For Thursday, January 19, 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 1.1% on volume barely below Wednesday but still above the 30-day moving average volume.  The S&P 500 would have to decline about 21 points (1.6%) on Thursday to cause our forecast to change to uncertain.

Subjective Comment:

The continued up-trend in the S&P 500 index is encouraging.  Today’s close above the 1300 is the highest the market has been since late July.  Volume remains light by long-term historical standards but was higher than the recent 30-day moving average.  The presence of very strong buying remains absent and is something we would like to see to feel more confident about the possibility of a continued up-trend.  It has been over 20 trading days since a down-day occurred on significantly higher volume.  Historically such up-trends on light volume with only low-volume down-days has preceded periods of decline, but this historical observation is not a good predictor of the future.  It is however rare for a light-volume up-trend to persist so long without at least one day of heaving selling.  The daily market data continues to suggest most investable funds are remaining un-invested as participants wait to see what will happen.  It is likely that headlines could be continuing to spook some investors.  The US debt ceiling and nearing default on Greek debt could be causing concern, but we do not think these events will have any impact of consequence on markets in the near term.

The headline Producer Price Index was up by a minor 0.1% with core PPI up 0.3%.  The core PPI increase was the largest one-month gain in the past 18 months (since July 2011).  Year-over-year change in the non-seasonally adjusted PPI was 3.0%, and this was the highest gain in the past 3.5 years (since June 2009).  PPI (and CPI) month-to-month do have fluctuations but the longer trends show an increasing price inflation.  Austrian Business Cycle Theory describes how money printing first increases prices in higher-order goods tracked by the PPI before consumer goods begin to increase.  The rapid US M2 money supply expansion last summer is showing up in the inflation numbers and is capable of continuing a mini-boom in the economy for a little while longer.  If M2 continues to expand rapidly as first observed last week, then this mini-boom will go on longer with even higher price inflation rates.  We will analyze the updated M2 statistics due to be published by the Federal Reserve tomorrow to see if the one-week up-tick was a one-off blip or the beginning of a new trend.  Our recommendation to invest in leveraged index funds will strengthen if we see continued acceleration in the US money supply growth.

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