Fellow Board Members,
I have very belatedly interpreted the quantitative tightening by the Fed to be equivalent to an increase in bank reserve requirements, so that the Zweig Fed model is now a strong sell. This makes the overall Zweig supermodel a Sell, for the first time in well over 10 years.
The quantitative easing from 2009-2016 did not fall within Zweig's framework because, as far as I know, it had never been done before. It did have the effect of reducing bank reserve requirements, as the Fed bought up large amounts of non-Treasury debt.
By analogy, I should have treated the current runoff of the previously purchased debt as the reverse of quantitative easing and therefore as increased bank reserve requirements, which takes liquidity out of the system.
Sorry I am late with this. However, the Zweig model is not a short-term trading model and therefore still indicates that a protracted upward market move is unlikely.
As usual, take this with a grain of salt, especially if one is currently investing for retirement. All the above says is to be patient.
I moved my TSP entirely into the G Fund at higher levels, but that was not based on the Zweig model, which I was reporting as low to neutral - just above a sell.
Shorter term traders of course would see this situation differently.
Good Luck and Happy New Year,
Tex
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Posted by: mrweyl@hotmail.com
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