Market Direction Model - Model switches to BUY on July 17, 2018

Published:

18 Jul 2018 15:37 ET

MDM has switched to a BUY signal. As discussed, QE can push markets higher on a string for longer than expected. Keep in mind that this choppy, news sensitive environment when it comes to the major averages increases risk. Any bearish news item related to trade can cause a mini-gap down in the markets overnight. The major averages have had a tendency this year to move just high enough before breaking down, and just low enough before finding a floor. Such is the nature of relatively trendless markets, though this particular one presents as particularly challenging as the bearish headwinds push markets lower while QE pushes markets higher. These cross currents can act as rip tides thus can obstruct market averages attempting to find a sustainable, less noisy trend.

Nevertheless, recent market action has been resilient in the face of the trade war with China. A number of leaders continue to act constructively. The FAANG stocks serve as one example. The NASDAQ-100 and NASDAQ Composite, both having hit new highs, are showing good strength, pacing ahead of the S&P 500 and Dow Industrials. Earnings season is expected to show strong numbers once again, despite NFLX, with companies able to legally distort their earnings due to QE-related stock buybacks.

Suggested ETFs (Note: Many members buy the standard ETFs or their preferred ETFs. This list serves as a guide as to which ETFs we think may outperform, but the key point is to be on the right side of the market regardless of which ETF or ETFs one chooses.)

1-times

QQQ (NASDAQ-100) (Higher risk, higher reward)

2-times

QLD (NASDAQ-100)

3-times

TQQQ (NASDAQ-100)

TECL (S&P Technology Select)

NOTE: This is a suggested list. Investors may wish to become acquainted with the full range of available ETFs, and should make an effort to understand how these ETFs are created and what their components are, as well as being aware of the downside risks involved, especially with leveraged ETFs. Certain ETFs may be more appropriate depending on one's risk tolerance levels. Typing in keyword 'ETF' into the FAQ keyword search bar or going here https://www.virtueofselfishinvesting.com/faqs/search?p=1&q=etf and visiting this site https://etfdb.com/ can be instructive.

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