Short-Sale Set Up - A note on MDM vs going long or short stocks

Published : May 18 2016 at 9:01 ET

This was mentioned in the prior report just sent out:

"Also, keep in mind that shorts will work best in the event of a continued market downtrend. As long as the Market Direction Model remains on a sell signal, the short side can be entertained."


To be clear, individual names can be bought or shorted regardless of the signal of the MDM. That said, when the MDM is on a sell signal, the likelihood of a short succeeding increases. But sometimes the MDM may sit on a buy signal based on QE fumes which as we know can push markets higher for longer than expected. Meanwhile, the weaker stocks may fail to rally along with the general market or may rally into logical areas of resistance which can then be shorted. 

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