For Tuesday, May 22, 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 advance 1.6% on volume below Friday and lighter than the 30-day moving average volume.  The large advance of the index was sufficient to reverse the trigger of our stop-loss algorithm, turning our automated forecast back to growth.  If the S&P 500 declines about 6 points on Tuesday (-0.4%) the stop-loss routine will likely trigger again and return our forecast to an uncertain trend.

Subjective Comment:

Monday’s advancing US markets occurred on light volume.  This is not a positive sign consistent with growth.  Markets bounce up and down.  Investors need to know what the trend will be, and a declining trend has light-volume up-days combined with strong-volume down-days.  This has been the daily pattern for the past month.  This weak activity, combined with the recent relative weakness in the money supply growth rates and our 50/50 pattern predicting growth or decline leads us to conclude growth is highly unlikely.

The “growth trend” from our automated forecast is the result of our stop-loss algorithm that is susceptible to false-starts and errors when the market encounters high volatility.  A 1.6% advance after a steep decline is just the type of volatility that fools this subroutine on our process.  Stay out of the market and watch what happens for the next several days.  If strong-volume up-days become common with few weak-volume down-days in between, that would be a pattern consistent with growth.  If you jump in now you are likely to “catch the falling knife”.  Hold your risk-off positions and avoid all bonds.

Our updates will be similar all week until Thursday when the next update of the US money supply will be published.  Please keep checking in case something changes, but we doubt it will.  Also, please consider telling your friends and coworkers about us.  We work hard to provide the information investors need to improve the performance of US stock market portfolios, and referrals are the best tip we can hope to get from you.  The second best tip we hope for is a donation.

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