANIA for creating trading systems -- and I look at the system of COUNT1 SPIN = 1 and M2F ALT ITERM < 30 (oversold) -- the same system of the INDEXES above.  It looks promising also.  We LONG REMX and it is giving a BUY SIGNAL TODAY.

So is TMUS, T-MOBILE.

We had a question about NOG last week.  We are selling NOG on the basis of the scary TREND SHAPE (top pane).  NOG is oversold; and COUNT1 SPIN is a BUY.  But the TRENDSHAPE is horrendous.

We have to test this system more thoroughly.  We are showing it because it shows, again, that the majority of stocks in our system are OVERSOLD and BULLISH.  Any stock below that is LONG is OVERSOLD AND BULLISH in terms of M2F ALT ITERM and COUNT1.  How can I be suddenly BEARISH, even with the world (apparently) ending?

3/25/18

C1 M2F ALT INT-TERM

ISSUE

CLOSE

C1 SPIN

M2F ALT IT

POS

NEW POS

NEW POS

ISSUE NAME

TODAY

Yesterday

^BKX

106.407

1

20.531

Long

Banking Index

^DJI

23,947.48

1

29.762

Long

DJIA $

^FTSE

6,921.94

1

24.491

Long

FTSE Daily Index

^OEX

1,151.27

1

27.045

Long

S&P 100 Index $

^TYX

3.071

1

29.372

Long

30 YEAR TREASURY YIELD

^XCI

2,650.67

1

29.309

Long

Amex Computer Index Daily

AAP

110.84

1

29.929

Long

Enter Long

Advanced Auto Parts

ABC

84.03

1

25.922

Long

Enter Long

Amerisource

AEM

41.84

2

82.628

Flat

Agnico-Eagle Mines

ASH

68.35

1

26.66

Long

Ashland Energy

AXP

91.37

1

27.841

Long

American Express

BAC

29.881

1

20.102

Long

Bank of America Daily

BCS-PD

26.33

1

18.743

Long

Barclays APD

BIDU

230.08

1

24.3

Long

Enter Long

Baidu

BK

50.73

1

15.874

Long

Bank of NY Mellon

BMI

46

1

29.412

Long

Badger Meter

CA

33.93

1

28.105

Long

CA Technologies

CENX

16.85

1

24.441

Long

Enter Long

Century Aluminum

CF

36.92

1

12.278

Long

CF Industries

CLF

6.65

2

16.579

Long

Cliffs Natural Resources

CMA

94.07

1

23.667

Long

Comerica (banking)

CME

159.83

1

23

Long

CME Group

CQP

28.14

1

21.134

Long

Chenier Energy Group

CRM

116.34

1

26.381

Long

Salesforce.com

CRRVF

0.31

1

28.487

Long

CVR Medical Corp

CTIC

3.86

1

23.81

Long

Cell Therapeutics

DBB

18.06

1

23.95

Long

Base Metals ETF

DDD

11.43

1

27.608

Long

Enter Long

3D Systems

DFS

70.07

1

22.905

Long

Discovery Financial Services

DIA

235.11

1

27.188

Long

DJIA $

DIS

100.185

1

20.964

Long

Disney

EDZ

8.205

1

53.651

Long

* Emerging Markets Bearish ETF 3x (O)

EUFN

22.68

1

18.356

Long

Euorpean Financial Index

EVEP

0.15

1

11.427

Long

Enter Long

EV Energy Partners

EWA

22.15

1

28.221

Long

Australian Stocks ETF

EWL

33.895

1

26.794

Long

Switzerland ETF Country Fund

EWZ

43.89

1

28.711

Long

Brazil ETF $

EZU

42.4

1

28.571

Long

Eurozone

FFIV

144.51

1

24.467

Long

F5 Networks

FINL

10.55

1

39.033

Long

Enter Long

Finish Line

FITB

31.96

1

28.862

Long

First Third Bancorp

GD

218.81

1

29.035

Long

General Dynamics

GES

20.53

1

73.617

Long

Guess? Inc

GS

250.192

1

28.993

Long

Goldman Sachs Daily

HCLP

11.65

1

27.193

Long

Enter Long

Hi-Crush Partners Energy

HMC

32.91

1

23.832

Long

Honda Motor Company

HPQ

22.135

1

15.374

Long

Enter Long

Hewlett Packard Daily

IEP

56.595

1

16.106

Long

Icahn Enterprises MLP

ITA

194.72

1

25.565

Long

ISHARES US Aero-Defense ETF

IVV

259.83

1

27.917

Long

S&P 500 CORE ISHARES

JCP

2.91

1

7.737

Long

JC Penney

JJM

28.35

1

31.318

Long

Industrial Metals ETN

JJU

17.741

1

22.651

Long

Aluminum ETF (NO)

