Market Direction Model - Model switches to BUY on November 1, 2019

Published:

1 Nov 2019 09:53 ET

MDM has switched to a BUY signal.

Payrolls came in ahead of expectations while unemployment remains at 3.6%.

QE4, despite denials by the Federal Reserve, is nevertheless on its way. Meanwhile, the U.S. central bank continues to project an image of control. They say the financial markets are simply experiencing technical issues and seasonal bottlenecks such as quarterly tax payments. The Fed will start buying $60 billion in treasury bills per month and has called such action purely technical to gain control over interest rates. We have had 3 rate reductions across the last 4 Fed meetings, and more to come. A growing number of analysts expect interest rates in the U.S. to eventually hit 0% which is six 25-basis point rate reductions away.

In addition, the Fed has been busy putting out fires in the repo markets. What started as a temporary operation has expanded into a whopping daily injection of $165 billion on both the temporary and permanent facilities. The U.S. budget deficit is set to mushroom to $1.5 trillion per year. Do the math and U.S. debt will be over $22 trillion or 106% of GDP.

Christine Lagarde now heads the ECB. She has chastized Germany for not keeping monetary policy loose. She will certainly push for more QE.

The trade war is still a major issue as is Brexit with little end in sight to a satisfactory and conclusive, rather than transitory, conclusion.

All of the above factors should keep QE flowing strongly which is bullish for U.S. stocks, real estate, bitcoin, and precious metals.

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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