For Friday, Aug 12, the market forecast is for growth

We recommend any leveraged ETF that grows with the US market.  Please read our comments below for additional thoughts.

Here are some options:

2x Leveraged ETFs

NASDAQ 100

Russell 2000

S&P 500

QLD

UWM

SSO

3x Leveraged ETFs

NASDAQ 100

Russell 2000

S&P 500

TQQQ

URTY

UPRO

Technical Comment:
Thursday saw another very large change in the US stock market indices, this time upward and on low volume. 5 of the last 6 trading sessions have seen an upward or downward change of the S&P 500 greater than 4%. This extreme volatility is very rare in the market and has caused our algorithm to shift from uncertain back to growth.  Our forecasting algorithm uses historical patterns to identify turning points in the market, and it has identified a growth signal that has not been reversed by a fully developed decline pattern. Daily action has seen higher volume on down days, which is typical of decline patterns. In addition to turning point pattern recognition, our system has a modified moving average as a stop-loss safety net. This stop-loss algorithm has caused the frequent shift back and forth between an uncertain forecast and the growth forecast. This is why we have been providing an estimate of the S&P 500 movement that is likely to cause another shift in our forecast.  If the S&P 500 opens down 33 or more points on Friday, consider waiting until another day before getting back into the market because a drop this size will likely shift our forecast back to uncertain.

Subjective Comment:

As we’ve been writing recently, our opinion is an upward trend in the US markets will develop soon, along with accelerating price inflation, both driven by the accelerating growth of the US money supply. Even though the Fed’s QE2 program ended over a month ago, the newly created money in the banking system has been growing via the fractional reserve money multiplier. We have not encountered sufficient data to change this opinion. The problems in Europe and China continue to be different, and they are having spill-over effects into US markets. Large institutional investors frequently invest in multiple countries, so turmoil can spread. Adding to the market turmoil are the regulators in Belgium, Italy, Spain and France who are imposing short-selling bands in an attempt to stem the drops in their markets. These bans will last for 15 days. Banning short-selling has never helped and often increases the problems. The bans are scheduled to be lifted on August 26th, which could result in dramatic drops on that day. Coincidently, August 26th is also the date the US Bureau of Economic Analysis will release its revised GDP for the 2nd quarter, which is expected to be a downward revision. Also on August 26th in Jackson Hole, Wyoming, Ben Bernanke will give his keynote speech. This is the same speech where QE2 was announced last year. All of this sets up August 26th to be a day where a lot of events and announcements could have a big impact on the market.

The best thing for the US economy would be for the Fed to remove the excess liquidity from the US banking system to prevent price inflation. This would cause interest rates to go up and allow businesses to discover what investments and projects are truly viable and which ones should be scrapped. This is necessary for a true economic recovery. It would cause a crash in US markets and an increase in unemployment while everything is sorted out, but this would last only 3 to 6 months. It would also increase the borrowing costs for US Treasuries, putting more pressure on US deficits. One other consequence would be the failure of many insolvent banks in the US, including some of those considered To-Big-To-Fail. While healthy for the economy, the short-term pain is what the Fed is attempting to avoid. The Fed’s FOMC announcement of keeping interest rates near zero for the next two years shows the Fed has no intention of reducing the money supply. We sincerely hope there will be no QE3 in the future.

Anecdotally, here is an article we consider as a bullish indicator for US markets. Business insiders buying stocks indicates they believe there is money to be made in a coming up-trend. Warren Buffet has also been buying recently, indicating he thinks US markets will grow. Our best advice is to wait until this unusually high volatility subsides and then invest to take advantage of the trend that emerges. A decline signal might develop, but for all the reasons discussed we anticipate a growth trend to eventually emerge. Please keep checking our forecast every day.

5 Responses to For Friday, Aug 12, the market forecast is for growth

  1. For some reason or another, I can’t see all of this text, the text keeps disappearing? Are you using XHTML?

    • TSP LLC says:

      Thank you for alerting us to this problem.
      The last sentence of the text reads “Please keep checking our forecast every day.” If you are unable to see all the text, we’ll be happy to send it to you via email if you would like.
      We’ve been unable to recreate the problem you mentioned. You asked if we’re using XHTML. We publish using the WordPress blog service, and we’re not sure if XHTML is used. We’ll report the problem to their technical support to see if they can determine any possible problems.
      We’re terribly sorry you experienced a problem.

    • TSP LLC says:

      The WordPress support team was unable to identify why you experienced this issue. Their best suggestions are to clear your browser’s cache and cookies. If that doesn’t work, you could try and upgrade to the most current version of your browser.

  2. Conan Movie says:

    I think some of this stuff might have been stolen, it’s all over the web and other peoples websites, unless you’re the original maker?

    • TSP LLC says:

      Our forecast is completely original content.

      Our commentary reflects our thoughts on material and information we regularly read on other websites. We add our own thoughts and present information we think is most relevant to the direction of US stock markets, and we attempt to be as concise as possible. In this regard, we are creating original content. When appropriate, we provide links to our sources.