MAMOx: Covert Correction on the Horizon

• Posted by DynamicHedge
• on September 26th, 2013

I’m not going to mince words here. The MAMOx is our most trusted indicator and has guided us through this bull market very well. This indicator has done a great job of maintaining a bullish tone for much of the run, but it’s about to turn bearish. Ordinarily we would consider this a cause for minor defensive posturing, but this skew is happening at a time when:

1. Market participants are desensitized to crises and have been lulled into a false sense of security due to a market that has rewarded every dip buyer. “It’s deja vu all over again.”
2. A euphoric high was made on the promise of infinite QE. The QE news was designed to squeeze shorts but in a hilarious twist of fate has now created a false-breakout and trapped longs. “The battle of wits has begun. It ends when you decide and we both drink, and find out who is right… and who is dead.”
3. Strategists have been busy revising forecasts upwards after a monster run. Classic luring retail money back into the market at precisely the wrong time. “My horoscope says I’m more rational than most. What does yours say?”

I believe in higher prices. Trust me, in the long-term this bull run is far from over. In the near term I believe an unusually large pullback (for this bull market) is due and will serve as the reset needed for higher prices. This correction will catch many people off guard and wrong-footed. The MAMOx indicator has yet to signal but it is almost a mathematical certainty that it will in the next couple weeks. Govern yourself accordingly.

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