The GGT Long-Cash Ratio (LCR), which is a measure of how many stocks in the database are outperforming their history over the past year, has hit a new local high of 4.2, meaning that 42 stocks of every 52 are firing on all cylinders (e.g., 10 are underperforming or 42:10 ratio).
This level has only been hit a few times in the past since September 2008 (when I started publishing GGT) and has lasted only 1-5 days in length before a significant drop in the markets has occurred.
Here's a graph which puts it in context:
Over 80% of the database is in some form of LONG status. We certainly can move higher from here, but I do not think we'll go much higher before a drop occurs. This is a terrible reward:risk ratio.
Since the long call in this account at the start of December we have moved up +4.3% in the C-Fund (tracks S&P500), +7.1% in the S-Fund (tracks the market ex-S&P500), and +5.9% in the I-Fund (tracks the EAFE index). The F-Fund, which is a bond fund, has lost -0.4%. Using the aggressive portfolio allocation values of December 3rd this is a total gain of 4.4% on this signal.
Today (Friday) is Day 2. Monday will be Day 3, and I'm traveling. Given the restrictions of this retirement account (2 trades per month) and the overbought nature of the markets, in combination with the extraordinarily high level of the % longs in the database and the ticking time bomb that has occurred when we hit these levels, I am moving 100% to G-Fund (Cash), effective with the close of markets on Friday, January 11th. I may leave some money on the table, but in general, it is not worth the risk at this point. I could easily lose 4% in a day or two, wiping out the work of the past 6 weeks.
Of course, you are responsible for your own investment decisions and I am not. Please do your diligence, and please take ownership for your actions.
Regards,
pgd
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