Market Direction Model - Model switches to BUY on September 5, 2019

Published:

5 Sep 2019 15:10 ET

MDM has switched to a BUY signal. The amount of negative yielding debt jumped $3 trilllion in August alone. The total now stands at more than $17 trillion. CME Fed Fund Futures expect 3 rate cuts over the next 3 Fed meetings which will bring the target rate down to 125-150 bps by the end of the year. Other central banks are following suit. Incidentally, since the Lehman crisis in 2008, there have been more than 730 interest rate cuts in total around the planet by central banks.

Suffering economies were a headwind for stocks in the U.S. because prior to December 2018, central banks were far more hawkish. Fed Chair Powell had been hiking rates until his about face on December 24, 2018, the market low. Other central banks followed suit. U.S. stocks have been in a bullish uptrend since that date.

The exception to this has been the trade war between the U.S. and China which is a major headwind to the progress of stocks. But the reacceleration of QE is here for the foreseeable future. With the number of global issues unfolding whether it be slumping economies, devaluations in Argentina, stand offs in Hong Kong, et al, all stand to help increase the flow of QE. That said, expect more gap up/gap down days as par for the course with the steady stream of QE to help guide markets higher perhaps in the context of a sloppy uptrend.

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

SPY (S&P 500)

QQQ (NASDAQ-100)

2-times

SSO (S&P 500)

QLD (NASDAQ-100)

3-times

UPRO (S&P 500)

TQQQ (NASDAQ-100)

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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