Markets are reacting positively to the jobs numbers but its the season for temp worker surges, so there may be a little false sense of hope and underlying concerns about FED tapering are still lurking in the background. For now the DOW remains below the 16,000 resistance level and the close today should serve as a tellatle for next week's likely direction. A closer examination of the technicals shows we're still in a short term downtrend so we need to be cautious going Long at this point.
Several readers want to know how to deal with the possibility of a sustained downtrend in the markets but don't want to assume short positions and don't want to be in cash.
There are a couple ways to solve that problem and the new M3 SPY Trader was actually designed with that purpose in mind. It's instructive to run a couple of these setups on a daily basis...not necessarily to trade them, but simply to see how M3 is analyzing the momentum rankings.
First, the SPY, SDS, VIX setup. SDS is the ultra short (x2) SPY and VIX is the S&P volatility index.
ETNs are different than ETFs in that they are based on a basket of futures and tend to exhibit an unavoidable decay factor that makes them suitable only for short term trading (2 weeks or less).
This is really a market neutral model where we are looking to see which side of the bull/bear momentum is currently leading.
Once again I've turned on the AUTO STOP function to better see the risk situation.