Ready To Reduce Risk If Needed

One of the main objectives of the CCM Market Model is to help us discern between volatility to ignore and volatility that requires defensive action. As of Wednesday’s close, recent weakness has, for the most part, fallen into the volatility to ignore category. However, that will most likely change if we do not see some improvement Thursday or Friday.

If the model calls for it, we will take an incremental step away from risk this afternoon. If we pay attention to the models and follow the rules, we will balance the desire to capture future upside with the need to protect capital during prolonged corrections or bear markets.

The chart below helps us answer the question, “Would I rather be long QQQ or short?” As of Wednesday’s close, the answer was “long”.

The model will step away at a faster rate once a bearish moving average crossover occurs (blue drops below red). It has not happened yet on any of the charts presented here.