For Thursday, February 16, 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:

The S&P 500 index was down again on Wednesday with volume above Tuesday and higher than the 30-day moving average volume.  Wednesday’s decline was not enough to change our forecast, but an additional decline of about 4 points (-0.2%) on the S&P 500 on Thursday could be enough to switch the forecast to uncertain.

Subjective Comment:

Wednesday was a second day in a row where the market index was down on stronger volume.  Two strong-volume down-days in a row is more concerning than one and forms the beginning of a negative pattern.  Additionally our system is very close to a stop-loss trigger.  It appears US markets are moving sideways which can often happen during a trend.  The headlines regarding Greek debt, a possible conflict with Iran and rising oil (and gasoline) prices could be causing concern among market participants.  These events could certainly put downward pressure on US equities.  Our primary concern is the fading effect of the monetary stimulus from the rapid US M2 growth that occurred last summer.  Without an acceleration in the M2 growth rate the current bubble-boom will be short lived.  Only accelerated growth will sustain the bubble longer before it bursts.  Tomorrow we will report on the weekly update of the US money supply statistics.

We advise holding your current investment positions through Thursday (tomorrow).  If you have been preparing to invest but have not yet purchased your funds, consider waiting until Friday.  Hopefully you are already invested, and if you are we recommend holding your securities.  A small decline on Thursday could trigger our stop-loss algorithm.  A third day in a row of decline on increasing volume would also be worrisome.  Last week we noted the expansion of various US bank reserves, so it is possible the US M2 money supply statistics might begin showing growth.  Also, there was additional economic data today suggesting the economy is improving in response to the expanding money supply.  February’s Empire State Manufacturing Survey showed continued expansion for the third month in a row for the state of New York.  The National Association of Home Builders / Wells Fargo index of homebuilder confidence rose for the fifth straight month.  The last time there were five consecutive months of improvement in this index was October 1995.  Also, the Federal Reserve reports manufacturing production increased 0.7% in January with output in December increasing to 1.5% in an upward revision.  So there is mixed news and data suggesting continued growth and possible weakness could be developing.  This is why we suggest holding your investment positions for a day.  Tomorrow we will see if there is a third day of market weakness or not, and M2 money supply data will be available to provide an update to our subjective recommendation.

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