The model's fail-safe was hit, thus the model returns to cash. The loss on fail-safes is typically a lesser negative than -2% on the NASDAQ Composite unless the market is unusually volatile. In this case, the fail-safe triggered at -2.3%, which is a smaller loss than expected given current levels of volatility.
The market is still in a chop zone, a period that follows a steep correction where the market remains volatile and somewhat trendless.
Quantitative easing out of Europe could push the markets higher in a lackluster fashion as QE1 and QE2 has done for US markets from March 2009 - June 2011.
Many arguments can be made that Euro-QE will be ineffective, but the model does not argue with its fail-safe, thus has moved back to a cash position.
In Euro-news, Germany and France have agreed on increasing the bailout facility. The details now need to be hammered out. This could create additional delays. The markets do not like uncertainty so in the meantime, the markets could head lower. In addition, the action of leading stocks has been anemic at best. That is all to say that the model is not far from switch into a sell signal should selling pressure continue.
In this highly volatile environment, it can be prudent to keep position sizes on the smaller side and pyramid in on a price basis, whether the position is in an ETF from the model's buy or sell signals, or in a stock.
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. ©2021 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.