For Thursday, Oct 27, 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:

Wednesday the S&P 500 spent time in negative territory before surging strongly near the end of the day to close up 1.1% on volume higher than Tuesday and above the 30-day moving average volume. The low for the S&P 500 was 1221. Relative to the S&P 500, our automated forecast is now about 43 points above (3.5%) the stop-loss trigger. That is how much the market would have to drop on Thursday to switch our forecast to uncertain.

Subjective Comment:

The initial downward motion demonstrated support in the 1216 – 1226 range. When a prior level of resistance becomes a new level of support, that is a bullish indicator. It is also bullish to see the market advance on higher volume. The volume was just a little higher than the 30-day moving average, so it’s not a bullish as it could be.  Continued rumors from Europe regarding agreement (or non-agreement) on a bailout mechanism are influencing US markets. The highly indebted countries and many large banks need bailouts to avoid defaulting on sovereign bonds. There are even rumors Germany will leave the Euro and reintroduce the Deutschmark if the European Central Bank resumes printing money (aka monetizing debt). The ECB is buying bonds of distressed countries, but they are selling assets to raise the funds necessary to purchase those bonds. This is called “sterilizing” the purchases since the net effect is to not change the base money supply. On November 1st the ECB will have a new President. Out-going president Trichet (a French national) has kept the tight-money policy in place. In-coming President Draghi (an Italian national) has said he will continue bond purchasing. Mr. Draghi also hinted he may monetize the debt (print Euros). We’re not really sure how this will play out, but the guessing and rumors is causing uncertainty and volatility in US markets.

The rapidly expanding US money supply is having a stronger influence on US markets and the US economy. US banks are lending as rapidly as they can, which is causing the money supply to grow. The Fed’s Operation Twist does not add to the base money supply as the buying is sterilized by equal amounts of selling. There is speculation the Fed may initiate QE3 to buy more mortgage backed securities to help the housing market. The US economy is beginning another bubble-boom thanks to this money creation. Regardless of what Europe does, the US is going to grow and eventually price inflation will be very high. If the Fed launches QE3 it will be even worse. If the ECB starts printing Euros too, there will be spillover effects to the US and the stock growth and price inflation will be much stronger still. Bubble-booms all eventually go bust. Continue to follow reliable market timing signals to know when to invest (NOW) and when to divest. Leveraged investing is risky and will make down-days more painful. Unfortunately this risk is necessary to keep your investment growth ahead of price inflation.

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