For Thursday, June 7, 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:

Wednesday the S&P 500 advanced 2.3% (not a typo, 2.3%) on volume above Tuesday and higher than the 30-day moving average volume.  This was sufficient to reverse our stop-loss trigger and return our automated forecast to growth.  If the S&P 500 drops on Thursday by about 23 points (-1.8%) our stop-loss algorithm would likely re-trigger and change our forecast back to an uncertain trend.  Please remember that large volatility can create false-signals from the stop-loss algorithm.

Subjective Comment:

The very large advance in US markets was finally on higher volume.  This is a break in the prevailing pattern of market weakness, but it is only one day after weeks of decline and negative patterns.  Speculation in financial news attempts to assign cause.  It could be new attempts in Europe to address their crisis or the recent information from the US Federal Reserve.  It is interesting to see such a large advance on high volume.  Our automatic forecast has returned to growth from the reversal of the stop-loss trigger.  Subjectively we’re cautious about the sustainability of continued market growth.  With over $1.5 Trillion of excess reserves in the US banking system, there is clearly enough cash to drive the market higher if US banks choose to accelerate loan originations.  Given the current state of the US money supply growth rate we do not recommend investing yet.  We advise you to wait.  Our automated forecast recommends investing, but our subjective opinion differs.  You must decide for yourself, but we suggest the continued accumulation of cash and holding of price inflation hedges.  Avoid bonds and the US stock market now, but continue to watch the market daily for signs of continued strong growth (like today).

In summary, one day, no matter how strong, is not a trend reversal.  Several days like Wednesday need to happen before we will change our opinion.

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