Our Competitive Advantage

June 21, 2013, 09:45 am ET, BY Thomas H. Kee Jr- Editor, Stock Traders Daily| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

The Stock Market has become volatile, iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) was up almost 12% on Thursday, which tells us that the fear gauge is increasing, technical support levels have begun to break, and because everyone knows the FOMC has been the driver of asset prices Smart Money recognizes that a meaningful correction can come.  Furthermore, my macroeconomic work, The Investment Rate, tells us that the rate of change in the natural flow of new investment dollars in the United States declines aggressively starting at the end of 2012 and for the next handful of years. 

Everything considered, this is not unlike what we have seen before, and the fact is that if the Market does decline and if the economy does retract to the level at which it would be without FOMC stimulus, those who are left holding the bag will again experience severe wealth destruction like they have after the Internet Bubble, the Credit Crisis, and now probably after the Stimulus Bubble too.

Mostly because they do not think they have an option, individual investors usually take the brunt of the pain, but as individual investors we are much more nimble than institutions, we have the ability to control our risk much better than they, and we can actually incorporate proactive strategies that are efficient in any market environment as a result. 

An example is a strategy offered by Stock Traders Daily that is called the Lock and Walk Strategy. This Strategy has a few features, but it is best described using the video link below. 

• The strategy is market-based, focusing on the NASDAQ.
• It is never actually short so it is okay for IRAs.
• It trades ProShares UltraShort QQQ (ETF) (NYSEARCA:QID) and ProShares Ultra QQQ (ETF) (NYSEARCA:QLD exclusively.
• It has integrated risk controls.
• It has no overnight risk.
• It can work when the market increases
• It can work when the market declines
• It can work when the market trends sideways.
• It can be automated using Trend Tracker.

But possibly best of all to those who like to chase performance, it also has bettered the S&P 500 by 56.7% since January 2010.  Since Jan 2010 The Lock and Walk Strategy offered by Stock Traders Daily is up 61.3% versus the S&P 500, which is up only 39.11%.  That means that this risk-controlled strategy has beaten the market handily even during one of the most aggressive bull market runs we have ever witnessed, but there is a catch.

Proactive strategies require a little more work, even if you automate them, but if the market declines as The Investment Rate suggests, as the Smart Money seems to think right now, and as the VIX seems to be telling us, and if the FOMC lets the economy go it alone for a while, the reversion to the mean could cause serve undulation that could be completely avoided by using a proactive strategy and that little extra work could make a significant difference.

Lock and Walk video explanation:  http://www.youtube.com/embed/rpjtbYwyJ3Y

Support and Resistance Plot Chart for

Real Time Updates for Repeat Institutional Readers:

Factset: Request User/Pass

Bloomberg, Reuters, Refinitiv, Zacks, or IB users: Access Here.