MDM - Model switches to SELL on May 9, 2012
Selling pressure continues across major markets including European bourses. A double dip recession has recently been declared in the UK, with the Eurozone taking part of the blame. Since countries are highly correlative when it comes to recessions, the Europe and the US are not far behind. Further, negative price/volume action in AAPL which has been a highly correlative stock in the current environment and weighs in at roughly 17% of the NASDAQ-100, will also put added selling pressure on the market. AAPL violated its 50-day moving average on May 4, 2012.
Quantitative easing (QE) obscures since central banks continue to print money, making it difficult for the market to have any meaningful corrections. That said, in this challenging market environment that has characterized 2012 (http://www.virtueofselfishinvesting.com/reports/view/tvixuvxy-status-update-on-fail-safes-for-mdm-and-uvxy-models), we would suggest pyramiding in slowly into any ETFs so should the signal prove false, less is lost.
Note, sell signals are more likely to be short-lived as they have been since early 2009 when QE began. The key is in catching the signals that are highly profitable such as in May 2010 and August-September 2011 so best to play them all but in position sizes that are within your risk tolerance levels.
Suggested inverse ETFs:
PSQ - NASDAQ-100 bear
RWM - Russell 2000 small cap 1x bear. It should approximate 1x the inverse of the Russell 2000.
QID - NASDAQ-100 2x bear
TWM - Russell 2000 small cap 2x bear.
SQQQ - NASDAQ-100 3x bear
TZA - Russell 2000 small cap 3x bear.
EDZ - MSCI European emerging markets index 3x bear. Note, there are 1x and 2x equivalents but they are too thinly traded.
Always remember to position size in any of these ETFs/ETNs according to your risk tolerance levels. In this challenging environment, one may wish to pyramid in slowly so less is lost should the signal prove false.
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