For Monday, January 30, the market forecast is for growth

We recommend any leveraged ETF that grows with the US market.  Here are some options:

2x Leveraged ETFs


Russell 2000

S&P 500




3x Leveraged ETFs


Russell 2000

S&P 500




Technical Comment:

Friday the S&P 500 declined a slight 0.16% with volume below Thursday and above the 30-day moving average volume.  On Monday a slight decline in the S&P 500 could change our forecast to uncertain.

Subjective Comment:

Yesterday we discussed the recent trends in the US money supply.  It appears US banks remain cautious and have not accelerated the origination rate of new net loans.  The longer this situation persists, the greater the risk to the sustainability of the recent up-trend in US markets.  Manipulated bubble-booms in an economy (and stock market) caused by money supply inflation last while money growth rates accelerate.  Once growth rates slow the crash will follow.  For the past 18+ months the US M2 growth rate has been just above 4% except for June and July last summer when growth rates accelerated dramatically, adding around $400 Billion Dollars in about 9 weeks.  This burst of lending has been growing a bubble in the US economy and stock market rally.  If M2 growth remains in the 4% range the current bull market will end.  All of this is described by Austrian Business Cycle Theory.  However, ABCT is unable to predict when a crash will occur.

Our forecasting process is based on the daily S&P 500 market data.  When market participants decide a rally has ended, they sell their investments.  This creates patterns in the market data detectable by our forecasting algorithms.  We think it is possible to use leveraged investing now to take advantage of the continuing up-trend in the stock market.  However, there are signs the Eurozone debt crisis will continue to cause concern and influence US banks to hoard their $1.5 Trillion of excess reserves as a contingency against losses of European defaults and bankruptcies.  Downgrades of European sovereign bonds continue to occur.  Any international shocks, such as Eurozone defaults or an outbreak of hostilities between the US and Iran would spook markets and likely cause a decline.  The Federal Reserve would probably react by accelerating money printing to protect the US economy, but there would still be a market reaction.

We will continue to monitor the US money supply growth rates and report on it.  Our advice is to hold your current positions and be prepared to liquidate quickly.  Keep reading our blog every day.  We see signs of strength and reasons for concern.  Ultimately you must make your own investment decisions.  Using ABCT and our daily forecast offers an investment methodology that is not perfect but should provide better returns over time compared to a buy-and-hold strategy.

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