As we wrote in an earlier report, in prior market pullbacks from May through July of this year, the market would move lower on increasing volume, taking leaders with it. And just when it seemed as if the market would accelerate its downside move, it would then reverse to the upside. Sell signals issued by our Market Direction Model during those months, even though quantitative easing was less prominent, were typically met with upside reversals. As we are now in a full blown quantitative easing environment, shorting can be more challenging than normal, though there are some shortable stocks that are set up just right as we have made members aware.
The model will continue to monitor any further deteriorating action in leading stocks and major indices. For now, it is best to be in cash until we either get signs of a follow through day to warrant a buy signal or further deteriorating conditions to warrant a sell signal.
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