For Monday, Oct 17, 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 Friday the S&P 500 closed the day up 1.7% on light volume, lighter than Thursday and below the 30-day moving average volume.  Our forecasting system is not developing any patterns that predict market weakness.  The S&P 500 is closed at 1224 on Friday, breaking above recent resistance of 1216.  This is a bullish technical indicator, but it was not on strong volume.

Subjective Comment:

The US money supply is growing very fast as banks continue to tap their excess reserves and make loans at a rapid pace.  The money supply growth has slowed a little in the past two weeks, but over the past two to three months the growth rate has been very strong.  From June to September, seasonally adjusted M2 has grown from $9.1 Trillion to nearly $9.6 Trillion.  This is almost $500 billion of new money added to the economy in 3 months for an annualized growth rate of 21.4%.  The expansion of required reserves measures the rate of bank lending, and for the same time period the seasonally adjusted rate of expansion was 79.5%, which is almost an all-time high for the data series.  The banks are lending as fast as they can and most likely will continue to do so.

Yesterday we mentioned economic data will continue to surprise and show signs of a growing economy.  Today we ran across this article that nicely pulls together a lot of the recent data and makes the same point.  If you feel like the economy sucks, that’s because it has and many people are unemployed.  Unemployment is a lagging indicator for the economy.  Businesses hire once they are certain an up-turn is going to continue.  Similarly, investors tend to rush into the stock market as they become convinced a bull market will continue.  All of the new money in the economy has been on the sidelines of the market.  We expect this young bull to start moving up more rapidly as the idle money begins pouring into the market.  We also think banks will continue to lend and further expand the money supply, causing consumer prices to rise along with stock prices.  As consumer prices rise, your purchasing power will fall.  This is why leveraged index funds are necessary.  They will help you grow faster than the rate of inflation.

If you need additional proof the banks will continue to lend, look at excess reserves.  There are $1.54 Trillion banks can lend thaas a result of Quantitative Easing.  The Fed is paying 0.25% interest on these reserves, but they are considering lowering the interest paid on these reserves in order to encourage more bank lending.  Bank lending is expanding at a near-record pace, and the Fed wants more faster!  Price inflation will be the very ugly and serious consequence of the expanding money supply, and Europe is going to join the money printing party.  As Europe expands their money supply, the downward pressure on European markets will ease and in turn this will ease the downward pressure Europe has been exerting on US markets.

Expanding money supplies cause economies to experience an unsustainable boom.  These booms can last for years before the resulting bust.  This is called the business cycle, and it is NOT a natural part of a free market economy!  It is caused by the artificial force of expanding money supplies.  There is no way to avoid the bust after the money-expansion-boom.  This is explained by the Austrian Business Cycle Theory.  ABCT is not easily explained, but it can be understood by anyone willing to invest the time to learn.  Printing money causes inflation.  That is not ABCT, but an economic fact confirmed by thousands of years of history.  ABCT explains how the economy appears to boom as the money supply expands, and then it explains why so many businesses go bankrupt at the same time.  This is the bust, or a depression, recession, or panic as it has been called in the past.  If you accept the premise that all business leaders are trying to make a profit, how does it make sense that so many businesses would all go bankrupt at the same time?  ABCT explains this.  The monetary base (M0) of US Dollars was $834 Billion in August 2008 before the most recent crisis began.  As of September 2011 the monetary base is $2.64 Trillion Dollars!  The Federal Reserve has Tripled the monetary base in 3 years!  This expansion is unprecedented in all of US history.  There is no comparison.  The other money aggregates of M1, M2 and others all grow in response to M0, but the growth takes time.  The time for growth has arrived.

We invite you to make a lot of money by investing in leveraged index funds.  The US stock market is going to go up.  We don’t know how much nor how long it will last, but we know it will indeed go up from here.

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