For Friday, Nov 04, 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 up 1.9% on Thursday.  Volume was higher than Wednesday and barely above the 30-day moving average volume.  To trigger the stop-loss algorithm of our automated forecast, the S&P 500 would have to drop about 44 points (3.4%) on Friday.  Up-days on increasing volume is a positive technical signal in a growing market.

Subjective Comment:

The circus that is the European debt crisis continued on Thursday.  The Greek referendum to allow citizens to vote on the bailout is an on-again, off-again comedy.  In the big picture, Greece is too small to matter.  What the leaders of France and Germany care about is preventing a default of Italian and Spanish debt.  Ignore the chattering and rumors and follow the money.  That One Trillion Euro bailout announced last week is missing one small thing – the One Trillion Euros.  If we had to guess where all that money will come from, it would be the printing presses at the European Central Bank (ECB).

Thursday was just the second day on the job for the new ECB President, Mario Draghi, and the ECB announced a reduction in their target interest rates.  The only way any central bank can lower interest rates is by printing money to buy bonds.  Euro printing will resume on November 9th.  We thought Mr. Draghi might have at least waited a few weeks before easing monetary policy, you know, to give the impression of thoughtful deliberation.  If he’s this willing to initiate the printing presses, our guess is the ECB will print Euros for the bailout if cash is unavailable from other sources (which will likely be the case).  This will ease short-term debt problems, but more debt (bailouts) will not solve the problem.  It will just make the problems worse down the road.  Look for more Euro printing in the future as the ECB and Mr. Draghi desperately try to bailout the banks and over-indebted countries, and also to fight the recession that has begun across the Eurozone.

The other money supply to watch is the amount of US Dollars.  Every Thursday the Fed publishes updated numbers.  The previous drop in required reserves was just a blip in the up-trend.  The new numbers show required reserves at $96.36 Billion.  This means during October US banks made just over $39 Billion in new loans (net of loans paid).  Banks continue to expand the money supply just as fast as they can.  Looking at the M2 money supply we noticed a decline of $36 Billion during the past week (seasonally adjusted).  The 13-week annualized growth rate remains in the double digits at 12.5%, but M2 has slowed and now appears to be flattening out.  The non-seasonally adjusted M2 is showing the same general trend of flattening its growth rate.  The rapid lending of the banks is driving the expansion of the US money supply.  The divergence in reserves and M2 is probably a timing in the reporting and errors in the measurement methodology.  Still, the trend had been very strong growth for the 3 months of July through September.  The growth during October slowed down.  The new money created for the past 4 months is sufficient to fuel the bubble-boom starting in US stock markets and the economy.  If the growth rate returns to the level seen prior to October then this expansion could last longer.  If the growth rate continues to slow or reverses, the bubble-boom in the US will not be as long.  Either way, it will come with serious price inflation.

Further evidence continues to appear in the financial press that supports our contention the US economy has begun another bubble-boom.  According to a Reuters article, 23 major US retailers reported monthly results are expected to show a gain of 4.5% versus last year (same store gains).  This and other evidence continues to mount that point to economic growth.  Even initial and continuing unemployment claims, a lagging indicator, are showing signs of improvement.  All of this is caused by the expanding money supply.  That is what we mean by bubble-boom.  It will eventually pop and another recession will come.  The price inflation we expect to be serious could cause this boom in the US to be short.  We do not guess how long a boom or a recession will last.  Our automated forecasting identifies turning points, and when we see these patterns appear we will inform you with our daily updates.  If you have not yet invested, stop waiting.  Using leveraged index funds is a great way to take advantage of our forecast.

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