For Friday, Oct 14, 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 down 0.3% on Thursday with volume below Wednesday and lower than the 30-day moving average volume.  After multiple up-days, a down-day on lighter volume is typical of a bullish pattern for the market.  The S&P 500 would have to decline about 42 points on Friday (-3.6%) to switch our forecast from growth to uncertain.

Subjective Comment:

The S&P 500 is about 12 points below the resistance level of 1216.  This would be a 1.0% increase on Friday.  When the market moves strongly above this resistance level on higher volume it will be another bullish indicator.  We expect this to happen in the near future.  The intraday movement of US markets on Thursday demonstrated again the downward force from Europe and the upward force of the expanding US money supply.  European markets closed down 0.7% to 1.3% on Thursday.  Once European markets closed, US markets moved off their lows for the day to close mixed.  The S&P 500 and Dow were down about 0.3% while the Nasdaq closed up 0.6%.  This is evidence the expanding US money supply is becoming stronger than the downward forces from Europe.  The bailout mechanism in Europe is falling into place, but headline news will continue to be negative.  For example, S&P downgraded Spain’s debt rating on Thursday.  Long term the bailouts will not work, but it will ease pressure over the near term.

The Federal Reserve published updated money supply data on Thursday.  The preliminary estimate of the 3-month annualized M2 (seasonally adjusted) M2 growth rate is 21.4% for September, down slightly from 23.6% in August and still well above the 15.8% growth rate in July.  These values come from the published monthly estimates.  The weekly estimates of the same growth rate show a slowing down to 15.8% as of October 3rd.  Although the growth rate has slowed in the latest numbers, it has been in the double digits since late June, which is over 3 months of very high growth.  Incredible as it may seem, minutes from the most recent FOMC meeting show discussion of lowering the interest rate paid on excess reserves to encourage more bank lending.  The recent rapid growth of the money supply is coming from bank lending.  The Fed seems unconcerned about the inflating money supply’s impact on consumer prices.  With no indication the Fed will take any action to reverse course, we expect the US money supply to continue to expand just as fast as commercial banks are able to make loans.

We expect economic news in the US to continue to surprise on strong performance.  For example, Google released their Q3 earnings Thursday which were very strong.  Their announcement included comments about expanding their employment as well.  Expanding employment is a lagging indicator, so by the time news about employment becomes positive other economic data will be flashing strong growth numbers.  As US markets continue to climb and the news gets better, more investors will return and cause markets to go even higher.  The expanding money supply provides many people with the power to purchase, and stocks will be included in that purchasing.  Price inflation will also lag, but it will occur.  When the price inflation becomes painful, it will likely blunt the market and perhaps even motivate the Fed to tighten the money supply.  However, that is not in the near future.  The near future will see US markets expanding.  We recommend investing in leveraged index funds to take advantage of the beginning of this bull market.  We do not know how long it will last, and leverage is absolutely necessary to stay ahead of the eroding value of the dollar that will come with price inflation.  If you’re still uncertain, wait for the strong growth above 1216 on the S&P 500 for confirmation the bull market has returned.

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