For Wednesday, Aug 24, the market forecast is for growth

We recommend any leveraged ETF that grows with the US market.

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:

The S&P 500 Closed up 3.43% on Tuesday on smaller volume compared to Monday, but higher compared to the 30-day moving average.  Such large moves in the market are rare, and when they occur they tend to cluster.  Within the past 2 weeks the S&P 500 had huge up-days on August 9th (+4.74%) and August 11th (+4.63%), so volatility continues.  Aug 11th and 9th large up results were both on light market volume.

Tuesday’s huge increase flipped our forecast from uncertain to growth.  The stop-loss algorithm in our automated forecast is designed to protect against down-trends.  Unfortunately, this design can create false-starts in our forecast during periods of high volatility.  If the S&P 500 were to close down by about 24 points (or more) on Wednesday, our forecast will likely flip back to uncertain.  This back and forth between growth and uncertain is what we mean by “false starts”.

Subjective Comment:

S&P 500 volume on the 9th and 11th (recent large up-days) was 2.4 billion and 3.7 billion shares respectively.  Volume on Tuesday was 5 billion shares.  It is encouraging to see the market move up on higher volume as this is typically a more bullish trend indicator.  Our forecast is for growth, but caution is recommended until volatility subsides and a clear trend develops.  As previously mentioned, this Friday will see the expiration of the short-selling ban in several Eurozone countries, as well as Ben Bernanke’s speech at the Jackson Hole conference.  Both events could cause Friday’s market action to move dramatically up or down depending on what happens.  It might be wise to wait until Monday next week before moving back into an US Market index fund.

The US money supply growth continues to accelerate.  This will drive an artificial boom in US markets and cause price inflation to also accelerate even more than it already has.  This is the force attempting to drive US markets up.  The downward force continues to be the tight-money policy in the Eurozone and resulting liquidity and solvency issues this is causing for banks. This is very bad for European banks, but it has a spillover impact on US banks too.  US Money Market funds have been reducing their exposure to European banks but significant risk remains.  The cost of funding for European banks is getting very expensive as a result of this turmoil.  It is difficult to predict how these countervailing forces will play out over the near term.  Eventually we expect US markets to break out and trend upward, but it is not easy to guess when this will happen.

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