For Monday, Sep 5, 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 dropped 2.5% on Friday on volume slightly below Thursday’s volume, and also slightly below the 30-day moving average volume. Despite this large drop, our automated forecast remains for growth.

Subjective Comment:
The S&P 500 market drop on Friday was painful for owners of index funds and more so for those owning leveraged funds like we have been recommending. We commented on Thursday that a drop of about 22 points or more in the S&P 500 would likely trigger our stop-loss algorithm. It did not. The stop-loss algorithm invoked a subroutine designed to minimize false “uncertain” forecasts during a growth trend. The adjustment means Monday the S&P 500 would have to drop about 55 points to trigger the new stop-loss setting.

The two most likely causes for Friday’s sell-off in US markets was weakness in the Eurozone, and the publication of monthly US unemployment statistics by the Bureau of Labor Statistics. As we have discussed previously, the European sovereign debt, European banking exposure to that debt and the tight monetary policy by the European Central Bank have been putting downward pressure on Eurozone economies and stocks. This has a psychological impact on US market participants, and also has a technical impact as many institutional investors have global and domestic investments. We have speculated the US stock markets will eventually decouple from Europe and move higher. We still think this is the case, but clearly the expanding money supply in the US has not overtaken the downward pressure from Europe. It’s difficult to predict when this will happen, but we believe it will.

The unemployment report released on Friday was discussed at length in the media. Much was made about the fact that there was a net change of ZERO new jobs by US employers. This is the first time since 1945 there was net ZERO growth in jobs, and the official U3 unemployment rate remained at 9.1%. This is the cursory analysis of the report. We think the details actually show a more optimistic picture. Specifically, the private sector added jobs while State and Local governments reduced jobs, resulting in the net ZERO growth. Governments are reducing workers because of falling tax revenues that has already occurred. The private sector is adding jobs in response to growing profits as a result of the expanding US money supply. Another thing to consider is the apparent decline of 48,000 workers in the information industry. This included about 45,000 workers who were on strike when the survey was taken, and who have subsequently returned to work. If those 45,000 were not considered “unemployed”, the private sector would have added about 62,000 jobs in August, while the government sector declined by 17,000. This is still weak job growth, but it is not as bad as the headline and simple analysis initially suggests. For an excellent analysis of the unemployment report, we recommend this post at EconomicPolicyJournal.com.

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