For Tuesday, Nov 01, 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:

US Markets were down sharply on Monday with the S&P 500 declining 2.5% on volume lighter than Friday and below the 30-day moving average volume.  The S&P 500 would have to decline about 33 points (2.7%) on Tuesday to trigger the stop-loss algorithm of our automated forecast.

Subjective Comment:

European markets declined on Monday, pulling US markets down.  In Europe, last week’s news about the One Trillion Euro bailout combined with 50% principal write-downs on Greek debt has given way to the pesky detail of where the One Trillion Euros is going to come from.  There was some nonsense about asking for some funding from China, but that’s unlikely to happen.  Some funding will likely come from the International Monetary Fund (IMF), and perhaps some from the US Federal Reserve via Dollar swaps.  Most likely the European Central Bank (ECB) will begin printing Euros to pay for the bailout.  Mario Draghi takes over as the ECB President tomorrow, so if the Euro printing press is going to start up it will likely happen very soon.  There will be another European summit in Cannes, France on Thursday and Friday, so news from Europe will likely influence European markets and consequently have some spill-over impact on US markets.

The Fed’s open market committee (FOMC) meets on Tuesday and Wednesday (Nov 1 & 2) this week.  A statement is scheduled to be released at 12:30 pm (Eastern) on Wednesday with Chairman Bernanke giving a press conference at 2:15 pm.  Based on previous statements from the Fed, the market is not expecting interest rates to change.  There will likely be some update on their Operation Twist, but this is of no consequence to the markets.  There has been some speculation the Fed might initiate QE3 to purchase more Mortgage Backed Securities.  The rumors on this have been sparse.  We will not guess if QE3 will be announced or not.  Should QE3 be initiated, the stock market would move up in response.

The key thing to remember is the growth rate in the US money supply.  Although QE1 and QE2 are over, the Fed is allowing the supply of Dollars to grow rapidly as US banks are lending as fast as they can to anyone willing to borrow.  US banks are still sitting on about $1.6 Trillion of excess reserves upon which they can eventually expand the M2 money supply by just over $15 Trillion, which would more than double the current M2 money supply.  QE3 is not needed in the rapidly expanding monetary environment in the US.  For the past 3 months banks have been expanding rapidly and this new money is starting to initiate the bubble-boom predicted by Austrian Business Cycle Theory.  Large down-days like today can be jarring, and with the turmoil in Europe pressuring US markets downward while the money growth pushes them up, large swings up and down continue to be likely.  There have been large one-day swings in the past few weeks, but the S&P 500 has had 4 straight weeks of gains even will all this daily bouncing around.  In the past 3 weeks, the gains have been on increasing weekly volume.  Increasing markets on higher volumes is a technical sign of strength.  Monday’s one day decline was large but its significance is minimized by the lighter daily volume.  We expect continued growth in US markets despite daily fluctuations.  Now continues to be the time to invest.

Comments are closed.