For Friday, Aug 26, the market forecast is for growth

We recommend any leveraged ETF that grows with the US market.  See additional comments below.

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 dropped 1.56% on Thursday.  This drop was on volume higher than Wednesday the 30-day moving average.  This was not enough to trigger the stop-loss algorithm, so our automated forecast remains for growth.  To trigger the stop-loss on Friday, the S&P 500 would have to drop about 15 points.

Subjective Comment:

Downward motion on higher volume is bearish for the market.  There have been 12 such down days on higher volume in the past 2 months, and this is a lot.  We still expect the accelerating growth of the US money supply to eventually drive the US stock markets (and price inflation) up.  It is difficult to guess when the downward forces from Europe will be overcome by the upward forces of the US money supply.

Eurozone problems continue to be a drag on US markets.  Greek banks are accessing emergency liquidity assistance, prompting speculation they are near bankruptcy.  The European Central Bank (ECB) borrowed $500 million from the Federal Reserve, and other commercial banks in Europe are increasing their dependency on the ECB by borrowing just over $4 Billion from an emergency lending facility this past Tuesday.  The sovereign debts taken on by the European banks have caused solvency problems, and they are desperately attempting to cover this with liquidity.  The tight Euro policy of the ECB is healthy in the long run, but only if the banks that should fail are allowed to fail.  If the ECB wavers and begins printing money, that will only delay the problem into the future where it will be much worse.

Yesterday we referenced the roomer Bank of America would be acquired.  Instead Warren Buffett’s Berkshire Hathaway acquired $5 Billion in a private purchase of preferred stock and warrants to purchase 700 million shares of common stock at any time over the next 10 years.  This private infusion of capital confirms that BofA is facing liquidity issues, and probably solvency problems too.  Expect the Federal Reserve to continue to support US banks directly or via brokered private support.  The policy of Too-Big-To-Fail continues.  We assume the Fed and the US government fear the failure of a major US bank and the consequences such a failure would have on the economy and stock market.  We do not believe Warren Buffett’s purchase was his own idea.  Back in February he sold all of his BofA holdings at a loss and was critical of their management decisions.  We suspect Warren was influenced or perhaps knows something, but that is pure conjecture on our part.

Tomorrow is Friday, August 26th.  We have discussed this date previously because of the speech Ben Bernanke will give at Jackson Hole and the expiration of the short-selling bans in several European countries.  Today those countries in Europe announced an extension of the short-selling ban, showing European regulators are still very concerned about their markets.

  • Italy & Spain extended their bans until 9/30
  • France extended theirs until 11/11
  • Belgium & Greece extended their bans indefinitely

Speculation about an announcement of QE3 continued to be published online and discussed on financial televisions shows throughout the day on Thursday.  The speech is titled “Near and Long-Term Prospects for the US Economy” and is scheduled to begin at 10:00 AM Eastern time.  Market action during and immediately following the speech is unpredictable, but it will surely be influenced by Ben Bernanke’s comments.  By the end of Friday, his remarks will have been over-analyzed and commented on for additional clues and clarity.  Consider remaining out of the market on Friday and watch what happens.

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