MDM - Model switches to BUY on June 18, 2013

Published : June 18 2013 at 10:31 ET

The general market has continued to rally, thus, the Market Direction Model is switching to a buy signal. In Monday's action, a Financial Times piece said Fed Chairman Ben Bernanke might scale back on quantitative easing, but then recovered some when the author of the piece said this scaling back wouldn't happen soon. Indeed, until signs the economy is truly recovering are present, QE is here to stay. Central banks don't want to prematurely slow QE only to see the economy take a nasty slide. The Fed meeting starts Tuesday and ends Wednesday.

The Market Direction Model has remained in cash for almost the past month as the market struggles to find direction. Leading stocks are waking up once again, and we have two days of accumulation out of 3 on the S&P 500, with one of those days being a follow through day. The Fed is likely to give market solace when Bernanke talks further about slowing QE but not until clearer signs are present that the economy is truly recovering. So far, the signs are not there, so QE could continue on full measure for at least a few more months, allowing the market to continue its uptrend.

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