MDM - Model switches to SELL on May 9, 2012

Published : May 9 2012 at 14:19 ET

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 (, 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:

1-times inverse

PSQ - NASDAQ-100 bear

RWM - Russell 2000 small cap 1x bear. It should approximate 1x the inverse of the Russell 2000.

2-times inverse

QID - NASDAQ-100 2x bear

TWM - Russell 2000 small cap 2x bear.

3-times inverse

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.

This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.