For Wednesday, December 7, the market forecast is for growth

If you choose to invest now 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 a small 0.1% on light volume.  Volume was below Monday and below the 30-day moving average.  Should the S&P 500 drop around 50 points (4.2%) on Wednesday, the stop-loss trigger in our automated algorithm would likely flip our forecast to uncertain.

Subjective Comment:

Our automated forecast remains for growth.  We continue to recommend caution while waiting on announcements from the European Summit this weekend and subsequent announcements from the European Central Bank.  The low volume and minor change in the markets on Tuesday indicate uncertainty regarding the next phase in the Eurozone debt crisis.  There was little news of significance to markets.  Either the ECB begins printing massive amounts of Euros to prevent Italian bond defaults or the Eurozone will soon experience a market crash and some sort of breakup.  The politicians are going to offer a “solution” to change the Eurozone treaties so as to force better budgetary behavior by member nations, at least that’s the idea.  There is some speculation changes to the treaties might be forced through without a popular vote.  These changes are what ECB President Mario Draghi was talking about several days ago when speaking to the European Parliament.  He said

“What I believe our economic and monetary union needs is a new fiscal compact…”

“We might be asked whether a new fiscal compact would be enough to stabilise markets and how a credible longer-term vision can be helpful in the short-term. Our answer is that it is definitely the most important element to start restoring credibility.”

“Other elements might follow, but the sequencing matters.”

There is an expectation that a “new fiscal compact” from the summit will in turn result in “other elements” from the ECB.  If the politicians announce treaty changes or some other sort of compact, markets will react positively on the expectation the ECB will then start printing Euros to buy soverign debt, with Italian bonds as the first priority.  However, the summit is the warm-up.  The ECB has to follow through with their own announcement, after which markets will really take off.  Of course, this assumes these political agreements and monetary policies are implemented.  If they are not, the markets could decline sharply and rapidly.

Should the ECB engage in massive Euro printing, there will be price inflation across Europe along with the market response.  This action can only delay the crash and recession that is coming in Europe, and if large enough it could delay the recession for quite a while.  The response we expect in the US would be banks accelerating their lending at a rate similar to this past summer, which would fuel a stock market and economic boom in the US.  This would also result in more serious price inflation in the US as well.

If you choose to invest now, consider investing only a portion of the funds you have available and be ready to respond rapidly to events out of Europe this weekend.  If the ECB announces a program to print Euros, the market will likely move up quickly.  If not, it will likely move down quickly.  A more conservative approach will be to wait until early next week to see what happens.  If the inflationary announcements we have described occur, be prepared to invest quickly to take advantage of the boom.

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