Model switches to CASH/NEUTRAL.
U.S. stock markets can go a lot higher without retesting March but with sharp corrections along the way due to the realization of second order effects. The model will likely switch to a buy on a sharp pullback that stabilizes then moves higher. For now, the odds are roughly equal of a market that moves higher due to QEternity vs. additional second order effects which can pull the market lower.
The price of oil where the May futures went negative because of the lack of storage space is a recent example though appears short-lived as markets are heading higher once again today. Barring any unforeseen negative news beyond what is expected regarding COVID-19, a shift back into a messy bull market is more likely given nearly limitless liquidity. This level of liquidity is unprecedented in the history of the Federal Reserve. While the stock market plummeted the fastest in history over a handful of weeks, it is now skyrocketing also in near-record time, defying most all negative news. The discount and fed funds rates remain near 0%. CME Fed Futures expect this to continue out to at least a year, pricing in probabilities at 100%.
Expect the leading stocks which are the new alt-currencies to resume their longer term uptrends, albeit sloppy, along with the general market. Fiat will continue to debase so this is bullish for bitcoin, gold, and palladium, but the limitless liquidity has to go somewhere so this is also bullish for stocks and bonds. The Fed is already buying various bond-related ETFs as well as actual corporate bonds such as Ford so stocks and stock-related ETFs are likely next.
Market Direction Model - Model switches to CASH/NEUTRAL on April 22, 2020
| Published: | 22 Apr 2020 13:30 ET |
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