For Tuesday, March 13, 2012, the market forecast is a growth-trend

We recommend any leveraged Exchange Traded Fund (ETF) that grows with the US market, but please read our comments below before investing.

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 index was virtually unchanged with a mild increase of 0.02% on Monday.  Volume was lighter than Friday and below the 30-day moving average volume.  For our forecast to change to an uncertain trend the S&P 500 index would have to decline about 15 points (-1.1%) on Tuesday.

Subjective Comment:

Friday volume is usually light.  It is not common for Monday volume to be lighter than the preceding Friday.  With the very light volume and no change in the index it appears market participants were uncertain how to react to the current circumstances.  We remain cautious about the very near term as the current daily market data patterns do not provide a clear indication regarding where the market will go from here.  The Eurozone debt crisis, the default from Greece and the current state of the US money supply remain as uncertainties for our subjective opinion regarding market direction.  We encourage you to read our prior posts for more details on these topics.

We thought it appropriate to mention the change in China’s behavior regarding purchases and holdings of US Treasuries and Dollars.  China has been selling their holding of US bonds, probably because they can see the developing devaluation of the US Dollar and want to get rid of the bonds before the prices start falling, which we agree will happen as price inflation gets worse.  Additionally, China’s trade balance with the US declined to the largest deficit in at least 10 years.  Instead of exporting more goods to the US than they bought, China imported a net $31.5 Billion Dollars in February.  Said another way, China sent back a lot of their Dollars to the US in exchange for goods.  This is a completely rational reaction by the Chinese as the US Dollar devalues, which is the same thing as price inflation.  In the past China has bought Treasuries and has propped up the value of the Dollar, which means money printing by the Federal Reserve resulted in less price inflation than otherwise would have occurred.  With China now removing the support and acting in reverse, price inflation in the US will accelerate.  We have been warning about price inflation for months, and we continue to encourage you to position your portfolio to protect against price inflation.  If you own bonds, sell them as soon as you can.

For our regular readers we will not repeat what we’ve written the past few days as our opinion remains unchanged.  For new readers or anyone wanting to catch up on our recent posts, we encourage you to read our posts from last Thursday and last Friday.

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