For Monday, March 19, 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:

US markets were mixed on Friday and relatively unchanged.  The S&P 500 increased 0.1% on very strong volume, both stronger than Thursday and above the 30-day moving average volume.  S&P 500 volume was the strongest it has been in 3 months, since mid-December.  If the S&P 500 declines on Monday by about 23 points (-1.8%) our forecast could change to an uncertain trend.

Subjective Comment:

US stock market daily data have patterns right now that signal continued growth for the near future.  After advancing for months there was a pause during the past couple of weeks as some weakness developed, followed by patterns of a strengthening market.  This past Tuesday a very strong market advance on high volume completed a pattern predictive of future growth.  The remainder of the week the market has held its gains which is also a sign of strength.  On Friday the S&P 500 continued to hold its gains and advanced slightly on the strongest volume in 3 months.  Friday market volume is usually light, so the 3-month high-volume on a Friday is significant indeed.  US markets are going up from here.

The official (and understated) Consumer Price Index was published on Friday.  The “official” CPI increased 0.4% in February, which is an annualized rate of 4.8%.  Shadowstats.com updated their more accurate CPI which shows annualized inflation above 10% when measured by the official method in use in 1980.  The reason price inflation is getting worse is the same reason the US stock market is advancing and the US economy is growing.  The Federal Reserve has been printing digital dollars at an astounding growth rate.  What’s different now versus the past half-century is the aggressive growth of the M1 money supply combined with the new policy paying interest to banks that keep excess reserves on deposit at the Fed.  This has allowed M1 growth faster and larger in the past 4 years since at least 1960.  M2 growth has been very strong as well but has not reached the levels seen in the 1970s and early 1980s because of the stockpiling of excess reserves at the Fed.  In the year following the market crash of late 2008 the Fed grew the monetary base (M0) at a rate over 100% annually, something never before accomplished going back to the early 1920s. When US banks begin to lend their excess reserves they have the capability of creating rates of monetary and price inflation that are beyond anything experienced in the lifetime of all living US citizens.  This is why we are so very concerned about price inflation and have been warning our readers to research investment hedges accordingly.

Our investment advice remains the same.  Sell all your bonds, including TIPS.  Invest in hedges against price inflation (real assets) that make the most sense for your situation, and invest in leveraged index funds that grow at multiples of the US stock market.

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