MLR - Have the markets changed for good? Have they become unpredictable?
Even though 2012 appears to be the most challenging year yet, fortunately, such periods are aberrations and always come to an end. Some question whether the market has changed permanently since the start of dark pools, high frequency trading (HFT) algorithms, and quantitative easing (QE). It is a reasonable question but one must remember that dark pools, HFT algorithms, and QE all have been alive and well over the last couple of years. While these years were challenging, especially trendless, volatile, news-driven 2011, the Market Direction Model (MDM) outperformed in both 2010 and 2011 using NASDAQ Composite as benchmark:
2011 MDM +11.2% vs NASDAQ Composite -1.8%
2010 MDM +26.0% vs NASDAQ Composite 16.9%
One could multiple the above MDM performance by roughly 3x if using 3x ETF TECL.
Eventually, the market will catch a sustained trend. This has historically made a big difference in terms of overall performance over time, and this is the premise of the Market Direction Model. So far, the current sell signal which triggered on October 18 is working but the question remains whether the market will continue lower or continue its attempt to find direction, spurred on by a variety of cross currents. Main event that supports an uptrend: quantitative easing. Main events that support a downtrend: Eurocrisis and slowing earnings in the U.S. and abroad. Romney is catching up in the polls, but Romney vs. Obama remain a wildcard.
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.