QT Triggers Market Reversal

With yesterday's decline in the stock market, just 52% of the top 100 companies in the US as measured by market capitalisation now trade above their long-term 200-day moving average. When the majority of stocks start trending lower, a broader market sell signal is triggered. This market reversal is coinciding with efforts by central banks to reverse years of money printing via Quantitative Tightening (QT). I do not think they will get very far with this experiment. In Q3 2018, the US Federal Reserve will attempt to withdraw $120 billion from the market while the ECB will add $100 billion for a combined net withdrawal of -$20 billion. This net withdrawal by the Fed and ECB will accelerate sharply in Q4 2018 and 2019, unless the market breaks. All eyes are watching. Something has to give.


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