MDM - Quick test with toe in water, back to Neutral

Published : July 12 2011 at 5:32 ET

The MDM had just switched to a buy to dip its toe in the water to test the tug-of-war going on between the market pricing in renewed rounds of quantitative easing in both the US and in Europe, vs. the PIIGS problem which has now spread in full measure to Italy. While it is fine to test the waters during challenging markets, as yesterday's pullback afforded a potential buying opportunity with rising odds of QE becoming, once again, a lift for the markets, it is also important to be quick about it, as there are the quick and there are the dead. Given rising gold AND a rising dollar, this expresses short term difficulty in the general market, thus it is best to switch back to a neutral stance for the time being.

The pyramiding strategy we advocated in a prior report with ETFs given this trendless environment that so far characterizes 2011 keeps one's losses to an absolute minimum. This is an important structure in trading strategy when markets are as tough as they have been this year. So you have two important tools at your fingertips: 1) the MDM's failsafe which keeps losses to typically within less than 2% on a 1-times ETF, and 2) a pyramiding strategy for ETFs so you gradually size into a position as it proves itself on a price basis (to be determined by each member based on their own risk tolerance levels).


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