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MDM - Model switches to SELL on October 6, 2014

MDM has switched to SELL. The current bounce on two days of diminishing volume and the 50dma act as headwinds. Further, with Fed QE tapering almost finished, QE3 ends this month with the final tranche of $15 billion. When QE1 and QE2 ended, this caused fairly substantial corrections in the stock market until the next cycle of QE began. Thus even though the S&P 500 has not corrected more than 6.1% since January 2013 when QE3 began, technical signs are showing this current correction could get worse. The S&P 500 and NASDAQ Composite stand at around 2-3% off their highs.

The Fed's hands are tied as they realize they must keep rates unusually low for a prolonged period until the economy starts to gain traction. While there are small signs the economy is improving, and history shows the market tends to have a substantial correction within 6 months of the Fed doing their first rate hike, the Fed remains dovish toward easy monetary policy since they know some of the economic indicators (CPI, unemployment, etc) are not telling the whole story. Thus expect some form of QE4 in the future. But until that happens, the market will lack support from quantitative easing as QE3 finishes its course this month. Volatility was elevated after QE1 and QE2 ended due to the market correcting, so the model's signals may be shorter lived than normal since the market rises slowly but falls energetically. 

Suggested ETFs:

1-times inverse

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

PSQ - NASDAQ 100 1x bear.

2-times inverse

TWM - Russell 2000 small cap 2x bear.

QID - NASDAQ 100 2x bear.

3-times inverse

TZA - Russell 2000 small cap 3x bear.

SQQQ - NASDAQ 100 3x bear.

TECS - S&P Techology Select Sector 3x bear.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (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. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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