For Monday, May 14, 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 as our subjective opinion differs from our automated forecast.

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 declined 0.34% on Friday with volume above Thursday and higher than the 30-day moving average volume.  In a rare event for our automated forecasting process, the stop-loss trigger executed a recalibration sequence which resulted in our automated forecast returning to a growth trend.  It is very unusual for our forecast to switch from “uncertain” to “growth” on a down-day for the market, but that is what happened because of the automated recalibration.  A decline of the S&P 500 on Monday of about 3 points (-0.2%) would likely change our forecast back to an uncertain trend.

Subjective Comment:

Friday was a strong-volume down-day on the S&P 500, marking the 3rd such day for the week and the 4th strong-volume down-day in the past 7 market trading sessions.  This is many strong-volume down-days in a short period of time.  It does not make a fully formed predictive pattern, but it is indicative of market weakness.  The accumulation of strong-volume down-days combined with the possibility of a slowing US Money Supply growth rate has us very concerned.  We do not see how the US markets or economy can possibly continue the bubble-boom that began about 9 months ago given the current conditions.  While US banks and/or the Federal Reserve could cause the US Money Supply growth rate to accelerate anytime they choose, the momentum of the current situation is unlikely to be turned in the near term.  US price inflation will continue as the money supply is still growing, just not as fast.

We advise against investing in US equities, despite the change in our automated forecasting signal.  There has been no pattern development suggesting the US market will grow.  The change was a technical recalibration and our forecast will likely return to an uncertain trend with any decline on Monday.  The stop-loss algorithm continues to be susceptible to false signals when the market moves sideways.  The recalibration sequence is an attempt to minimize this behavior, but like all forms of technical analysis it is imperfect.  At this point we think a pause in any inflation hedging is appropriate as the new trend in the US money supply asserts itself.  Continue to avoid money market funds as they do have exposure to European debt.  Hold cash or a risk-off position.  Continue to avoid all bonds.  Now is the time to protect your wealth and wait for a new trend to present itself.

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