Monday, November 12, 2012

DN Pairs - Part III..11.12.12

This is a continuation of last Monday and Tuesday's pairs posts. What today's version features is an adjustment to the size of the pair components.  We're no longer comparing 1:1 size (in terms of dollars) but a 1.5:1.8 skew.  The result is a halving of the volatility over the past four years...a good thing.

Keep in mind that Long QQQ is basically the same thing as Short SH, so these pairs are really only used as a confirmation of directional momentum of our little 6 ETF is NOT a portfolio.
The DN model is not concerned with trading anything other than the extremes of the momentum spectrum and since most retail traders don't like to trade short and most IRA accounts don't permit it, the objective is to provide a Long only position whether momentum is bearish or bullish.

Our current outlook continues on the bearish side with SH (SPY inverse) dominating the #1 spot over our 2 week lookback. 
As mentioned on Saturday the DN and T2 momentum rankings are in conflict with the consensus of the actual pairs signals, so we're left in a kind of no man's land for the time being.
Nothing says you must be vested at all times so cash is always a viable choice at such times.
In fact, the T2 RSQ stopped and the RM versions of LM and TAQK have turned out to be safe moves over the last month. 

As of 8:00 am PST Monday the NYSE advance/decline is in a steady downslope, currently at .75.
There are no new Alerts this morning.

FYI...a topographic view of the QQQ/SH  "sweet spot" consistency.