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MDM - Switches to Buy on December 2, 2011

The U.S. Federal Reserve, the European Central Bank (ECB), the Bank of England, the Bank of Japan and the Swiss National Bank all recently agreed to increase liquidity to help spur economic activity.

The central banks agreed to lower the pricing on existing temporary U.S. dollar liquidity swap arrangements by 50 basis points, putting the new rate as the U.S. dollar overnight index swap rate plus 50 basis points.

The pricing will apply to all operations beginning Dec. 5. Access to the swap lines has been extended until Feb. 1, 2013.

This means that dollars will be made available at lower rates until Feb 1, 2013 to Europe's troubled financial sector.

In addition, the ECB on Tuesday November 30 failed to fully offset its purchases of euro-zone government bonds through a weekly money-market operation, highlighting growing tensions in Europe’s banking system as institutions scramble for cash.

If the ECB doesn’t step in with an additional tender aimed at mopping up the leftover liquidity, then the new ECB president is potentially ready to accept monetization of debt, thus challenge the German view about printing money via open-market bond purchases. This could open the door to increased QE out of the Eurozone.


Given the price/volume action in major indices and leading stocks such as ROST, DLTR, BIIB, PNRA, FAST, HIBB, ORLY, SWI, QCOR, ISRG, MA  (many which are in first and second stage bases thus pose less risk) since this news, the model has thus switched to a buy signal. Of course, keep in mind that the timing is still premature on a number of leading names as they move toward nearing completion of their basing patterns (AAPL, UA, RAX, RHT, CMG, HLF, HANS, ULTA). Patience will be required on these names. On others, we will continue to send out reports as we see actionable pivot points.

Since we are still in a period of unusually high volatility, some members may prefer to pyramid into their position(s) slowly, letting the price of their respective ETF(s) prove themselves before adding to their position(s). Since the market has come straight up from lows, the fail-safe, if activated before the market has a chance to move higher, will most likely be beyond its normal -2% range. This is an unlikely but possible occurrence in this environment. In the days ahead, the model expects to see constructive pull backs as the market moves higher.

Suggested ETFs:


IWM (Russell 2000)


SPY (S&P 500)


UWM (Russell 2000)


SSO (S&P 500)


TNA (Russell 2000)


UPRO (S&P 500)

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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