For Wednesday, Oct 19, 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 Tuesday US markets rose just as sharply as they fell on Monday.  The S&P 500 closed up 2%, completely recovering its Monday loss.  Tuesday’s volume was above Monday’s and barely above the 30-day moving average volume.  On Wednesday the S&P 500 would have to drop about 37 points (3.1%) to trigger our stop-loss algorithm and flip the forecast to uncertain.

Subjective Comment:

European markets were mixed on Tuesday.  London’s market was down 0.5%, the German market was up 0.3% and the French market closed down 0.8%.  European sovereign debt continues to be downgraded with Moody’s downgrading Spanish bonds.  European banks are being downgraded too.  This weekend there is a G20 summit where a major announcement is anticipated regarding the bailout structure that has been under development by politicians and bureaucrats.  The details of the plan are not fully known, but it is likely to delay the major problems for a little while.  How long this bailout will work is difficult to predict, but eventually the crash that is avoided now will be worse later.  The best thing for the Eurozone, and any economy, is to let bad businesses fail regardless of what they do.  Governments should not bailout anyone, and money should not be printed at all.  Once the money supply has grown, the resulting inflation and manipulated economic boom must burst and crash.  The only way to avoid the crash is to not print money in the first place.  This includes abstaining from printing by the central bank and from fractional reserve lending by commercial banks.  Until these practices end, the boom-bust business cycle will continue.  We are guessing the pending bailout announcement this weekend will reduce downward pressure on European markets.  We also think the new President of the European Central Bank, Mario Draghi, will reverse the tight-money policy and lower interest rates by printing Euros sometime in November or December.  (Mr. Draghi will replace current ECB President Jean-Claude Trichet at the end of this month.)

European markets have been keeping the US markets down for the past several months as the Eurozone business cycle has been topping out.  This has caused US markets to move sideways with high volatility because the rapidly expanding US money supply is the upward force trying to cause US grow.  This is not real growth, but the manipulated boom caused by excessive money printing.  US banks have been expanding their lending very rapidly as demonstrated by the growth in required reserves.  We have been commenting on the growth of bank lending for some time as have some other astute blogs.  EconomicPolicyJournal.com is a good source of economic information.  Today they noted that bank lending is starting to be noticed by mainstream media outlets.  The excess reserves ($1.5 Trillion) in the US banking system will fuel the bank-lending inflationary boom, and it will be accompanied by significant price inflation.  Signs of this are already showing.  Tuesday the Producer Price Index was published and showed a sharp increased for finished goods.  This inflation was much stronger than expected.  For the best Consumer Price Index data, we recommend Shadowstats.com.

Our automated forecasting system is not perfect.  Sideways market motion with high volatility causes our forecast to frequently shift between the “growth” and “uncertain” forecasts.  The expansionary money supply pushing up has been balanced by the drag from the crashing Eurozone.  All indicators suggest the US money supply will continue to grow.  If Europe implements a massive bailout and begins printing Euros to reduce interest rates, the leash holding US markets back will break and US markets will grow soon.  If the tight money policy persists in Europe without bailouts, that will be good for Europe in the long run as the unhealthy businesses (and banks) go out of business.  This would allow the European economies to reset and grow.  Part of that includes the necessary decline in European markets as those unhealthy businesses fold.  If this downward pressure from Europe is how things play out, then US markets will continue to experience volatility and sideways motion a while longer.  Regardless of the course Europe takes, the US money expansion will eventually overpower and cause US markets to move up.

Volume on Tuesday was up, but not dramatically so.  We are still looking for a technical breakout above the 1220 level on the S&P 500.  This breakout would be upward motion on higher volume with the ability to stay above 1220 for a few days.  Friday and Tuesday the market has reached this breakout level, but the action has not yet been strong enough for us to declare a technical breakout signal.  If you’re still cautious and want to see the strength in this bull rally, wait for strong upward movement from here on high volume.  You might also wait until after the G20 summit announcement this weekend.  If you can tolerate more risk, the time to invest is now.

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