MLR - 2012

Published : January 3 2012 at 15:37 ET


"First, do not be invested in the market all the time. There are many times when I have been
completely in cash, especially when I was unsure of the direction of the market and waiting
for a confirmation of the next move." - Jesse Livermore

Our observations over the years, especially over the last decade, is that a strategy we call "Open Window" would only take the highest probability trades in the highest probability environments, namely when the window of opportunity is wide open. The issue with this strategy is that it tends to be very difficult to execute since in less-than-ideal environments, money can still be made, so it runs counter to the trading psychology of wanting to be in the action. In practice, however, the great paradox is that profits earned by waiting for just the right times would often be greater. We will indicate in future reports when such a period may be occurring. Of course, in trading, a 50% success rate during a strong bull market is admirable, thus position sizing, pyramiding winning positions, and being quick to cut losses is key.



The Market Direction Model tends to have strings of false signals during trendless markets. Check 2007. That was its longest string of false signals. Also, in the mid-1970s when trendless markets could last for most of the year, the model would have done better had certain rules been employed that are used today. That the model did as well as it did in 2011 which goes down as the most trendless and volatile market in the history of the NASDAQ Composite, shows that the additional rules employed due to material changes in the market helped rather than hindered the model. The model finished 2011 up +11.1% using NASDAQ Composite which is equivalent to many 1-times ETFs, and was up +17.3 using TNA and up +35.0% using TYH.

In the wealth account we managed for accredited investors, we finished the year up __% before fees, __% after fees. We did this by capitalizing on the very few trends that occurred in 2011. Our long term track records were achieved by often keying in on the best names then pyramiding them.



While a year such as 2011 is unpleasant to most, we welcome the challenge as it is during such years that our ability to profit is really put to the test. It is also during such periods that new ideas are born and then utilized. The Pocket Pivot would not have been conceived had the compressed and grinding markets of 2004-2005 had not come about. These were years where the market would take a step forward, then 3/4 of a step backward. We eagerly await whatever 2012 holds in store.

Even should the European Central Bank foot-drag when it comes to printing money, and should the trendless volatility of 2011 continue into 2012, there will be new trends, just as there were a small handful in 2011. Low growth, low inflation, low interest rates should persist. Central banks will be forced to run their printing presses. This should favor gold so we naturally will be watching closely for an entry point which may not come for yet a number of months as its current basing pattern traces out.


Infinite peace, love, and prosperity for us all in 2012.

Dr. Chris Kacher
Managing Director
MoKa Investors, LLC
Virtue of Selfish Investing, LLC

Gil Morales
Managing Director
MoKa Investors, LLC
Virtue of Selfish Investing, LLC

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