For Tuesday, Aug 30, 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:

On Monday the S&P 500 closed up 2.8%, a very large one-day change for the market.  The volume was lower than Friday and just below the 30-day moving average.  Our market forecast remains for growth.  The S&P 500 would have to close down about 53 points on Tuesday for our forecast to switch back to uncertain.

Subjective Comment:

While encouraging seeing the market move upward, it would have been nice to see such a large up-day occur on higher volume.  It is common after such large one day changes to see the next day reverse direction. Large changes in the market, up or down, indicate volatility is still present.

We have repeatedly discussed our thesis that the accelerating growth of the US money supply is trying to move US markets up, countered by weakness in world markets trying to pull the US markets down. We recently showed a graph where the S&P 500 had fallen less in the past 3 months than world markets.  On Monday world markets advanced, but not as much as the S&P 500. This is consistent with our hypothesis. World markets may have been up, but they are still going to be trending down as China and the Eurozone have tight monetary policies.  China, after announcing Friday new bank reserve requirements to drain $688 Billion of liquidity from their economy, announced Sunday another bank reserve requirement to drain an additional $140 billion. This continued money tightening will put more pressure on their market, causing their stocks to drop further.

The President of the European Central Bank (ECB) is Jean-Claude Trichet.  His 8-year term expires on October 31st when Mario Draghi will become the next ECB President.  The current tight-Euro policy will likely stay in place until Trichet is replaced by Draghi.  If the ECB is going to begin printing new Euros, it will probably happen in November or December.  Of course, Trichet might change monetary policy just before leaving office. Guessing what policy decisions will happen is just that, guessing.  As economic problems in the Eurozone persist, there will be pressure to begin printing money to purchase the bonds of struggling countries and inflate the Euro. The transitory nature of the ECB leadership makes it even more difficult to guess what monetary policy might be, and when it might change.

During the past weekend there were plenty of articles attempting to interpret the Jackson Hole comments made by Fed Chairman Ben Bernanke.  The 2-day FOMC meeting was interpreted by some to be a hint that QE3 will be announced on 9/21.  There is also speculation that Bernanke is constrained by politics and needs a market drop before QE3 could be justified.  Two good articles on the topic are here and here.  We don’t know and will not guess what Bernanke will do.  We hope US markets do not decline, but it is possible the downward pressure from world markets will continue to constrain the upward pressure of the expanding US money supply.  Inflation is a terrible economic policy under all circumstances.  Unfortunately, that is what the Fed has chosen.  With the banking fractional reserve money multiplier working as US banks make loans, no more money printing from the Fed is needed.  High price inflation is coming as a result of the Dollar growth, as well as increasing stock prices.

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