Off your game?
Read our free, updated as of Mar 3, 2022, Dr K report on how to optimize your mind and body so you can boost your focus when trading the markets.
Meet Dr K !
Chris Kacher
  • Nuclear physicist
  • Stock & crypto market wizard
  • Blockchain builder
  • Bestselling author
  • Top 40 charted musician
  • Biohacker
  • Former computer hacker
Your email will always remain private.

MLR - PMP 7/10/14

Major averages moved higher yesterday on lower volume after the last two day drubbing. Damage done to leading stocks is pronounced and is reminiscent of prior market corrections where an initial 1-2% pullback over a couple of days in the major averages would lead to much deeper damage among leading stocks. Earlier this year, initial damage was considerable and led to the deepest corrections among leading stocks since QE began in full measure in January 2013. That said, with an imminent changing of the QE guard on the horizon, this initial damage could worsen in at least the short run, and with futures down sharply this morning as reality bubbles back up to the surface in Europe, this is starting to play out in real time.

So while markets kept calm yesterday after the minutes from the June FOMC meeting were released, the level of complacency was a red flag, and today, markets seem to be having second thoughts. Within those minutes were Fed concerns about the low volatility complacency seen in the markets as they continued to reach new highs over the past few weeks implying that investors aren’t factoring in a more hawkish central-bank approach.
Assuming the economic recovery goes as planned, the Fed will end its bond-buying program in October. That said, the Fed has said it will keep rates near zero for a "considerable time" which implies some form of market manipulation. While the market expects interest rates to be kept low well into 2015, Pimco's Bill Gross, manager of the largest bond fund in the world, has said he expects low rates well into 2016 due to a lackluster economic recovery.
So given this, the long term uptrend could remain intact, but a correction of the magnitude seem earlier this year is entirely possible. Complacency is also observed by the latest survey of Investors Intelligence newsletter writers which showed a rise in bullish sentiment to 60.6% from 57.6% last week. The bulls-bears spread stands at 45.4% which is the highest so far this year. Such complacent bullishness can act as a contrarian signal.

It is best to keep stops tight in such an environment. Selling and moving to the safety of the sidelines or establishing short position in logical areas can also be prudent.

Given all of the the above, the Market Direction Model and UVXY Model are both heading to cash this morning. UVXY's latest signal reaped huge gains, and as we have stated before, one can take profits when certain percentages are reached, while trading around a core position.

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.
Copyright ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing.
All Rights Reserved.
privacy policy