Frequently Asked Questions

Dr K Market Direction Model
Have either of you considered keeping MDM in a buy signal as long as QE is in effect?

Q: So far in 2014, it seems similar to the past with QE in full effect.
MDM has had a few triggers this year that has directed members to go to Cash instead of continuing a Long position. However, in each of these instances, it would have benefited the investor to remain Long and ride out the short term correction. Since QE seems to continue and push the markets higher, have either of you considered keeping MDM in a buy signal as long as QE is in effect?

 

A: Yes keeping MDM in a buy signal longer than normal is part of the strategy. That said, possibly moving to the safety of cash when the major averages are just one or two percent off their peaks is also part of the strategy as the averages have corrected as much as -9.7% in the case of the Nasdaq Composite in this QE intensive environment which began at the start of 2013, as well as during parts of 2009-2012 when QE1 and QE2 were in effect.

Should MDM not get a sell signal early on, it is more likely to sit on it's buy signal and weather the correction which tends to be relatively shallow and contained to within 6.1% since Jan 2013 in the case of the S&P 500.


Published: Sep 6 2014