For Friday, December 9, 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 was down 2.1% on Thursday with volume higher than Wednesday and just above the 30-day moving average volume.  If the S&P 500 drops another 10 or so points on Friday (about 0.9%) our automated forecast will likely change to uncertain.

Subjective Comment:

While volume was up on this large down-day for the market, the volume was not very much above average.  As we discussed yesterday, the European Central Bank rate cut announcement today was not the big news the market is waiting for.  However, ECB President Mario Draghi’s comments did imply that perhaps the ECB will not be printing massive amounts of money.  See this post at EconomicPolicyJournal.com for confirmation the market reacted to Mr. Draghi’s comments.  One way to interpret his comments are indeed that the ECB will not begin large scale asset purchases with newly printed money.  Another way to interpret it would be that he is putting pressure on the politicians at the summit in Brussels to implement the changes he recommended last week to the EU parliament.  These are the opposing opinions, and frankly we have no idea what the ECB will do.  We do think the market will react to the ECB’s next move, or lack of another announcement within the next few days.  This is why we have been advising a wait-and-see approach until the summit is over and Mr. Draghi announces what the ECB will do.

The Federal Reserve published the weekly update of US money supply statistics today.  The M2 growth rate (seasonally adjusted and non-seasonally adjusted) remains unchanged.  The past 17 weeks continue to grow around $9.7 Billion per week, which is annualized at 5.3%.  The spurt of lending this past summer was $56.7 Billion per week for most of June and July, or 32.2% annualized.  Austrian Business Cycle Theory explains how this burst of lending has caused a mini-bubble-boom in the US economy for the past few months.  That is why recently some economic indicators began to show improvement, and why some businesses have started to pick up.  The burst was caused by bank lending.  US banks slowed their lending to hold their $1.4 Trillion of excess reserves in case the Eurozone debt crisis gets worse.  Unless and until the ECB begins printing massive amounts of money, US banks are going to hold their reserves as a contingency.  If the ECB announces within the next few days a massive Euro printing program, US banks will likely begin lending again.  It will take a few weeks before the money supply statistics, along with excess and required reserves statistics begin showing any response.  European money supply expansion will also not be visible for a few weeks until after the announcement.  When the ECB balance sheet data is published, then we will know if they are expanding the Euro supply or not.

For aggressive investors, if you think the ECB is about to announce massive money printing within the next few days, Thursday’s market drop is a buying opportunity.  For those of you more cautious, we advise waiting a few more days.  The S&P 500 daily market data has not shown the kind of up-days on strong volume typical of a strong rally.

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