For Wednesday, February 15, 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

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 index was down most of the day.  US markets were all down and then rallied to end very close to Monday’s closing values.  The S&P 500 was down 0.1% on volume above Monday but below the 30-day moving average volume.  If the S&P 500 declines about 10 points (-0.8%) on Wednesday our forecast could change to uncertain.

Subjective Comment:

While the index decline of the S&P 500 was very mild, it occurred on volume higher than the prior day.  This fits our automated definition of a down-day on higher volume.  The volume was just below the 30-day moving average volume, so it is not appropriate to put too much weight on this one day.  Additionally, enough time has passed since the last high-volume down-day that there is no pattern of weakness here.  Should more high-volume down-days occur in quick succession, then we will become more concerned.  For now it appears the US equity indices might be taking a sideways pause in an otherwise up-trending market.

Money printing causes the boom and bust cycle, and it causes price inflation.  The US money supply continues to expand and this will cause the US markets to continue to increase and bring serious price inflation in the near future.  In 2008 average gasoline prices hit record highs above $4.00 a gallon in the summer.  In that year the average did not exceed $3.40 until April 21, but last week the US average gasoline price climbed above $3.52 a gallon.  The $1.5 Trillion Dollars of excess reserves in the US banking system is a result of the massive money printing by the Federal Reserve under the Quantitative Easing asset purchases (QE1 & QE2).  In addition to the past QE, the Fed is continuing a Zero Interest Rate Policy (ZIRP).  The only way the Fed can maintain ZIRP is the continued creation of new money.  Price inflation lags money printing when people expect prices might eventually come back down.  This expectation motivates people and institutions to hold larger cash reserves.  There are other reasons to hold cash reserves, and US banks are clearly doing so ($1.5 Trillion of excess reserves).  When these reserves escape via fractional reserve lending the money supply growth rate will accelerate.  That acceleration will cause additional growth of the bubble boom and more serious price inflation.  Price inflation is going to be a serious problem.  Position your investment portfolio now to grow your wealth faster than price inflation and taxes by using leveraged index funds.

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