JNK

35.62

1

27.473

Long

Barclay's High-Yield Bond

JPM

109.31

1

29.145

Long

JP Morgan Daily

KO

42.75

1

29.112

Long

Coca Cola Daily

KRE

58.91

1

23.29

Long

Regional Banks ETF

LMT

336.31

1

40.182

Long

Lockheed Martin

M

27.21

1

18.34

Long

MACEY'S

MCD

157.31

2

66.766

Flat

Mc Ddonalds Daily

MOO

59.89

1

26.348

Long

Agribusiness ETF

MSFT

89.65

1

29.982

Long

Microsoft Daily

MTL

4.5

1

29.48

Long

Mechel Open Joint Stock Company

NBIX

81.5

1

20.01

Long

Enter Long

Neurocrine Biosciences

NEM

38.85

1

44.167

Long

Newmont Mining Daily

NOG

1.77

1

22.441

Long

Enter Long

Northern Oil and Gas

NTRS

99.45

1

29.159

Long

Northern Trust Corp

NUE

59.44

1

10.021

Long

NUCOR STEEL

OESX

0.88

1

33.582

Long

Orion Energy

PCY

27.835

1

18.118

Long

Emerg Mark Soverign Debt

PKW

56.61

1

25.576

Long

BUYBACK ACHIEVERS ETF

PPA

56.01

1

26.834

Long

Aerospace and Defense ETF

PSTG

19.08

1

30.355

Long

Pure Storage

PTX

2.439

1

9.685

Long

Enter Long

Pernix Therapeutics

QQQ

158.51

1

29.122

Long

Powershares Nasdaq $

REMX

27.73

1

23.216

Long

Enter Long

Rare Earth Metals ETF

RS

84.4

1

18.451

Long

Reliance Steel

RSX

22.5

1

31.912

Long

Russian Index ETF

SHLD

2.18

1

28.655

Long

Sears Holdings

SINA

106.86

1

20.766

Long

Enter Long

SINA CORP

SPY

262.83

1

29.431

Long

Spider S&P 500 ETF $

SWKS

103.06

1

18.018

Long

Skyworks Solutions

SYNA

44.87

1

22.614

Long

Enter Long

Synaptics Inc

T

35.235

1

19.787

Long

ATT

TJX

79.88

1

15.299

Long

TJ MAX Stores

TM

124.5

1

23.512

Long

Toyota Motors

TMUS

59.74

1

26.963

Long

Enter Long

T MOBILE

TUR

41.08

1

21.609

Long

Turkey Index ETF

UTX

123.82

1

12.7

Long

United Technologies Daily

VGT

168.63

1

29.923

Long

Vanguard Info Tech ETF

VIAB

30.43

1

6.126

Long

Viacom

XLF

26.81

1

25.644

Long

Financial Sector ETF $

XME

34.19

1

16.07

Long

Enter Long

Spider Mining Metals ETF

XRT

42.96

1

17.53

Long

Retailers ETF $

Have a good weekend all.

MJC

READERS PORTFOLIO.

UNDER SEPARATE COVER.

We have added a new data-field to our RP.  COUNT2 30.  A rally in C2 carries the C2 COUNT to 30.  A selloff carries C2 COUNT to -30.  If you see a stock that is Long-term LONG with a C2 COUNT -30, this is one to consider.  A stock that is Long-Term SHORT and has a C2COUNT of 30 is a SHORTSELL CANDIDATE.  When a LONG Trade breaks down from 30, this is a possible SELL SIGNAL; when a SHORT Trade breaks up from -30, this is a possible COVER SIGNAL.  We will demonstrate this more later.  Also, a C1 move between 4 and ZERO is bearish, but it signals a furious struggle between Buyers and Sellers that often precedes a reversal from SHORT to LONG.  And, a Bullish C1 move from ZERO to 1 seems to be less powerful than a move from Zero to 2 and then back to 1.  We added Count1 (as data) back to our report.  You can work with COUNT1 and COUNT2 30 COUNT by yourself.  COUNT1 also tells you in PROP1 is bullish (COUNT1 1 or 2) or bearish (COUNT1 3 or 4).

FOR SUBSCRIBERS ONLY.

For fundamental CGTS descriptions:

http://home.mindspring.com/~mclark7/CGTS142.htm

MJC, CGTS

We have refined our system to a simple system of SPINS.

LEGEND:

COUNT1 SPIN SYSTEM AND M2F ALT SPIN SYSTEM

Essentially the trading mechanism is this:

COUNT1 SPIN SYSTEM

BUY: COUNT1 SPIN = 1

TRADING SELL/HOLD: COUNT1 SPIN =2

SHORTSELL: COUNT1  SPIN =3

TRADING COVER/HOLD SHORT: COUNT1 SPIN = 4

Long-Term Traders will Buy/Cover when Count1 Spin is 1 or 2 and Sell/Shortsell when Count1 Spin is 3 or 4.

M2F ALT SPIN SYSTEM

BUY: M2F ALT SPIN = 4

TRADING SELL/HOLD: M2F ALT SPIN = 6 two days in a row

SHORTSELL:M2 F ALT SPIN = 2

TRADING COVER/HOLD: M2F ALT SPIN = 6 two days in a row

Long-Term Traders will Buy/Cover when M2F ALT SPIN is 4 and Sell/Shortsell when M2F ALT is 2.

Disclosure: I am/we are long XME, IGT.