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Market Direction Model - Model switches to BUY on August 19, 2019

MDM has switched to a BUY signal. CME Fed Fund Futures now 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. Beijing has already indicated easier money on the way by announcing a long-awaited reform to interest rates. German Finance Minister Olaf Scholz said Sunday that the euro zone’s largest economy could provide fiscal stimulus, if needed, to combat a recession. Scholz suggested that the potential move would likely come after the European Central Bank restarted quantitative easing. Mexico also surprised with a cut in rates, the first in five years. Canada's yield curve inverted by the most in nearly two decades, piling pressure on the Bank of Canada to act. 

Markets are thus primed on reduced discount rates and a resumption of bond buying across the board. German 10-year bund yields now stand at a record low of ‑0.71%. Italian, Spanish and Portuguese bonds sharply rallied on the news. While QE cannot continue forever, the decade long bull market can be largely attributed to QE, so while the market action, albeit sloppy at times, remain in an uptrend, MDM will pick its reentries.

The sharp selloff last Wednesday was due to the 2- and 10-year yield curves inverting for the first time this cycle. It can take anywhere from a couple of months to around two years for the S&P 500 to peak after an inversion, based on Bank of America Merrill Lynch analysis of past 2s10s inversions spanning back to 1956, thus with the new wave of QE at hand, odds favor a resumption of the decade-long bull in the U.S. stock markets.

Nevertheless, with the number of global issues unfolding whether it be slumping economies, devaluations in Argentina, stand offs in Hong Kong, et al, 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, at least for now.

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.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2019 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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