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MDM (Market Direction Model): Update

The model remains on a buy for now. In the days ahead, should the NASDAQ Composite break below the 2368 level during the trading day, we will advise as to whether the model will switch signals or remain on a buy.

This current rally has correlated very closely to the U.S. dollar, which began to drop precipitously in late August. Gold began to anticipate by starting to rally a little bit earlier, and silver came on later in August as well as it broke out to new highs not seen since 1981 when silver reached $41.50 an ounce.

The current market environment is pushed around by two opposing forces: QE2 looms on one side, essentially the printing of money and the debasing of the dollar, which sends it plummeting while stocks and commodities react in teeter-totter fashion by going higher; on the other side is a poor and potentially deteriorating economic backdrop, as we saw in the jobs number on Friday.

ETFs such as DAG which corresponds to twice the performance of the deutsche bank liquid commodity-agriculture and other commodity based ETFs such as MOO, DBA, and DBC staged breakouts on Friday. They could be bought but keep your stops in place.


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