I have described before that Detma is a medium to long term trend following trading model. As such its only input is the price action which it filters according to its proprietary algorithms and from which it determines a BUY or SELL signal. The point I want to emphasise is that the directional positioning of the model is entirely determined by the price action. As such there is no human interpretation of what is going on. The model is short or long because the price action tells it to be that way.
It cannot be fooled or distracted by spurious news stories for example. It can generate spurious signals when the market is chopping around and that is how it pays back. It will get onto emerging trends early because it is always invested. It does not know however, whether the next signal that it takes will be a fizzer or a multi month trend.
It is generally accepted that the USD is heading for a big fall because the U.S. intends to inflate (print money) itself out of its catastrophic economic situation. It said at the recent G20 meeting that it needs growth. And guess what, it can print dollars with impunity. However the rest of the world won't like it that much so they will sell their USD holdings. The BIG question off course is when is the USD going to start its slide.
This is where the systematic process can come to the fore. So here is the question. The current increasingly short USD positioning of the Detma model can be the proverbial canary in the coalmine warning us of the early onset of a long term decline in the USD or it is a series of signals that are simply reacting to an overbought condition.
This time I am going to pay attention to the current alignment of the model and am squaring my short AUD position and I am going small long EUR and AUD against the USD - just in case.
Frank
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