MDM - A second chance

Published : April 20 2011 at 6:52 ET

The model issued a buy signal on March 24. Since then, the market went higher for 2 weeks, then retraced some or all of its gains, depending on which ETF you are following. That said, 2011 has been a relatively trendless year, so this type of market action is not surprising. Indeed, the trend following wizards chronicled in books such as Jack Schwager's "Market Wizards" series and Michael Covel's book "Trend Following" are mostly underwater this year. Even Dunn Capital, run by Bill Dunn, is down -12.06% YTD, and JWH & Co, run by John Henry, is down -7.29. Both Dunn and Henry have exceptional long term track records that date back to the 1970s:

Since ETFs are trading close to their original levels when the buy signal on March 24 occurred, the market is giving one a second chance to initiate a position if one did not initiate on March 24.

The fail-safe is likely to trigger should the NASDAQ Composite reach 2705, or 1.46% from the closing price on April 19. If we include futures action in today's premarket, the NASDAQ-100 futures is trading up about 1% from yesterday's close, due to positive earnings reports from some bellweather stocks. This would represent a 1.46% + 1% = 2.46% risk. Multiple by 3 to get an approximate idea of your risk level if you invest in 3-times ETFs.


This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.