The model issued a buy signal on March 24. Since then, the market went higher for 2 weeks, then retraced some or all of its gains, depending on which ETF you are following. That said, 2011 has been a relatively trendless year, so this type of market action is not surprising. Indeed, the trend following wizards chronicled in books such as Jack Schwager's "Market Wizards" series and Michael Covel's book "Trend Following" are mostly underwater this year. Even Dunn Capital, run by Bill Dunn, is down -12.06% YTD, and JWH & Co, run by John Henry, is down -7.29. Both Dunn and Henry have exceptional long term track records that date back to the 1970s:
Since ETFs are trading close to their original levels when the buy signal on March 24 occurred, the market is giving one a second chance to initiate a position if one did not initiate on March 24.
The fail-safe is likely to trigger should the NASDAQ Composite reach 2705, or 1.46% from the closing price on April 19. If we include futures action in today's premarket, the NASDAQ-100 futures is trading up about 1% from yesterday's close, due to positive earnings reports from some bellweather stocks. This would represent a 1.46% + 1% = 2.46% risk. Multiple by 3 to get an approximate idea of your risk level if you invest in 3-times ETFs.
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