Frequently Asked Questions

Dr K Market Direction Model
Why do you suggest shorting S&P500 ETFs, not NASDAQ ETFs, even though your MDM signals are flashed by the behavior of NASDAQ index, not by S&P500 Index.

In this case, with China potentially hiking interest rates for a second time, and the FXI China ETF showing weakness, and commodities looking to have put in a minor top, the S&P 500 is preferrable over the NASDAQ Composite because the S&P 500 is commodities rich while the NASDAQ Composite is commodities poor.

As to using the NASDAQ Composite for distribution days, the NASDAQ Composite has been shown to be the most reliable in terms of sell signals. It contains less noise than the S&P 500 or Dow Jones Industrial Average. When the model issues a buy or sell signal, I look to those ETFs showing the most strength. Studies have shown that those ETFs outperforming continue to outperform. Since markets correlate to some degree, I am looking to invest in those ETFs that show the greatest potential at that time. For example, if the EU is weak, and other areas of the world are showing more strength, and the model issues a buy signal, I would advise members to buy those ETFs showing the most strength. As a historical example, FXI (China) showed far more strength than the US ETFs from 2006-2007 thus was a far better investment.

Published: Nov 18 2010