For Tuesday, January 10, 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 Monday up 0.2% on volume lighter than Friday and below the 30-day moving average volume.  If the S&P 500 drops about 5 points on Tuesday our forecast could switch to uncertain.

Subjective Comment:

The light market volume in the US continues to be remarkable.  Volume has been very light for months.  Our contention continues to be that most market participants are remaining in a risk-off position while evaluating the effectiveness of recent European actions to stem the risk of the Eurozone debt crisis.  News from Europe includes forecast of a recession for Germany and further weakness in the financial sector.  The Italian bank UniCredit has seen a 50% drop in its stock price in less than 2 weeks with frequent halts to its trading.  It’s worth noting the halt on shorting bank stocks in Europe remains in place as a “temporary” regulatory action, so the decline is not being driven by short-sellers.  Italian bonds yields continue to be very high with 10-year yields at 7.16%.  The economic consequences of the European Central Bank’s monetary policy are causing the crash of the Eurozone economy just as Austrian Business Cycle Theory describes.  It remains unclear if the ECB has initiated aggressive monetization or if they are effectively continuing to sterilize asset purchases.  While this uncertainty remains, market participants will remain in a mostly risk-off position while waiting to see what happens.

There continues to be some strong news regarding the US economy.  November consumer credit surged by $20.4 Billion.  There was also the drop in the unemployment rate to 8.5% (published last week).  ABCT describes how new money enters the capital goods market first and then moves through the economy to the consumer sector.  This is why the lagging indicators of unemployment and consumer credit are now starting to respond to the US bank lending burst that occurred in June and July of 2011.  This positive news could begin to raise hopes of some market participants, but we remain cautious.  We know the summer lending was a short burst and has been followed by 20 weeks of slow M2 growth at 4.2%.  For a manipulated bubble-boom to be sustained for a period of time the money supply growth needs to continue at a high and accelerating rate.  The burst of lending is working its way through the capital structure and is having its simulative effects, but if US M2 growth rates do not resume growth at a higher rate, ABCT describes how and why an economic contraction must resume.

Data scheduled to be published in late January will show if the Euro money supply has increased its growth rate or not.  There will also be Fed data published to show if US banks continue their slow loan originations or not, and the resulting growth in the US M2 money supply.  For the next few days or possibly the next two weeks we guess the current light-volume trading will continue with mostly slow market growth or perhaps sideways motion on the S&P 500.  As data becomes available more participants will begin to conclude the direction they expect the market will move.  Should a rapid decline develop for a few days it could precipitate a downward momentum from fear based on the current levels of uncertainty.  Our automated forecast is for growth, but we hope these observations explain why we are subjectively uncertain about the near-term prospects for the US economy and markets.  The one piece of solid advice we can offer is to avoid US money market funds as they are exposed to European debt.

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