MDM - Model switches to sell signal standby

Published : December 15 2010 at 20:33 ET

With today being yet another distribution day, as the final volume tallies show greater volume on the NASDAQ Composite compared to yesterday's volume, the model is switching to a sell signal standby. In subsequent trading days, should the NASDAQ Composite make an intraday move below the low of today, at 2612, the model would most likely switch to sell. I say most likely because it is not necessarily guaranteed. The action of leading stocks would be the final nail in the coffin. Stay tuned.

As of late, leading stocks have sold off on substantial selling pressure. Of course, this is not a normal market environment with federal reserve quantitative easing fighting any downtrend, so we could very get another situation where the model issues a sell signal as it did on 11/16/10 only to see the market immediately find its low and move higher.

That said, when the market does make a concerted move, such as it did in May to the downside, or in September to the upside, these intermediate term trends more than make up for the small losses along the way. The losses are made small by the fail-safe that kicks in if the signal proves false.

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