For Friday, March 2, 2012, the market forecast is a growth-trend

We recommend any leveraged Exchange Traded Fund (ETF) that grows with the US market.  Here are some options:

2-Times Leveraged ETFs

NASDAQ 100

Russell 2000

S&P 500

QLD

UWM

SSO

3-Times Leveraged ETFs

NASDAQ 100

Russell 2000

S&P 500

TQQQ

URTY

UPRO

Technical Comment:

The S&P 500 increased 0.6% Thursday on volume below Wednesday and lighter than the 30-day moving average volume.  If the S&P 500 declines about 11 points (-0.8%) on Friday our forecast could change to an uncertain trend. 

Subjective Comment:

The gain on Thursday erased the S&P 500 index decline from Wednesday.  It would be better for the bullish growth trend if Thursday’s gain had been on stronger volume.  Wednesday’s strong-volume down-day remains a single data point, but until it has faded into the past without additional such days it could still become part of a negative pattern.  It is encouraging to see the index more than regain the prior day’s decline.

US money supply statistics were published today and show no change in the current growth trends.  The linear fit growth rates remain virtually unchanged since mid-2010 with the exception of the rapid growth during June and July of 2011 last summer.  The summer growth rate was about 5 times faster for the 8 weeks from 6/13 to 8/8.  Last week we thought the accelerating growth in excess and required reserves could indicate an expansion in the US M2 growth rate, but it has not appeared in the data series.  M2 Seasonally Adjusted is growing around 4% and the Not Seasonally Adjusted is growing at 7%.  This is strong growth and will fuel serious price inflation.  It appears the rapid 5x growth last summer will sustain the current bubble-boom for the time being.  We know if the current growth rate does not accelerate the bubble will pop, but we are not at that point yet.  Our best guess is that US and European banks remain cautious regarding lending as they wait to see how the Greek default or bailout will proceed.  While banks remain cautious, the fractional reserve lending will continue at its current rate.  The Greek deadline of maturing bonds on March 20th is getting closer.  If we are interpreting events correctly, then later this month things will get very interesting.  We will continue to rely on our daily analysis of market data for signals and forecasts of a change to the current growth trend.

Price inflation is getting worseOfficial and historic CPI also shows increasing price inflation.  The increasing money supply is the reason price inflation is accelerating.  Do not be fooled by news stories by reporters uneducated in Economics, and ignore “economists” who subscribe to the quasi-religious Keynesian economic theories.  Their explanations are misguided or deliberately misleading.  There are plenty of legitimate supply and demand issues that will impact prices, such as the new of an oil pipeline explosion in Saudi Arabia and the possibility of hostilities between Iran and other nations.  These do indeed cause specific prices to fluctuate, but the primary reason ALL prices are going up is the digital money printing by the Federal Reserve.  The US has entered the growth phase of the business cycle caused by printing money.  This cycle will repeat itself just as it has for over countless times throughout economic history as explained by Austrian Business Cycle Theory.  You should feel confident investing in leveraged index funds.  This will help you grow your portfolio faster than the current rate of price inflation.  Continue to add to your current positions.

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