After being out the the market since Oct 30th, the thrust from last week has triggered the 4% trading system into entering long into the market. Tracking live now for over 225 days the Ned Davis/ Zweig trading systems with some RedlionTrader tweaks has re-entered into the Rydex 2x Russell 2000 ETF (RRY). A 4% down week will close out the long trade. The system and tracking was started to show how continued pessimism from those last year was unfounded as far a near term market returns were concerned. Bearish comments from the likes of Nouriel Roubini kept enough of the money on the sidelines and the early gains were lost to many investors.
The table below tracks the current trade and return had one entered the market when Mr. Roubini dismissed the 4% thrust as just “another bear market rally” for suckers and labeling those who believed in positive 3rd quarter GDP growth as delusional.
An investment in the SPY ETF would have yielded thus far a 41% return with a leveraged ETF Russell return of over 78%. A safe cash sidelines positions has return only .22% during the same period.
The lesson here is to trade the markets and do your own research. The Zweig/Davis 4% system would have taken the investor out of the market early enough to have preserved the cash from the 2008 and early 2009 crash and safely re-entered the market when investor sentiment had returned.
The latest entry is based on the likely hood that more upside is left in this market.
