TradingEdge Weekly for Sep 18 - M2 model at +2 bullish signal, Market enters danger zone, Gold model turns favorable

by Sentimentrader

2026-09-18

Key points:

The M2 Stock Market Model currently reads +2 (both indicators favorable); since 1960, $1 invested only during +2 months grew to $21.65, versus $6.59 during +1 months and $142.69 when the model is greater than 0.
The High Beta/High Quality ratio crossed above 85 and the OEX put/call open interest ratio fell below 0.775; historical 6-12 month SPX win rates were 87% for both signals.
MEC reading fell to 2, entering the "danger zone"; historically, healthy environments saw $10,000 grow to $48,057 versus $16,341 in unhealthy environments, with maximum drawdowns of -63.6% vs -20.3%.
Slowing Real M2 growth (declining 12-month rate of change) is favorable for gold; since 1974, $1 grew to $10.69 during slowing months versus $2.27 during accelerating months, and $32.21 when Gold/Real M2 ratio exceeded its 26-month EMA versus $0.75 when below.
Risk On/Off indicator fell quickly from above 67 to below 35; historically, SPX was still 88% higher 1 month after the signal, but weakness emerges around 1 month out with 2-week positive rate falling to 25%, and avoiding that window improves historical returns.
Soybean futures rallied 13% in just over a month but are entering a seasonal weak period (TDY #176-191, Sept 15-Oct 6); since 1937, beans declined roughly 2 of every 3 years during this window, with losing years much larger than winning years.
CME FedWatch shows >90% probability of a rate hike; historically, stocks almost universall

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by Sentimentrader

2026-09-18

Key points:

The M2 Stock Market Model currently reads +2 (both indicators favorable); since 1960, $1 invested only during +2 months grew to $21.65, versus $6.59 during +1 months and $142.69 when the model is greater than 0.
The High Beta/High Quality ratio crossed above 85 and the OEX put/call open interest ratio fell below 0.775; historical 6-12 month SPX win rates were 87% for both signals.
MEC reading fell to 2, entering the "danger zone"; historically, healthy environments saw $10,000 grow to $48,057 versus $16,341 in unhealthy environments, with maximum drawdowns of -63.6% vs -20.3%.
Slowing Real M2 growth (declining 12-month rate of change) is favorable for gold; since 1974, $1 grew to $10.69 during slowing months versus $2.27 during accelerating months, and $32.21 when Gold/Real M2 ratio exceeded its 26-month EMA versus $0.75 when below.
Risk On/Off indicator fell quickly from above 67 to below 35; historically, SPX was still 88% higher 1 month after the signal, but weakness emerges around 1 month out with 2-week positive rate falling to 25%, and avoiding that window improves historical returns.
Soybean futures rallied 13% in just over a month but are entering a seasonal weak period (TDY #176-191, Sept 15-Oct 6); since 1937, beans declined roughly 2 of every 3 years during this window, with losing years much larger than winning years.
CME FedWatch shows >90% probability of a rate hike; historically, stocks almost universall

Upgrade your subscription plan to get access