Frequently Asked Questions

Dr K Market Direction Model
Please explain how quantitative easing (QE) has introduced material changes to the model.

QE began in late 2008, and MDM noticed it was a material change to the markets by early 2009, thus accounted for this change. Since then, the QE environment has artificially manufactured the bull market, especially the loose uptrend you see in the S&P 500 since January 2013 when QE went on full bore across many central banks. Because of this, the S&P 500 has limited its corrections to -6.1%. [Date of this writing: 9/25/14]

MDM's reversion to the mean strategy takes advantage of these shallow corrections in the major averages as a short term tool in this full bore QE environment which gives MDM the potential to more quickly switch out of its SELL or CASH signal to get back on board the uptrend after a correction. It also gives the MDM the potential to move more quickly to CASH or to SELL in the event the market looks weak after hitting new highs.

Published: Sep 25 2014