For Monday, January 23, 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 spent a majority of Friday in mild negative territory before closing up 0.07% on volume above the 30-day moving average but below Thursday.  On Monday the S&P 500 would have to decline about 30 points (2.2%) to cause our forecast to change from growth to uncertian.

Subjective Comment:

Typically market volume on Friday is light.  While Friday’s volume was below Thursday, it was above the 30-day moving average.  The market held on to its recent gains and continues an up-trend which is showing more strength the longer it persists.  Volume remains below historical norms, but the 30-day moving average halted its steady decline 10 days ago and has been moving up and down since.  8 of the past 10 trading days have been on higher volume, and the US markets are up strong since the beginning of January.  We are still waiting to see a seriously strong up-day on very high volume as more confirmation the current rally will continue, but we are expecting it based on the acceleration of US money supply growth and the European Central Bank’s stabilization of the Eurozone debt crisis via the 3-year, 1% LTRO loans.

If you haven’t read our posts for the past two weeks, we recommend doing so to catch up on the recent news regarding the US M2 money supply.  The Eurozone economies will likely stagnate for several months to come.  The LTRO loans are supporting the sovereign bond markets, but European banks are parking their excess funds in the ECB’s deposit facility instead of making additional loans as they fear bankruptcies.  Evidently it will take much more than the current LTRO to reignite a bubble-boom in Europe.

There is speculation the People’s Bank of China may change their monetary policy and accelerate the rate of money printing.  China is already suffering high price inflation and has an economic capital structure that is unsustainable after years of aggressive money printing.  China will crash hard.  We’re not sure when, but it will happen.  Austrian Business Cycle Theory describes how, but timing is difficult to predict and our focus is on US markets.  We mention China and Europe because trouble there can spook investors and cause downward pressure in the US.  We think the US M2 money supply growth will manipulate enough of a bubble-boom in the US that downward international pressure will at most cause temporary declines in US markets during a sustained up-trend.  Bubble-booms never last.  They always, always burst and are followed by a credit contraction.  The money growth in the US will also lead to serious price inflation later this year.

Aggressive investors should already be in the US market with leveraged index funds as part of their portfolio.  Cautious investors should have at least some of their portfolio invested.  Avoid investments dependent on Europe and China, and avoid bonds.  When price inflation gets bad the Federal Reserve will have to let interest rates rise.  Bond owners will lose when this happens, so there is time now to liquidate positions tied to bonds.  We think the burst of lending by US banks last summer will not sustain a bubble-boom through the entire year, but it will fuel a bubble a while longer.  If the recent up-tick in US M2 money growth continues, this will provide the additional fuel for a much longer bubble-boom, and the fuel for even higher price inflation.  Leveraged investing is one strategy to stay ahead of inflation.

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