For Tuesday, April 3, 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 increased 0.75% on volume below Friday and lighter than the 30-day moving average volume.  If the S&P 500 declines about 12 points on Tuesday (-1%) our forecast could change to an uncertain trend based on our stop-loss algorithm.

Subjective Comment:

The light volume associated with the US market advance on Monday is not a strong indication of continued growth, but it does not suggest a decline either.  Last week was the last of the first quarter for 2012.  At the end of a quarter it is common for mutual funds to sell off weak positions, thus avoiding having to report their holdings in quarterly filings and reports.  This is called “window dressing” and it can cause weakness at the end of a quarter.  This could have happened last week, but we are guessing and have no direct evidence this is the case.

Financial news outlets on Monday had various stories about the great first quarter but warned the second quarter could not be as good.  We do not attempt to forecast where US markets will reach by a given date in the future.  Our forecasting process analyzes data for turning points.  Right now we are in a growth trend and the daily market data has not identified a turning point, so we expect the trend to continue.  Our subjective comments are based on Austrian Business Cycle Theory which explains how an expanding money supply causes a bubble-boom in the economy and stock markets.  The US money supply had accelerated growth in the summer of 2011 with 7% annualized growth since then.  This has caused the recent up-turn in the economy and stock markets.  Jobs are booming in these 9 US cities and CNBC has published a list of US cities where homes sell the fastest (hat tip EconomicPolicyJournal.com).  This is additional evidence the expanding money supply is fueling another bubble-boom.  When the money supply expands, it does not flow uniformly to all people.  It flows first to certain areas and then spreads and these lists give an indication where the money is flowing now.  Should anything spook investors there could be a pause in the stock market growth.  Such shocks that could happen would be initiation of open hostilities with Iran, continued Eurozone debt crisis news, the crashing of the Chinese stock market and economy and subsequent political turmoil, and continuing price inflation in the US.  Any such events must overcome the expanding US money supply to stop the current bubble-boom.

Remember, price inflation is the consequence of the expanding money supply.  After the rapid US M2 growth last summer we expect price inflation to speed up in the near future.  Our investment advice remains the same:

  • Sell all your bonds, including TIPS – they will drop in value as price inflation drives up interest rates
  • Research and invest in hedges against price inflation best suited to your situation
  • Invest in leveraged index funds to take advantage of the continuing growth in US markets and keep checking our daily forecast

Comments are closed.