For Wednesday, March 14, 2012, the market forecast is a growth-trend

We recommend any leveraged Exchange Traded Fund (ETF) that grows with the US market.

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 advanced 1.8% on Tuesday with volume above Monday and stronger than the 30-day moving average volume.  This was the largest daily gain for the index since December 11th and the highest level for the S&P 500 since early June 2008, almost 4 years ago.  The S&P 500 would have to decline about 32 points (-2.4%) on Wednesday for the stop-loss algorithm to trigger and shift our forecast to an uncertain trend.

Subjective Comment:

Last Friday when we published the market forecast for Monday we talked about the formation of patterns in daily market data.  We said

It is common that both weak patterns and strength patterns can develop at the same time, so it takes several days for patterns to fully form.  The pattern over the past two weeks has more weakness than strength, but the pattern over the past three days shows possible strength.

The large advance on Tuesday combined with strong volume has completed a multiday pattern that predicts future growth.  Based on the daily market data we are now much more comfortable with the growth recommendation of our automated forecast.  The very large volume spike on Tuesday might be followed with a decline on Wednesday, but this should be considered an opportunity to get back into US markets using leveraged index funds.  We continue to be somewhat concerned about the growth rate of the US money supply as discussed last Thursday, but it appears enough money has been added to keep fueling the bubble-boom in US markets for now.

US markets opened strong and advanced during the morning on Tuesday.  The Federal Reserve FOMC announced their continuing monetary policy in the early afternoon which was consistent with market expectations as there was no immediate reaction.  What appears to have been the cause of the additional advance in the late afternoon was the announcement from JP Morgan Chase bank of a 5 cent dividend hike to 30 cents per share combined with a $15 Billion Dollar stock buyback plan.  Also in the announcement was a quote from the Fed that JP Morgan Chase did well on the Fed’s stress test.  This appears to have caused a great deal of confidence to return to investors as the markets rallied from there.

Market participants had several days to digest the details of the Greek default and appear to have been waiting for the FOMC announcement before making additional investment decisions.  While the JP Morgan Chase announcement caused an additional advance, the market was already up considerably and was holding after the FOMC press release.  The Fed commented on the recent price inflation and said it would be “transitory”.  We completely disagree.  All of the freshly printed money is driving gasoline prices and the price of everything else higher.  The expanding money supply is also the cause of the bubble-boom in the economy which is now progressing from the capital goods sector into consumer goods as retail sales climbed the most in 5 months.  Price inflation as measured by the official CPI is nowhere close to reality.  CPI as officially measured in 1980 is now over 10%, as reported by Shadowstats.com.  We recommend the following for your investments:

  • Research hedges against price inflation and choose strategies best suited to your situation
  • Invest in leveraged index funds that grow with US stock markets (options listed above) and continue to follow our daily forecast
  • Sell your bond positions, all of them, as fast as you can