MDM - Fail-safe?

Published : November 18 2010 at 10:23 ET

With positive news last night on Ireland and on the GM IPO which, without its $35 billion in goodwill, would have a negative net worth, the markets have gapped up.

The fail-safe is designed to minimize losses on false signals. We will advise members if and when this signal proves false in which case the model would go neutral.

Some fail-safes would kick in when the NASDAQ Composite trades intraday or closes above the close of the day prior to the day in which the sell signal was issued. This would mean the sell signal would switch to neutral once the NASDAQ Composite closed above 2514, as its closing price on 11/15 was 2513.82. But keep in mind fail-safes are contextual. Given today's gap up based on oversold conditions and seemingly favorable news, it is best to take a wait-and-see approach for now to see how the NASDAQ Composite closes today. Even should the NASDAQ Composite close above 2514, that does not automatically trigger a fail-safe. We will issue another report around the close.

Today's bounce could very well be an opportunity for the big money to continue to move out of the market. But it is also a question of whether the forces of QE2 are powerful enough to overcome the recent negative turn of events.


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