For Tuesday, February 7, 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:

Monday the S&P 500 closed down 0.04% after having been down a bit further most of the day.  Volume was very light, far below Friday’s volume and below the 30-day moving average volume.  If the S&P 500 declines about 2% on Tuesday our forecast would likely change to uncertain.

Subjective Comment:

The very light volume on Monday negates any significance to the minor decline in the US market indices.  The daily patterns in the market data are showing both signs of strength and weakness after last week.  Monday’s data does not clarify the current ambiguity in the overall pattern.  Very light volume usually occurs when market participants are waiting for more information before changing the makeup of their investment portfolios.  Our best guess is most investors are watching the debt negotiations in Greece, and the absence of any other news on Monday resulted in the light-volume day.

We continue to think there is plenty of money in the US economy to enable continued growth in US markets for the next several weeks and perhaps a few months at the current M2 money supply growth rate.  External risks remain such as the pending Greek bankruptcy, the Eurozone debt crisis, the crashing economy in China, potential conflicts between Iran, Israel and the United States, and now possible conflicts between the United States and Syria.  Any shock that could tighten world oil supplies will send all petroleum prices up along with other forms of energy.  Increases in energy prices will put downward pressure on the US economy.  Investing in Energy Companies might be a good idea, although we do not have the expertise to make a specific recommendation.  Problems in Europe will put downward pressure on US markets.  As the economic crash in China gets worse we are unsure how much of those problems will spill over into US markets.  We’re not sure how much of an impact a China recession would impact US markets.

What we are confident in is how the US economy will respond to the changes in the money supply as described by Austrian Business Cycle Theory.  If the current 4% growth rate continues the US economy will slow and the current bull market will stall and eventually fall again.  We are relying on our forecasting algorithms to identify the turning point from the daily market data if this is how things play out.  Right now we advise holding your current positions if you are cautious.  If you are an aggressive investor you should have your entire portfolio invested to stay ahead of US price inflation.  Leverage index funds are one strategy to do this.  There are others.  Price inflation, when it gets worse than it already is, will put downward pressure on bond prices.  We encourage you to sell all your bond holdings, including US Treasuries as well as US State and Local bonds.

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