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MLR - Special Report on Market Direction Model (MDM) and Crossbow (xbow)

Part of the Market Direction Model's (MDM's) strategy is to minimize risk. Thus when volatility jumps, MDM may elect to go to cash until it sees an open window to either go to an outright buy or sell signal. Note, that even if MDM is in cash and the market is falling as it did recently, you are gaining "single" points vs the market. In other words, if the market falls 5% and you're in cash, you scored 5% vs the market. Now if MDM is on a sell and the market is falling, you are gaining "double" points vs the market. Thus, if the market falls 5% and you're on a sell using a 1x ETF such as QQQ, you scored 10% vs the market.

At times, elevated volatility is mostly noise, in which case, MDM is best off remaining in cash. At other times such as after QE2 ended in mid-2011, the elevated volatility becomes coherent such that MDM may switch between buy and sell signals frequently as it did from Jul - Oct 2011.

After long term real-time studies conducted with actual capital, my intraday indicator Crossbow (xbow) tends to work well as purely an intraday timing device though this is not practicable for most people due to its frequency of switches. But xbow can also be used during periods of elevated volatility to enhance MDM's entry points. As you can see, the last couple of signals have been nicely profitable in a short time.

Periods of elevated volatility occur when the market corrects. And since the market takes the stairs up and the elevator/trapdoor down, the market tends to offer both buy and sell signal entry points as the market corrects. Xbow makes MDM switch signals more frequently when volatility jumps with the intention for quick profits in such environments. This is simply because xbow is an intraday indicator which fine tunes entry points using volatility instruments such as XIV, VXX, and VIX. Of course, outside of such periods, MDM may stay for weeks on a buy signal. 

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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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