For Monday, February 13, 2012, the market forecast is a growth-trend

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 0.7% on volume below Thursday but just above the 30-day moving average volume.  Should the S&P 500 decline about 7 points on Monday (0.6%) then our forecast could change to uncertain based on the workings of the stop-loss algorithm in our forecasting process.

Subjective Comment:

Down days occur during bull markets, and that is what Friday’s decline in the S&P 500 appears to be.  Volume was slightly above the 30-day average, but it was lighter than Thursday.  The daily market data was bullish this past week.  The up-days were on stronger and stronger volume, and the down-day on Friday was on lighter volume.  The magnitude of the decline on Friday was more than the up-days for the past week, but a 0.7% decline is not unusual.

Greece appears to have been the major concern of market participants on Friday.  The coming bankruptcy in Greece is about the most obvious thing in the financial world right now, and anything so obvious has been prepared for.  Some sort of deal will likely be worked out to write down a lot of Greek debt.  If no deal occurs then it will be an uncontrolled default.  The European Central Bank has provided a tremendous amount of Euro-liquidity with its 3-year 1% LTRO loans to banks.  The next LTRO from the ECB to European banks will be at the end of this month.  This will add even more liquidity before Greece defaults.  All of this is bad for the Eurozone, but the US economy and stock markets are decoupling from Europe and will grow over the short term.  The US M2 money supply expansion last summer is still fueling the current US bubble-boom bull market.

As we discussed yesterday, US banking reserves have increased recently.  This could indicate the US money supply growth is about to accelerate.  Any acceleration in US money growth will extend the current bubble-boom.  Now is the time to move more money into leveraged index funds as part of your overall strategy.  This will allow you to grow your portfolio with the US bull market and stay ahead of the serious price inflation that is coming.  The price inflation will cause bond prices to drop.  There is still time to exit your bond holdings now and move into US equities.  Of course there is always risk.  We are concerned that the US money supply might not accelerate its growth rate.  Our opinion is the current bull market will continue for a little while longer without acceleration of the money growth, so we advise taking advantage of the bull market in progress.  If things turn our forecast will do a very good job of identifying the exit point should it appear.

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