For Tuesday, June 12, 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


Russell 2000

S&P 500




3-Times Leveraged ETFs


Russell 2000

S&P 500




Technical Comment:

The S&P 500 dropped 1.26% on Monday with volume higher than last Friday but below the 30-day moving average volume.  The S&P 500 remains above the stop-loss trigger in our automated forecast.  A drop on Tuesday of about 15 points (-1.1%) would be enough to reach the trigger and change our forecast to an uncertain trend.

Subjective Comment:

Monday was a strong-volume down-day when comparing the volume to the prior Friday.  This resulted in another appearance of the 50-50 pattern in our forecasting process.  This is when a pattern emerges in the daily market data that suggests the odds of a market advance or decline are even at 50/50.  The Eurozone debt crisis is getting extremely serious.  Capital and border controls are being discussed as a mechanism for dealing with a Greek exit from the Euro.  This is likely to intensify the already in-progress bank runs.  Capital controls are when governments impose restrictions on the movement of money and wealth across borders or limits on the daily amount of bank withdraws permitted.  This shows how bad things are getting in Europe.

The flow of money out of Europe is likely resulting in US Dollars flowing back into the US from overseas, and this money is being used to purchase US Treasuries.  The Fed Funds rate has remained very steady at 0.15%.  The only way a stead Fed Funds rate is maintained is by the Federal Reserve action of increasing the money supply, or reducing the money supply in response to market action.  The inflow from Europe is causing the Fed to have to offset by reducing US banking reserves.  This is the most likely explanation as to why the US M2 money supply growth rate has gone from over 7% annualized a quarter ago to near 0% for the last 3 months.  This slowing of the growth rate will not allow US markets to grow from here.

From our proprietary technical analysis and subjective interpretation of the money supply we see US markets at best remaining flat from here.  More likely they are set to decline.  Our automated forecast is being tricked by the high volatility in the market.  Avoid US equities right now.  Hold your price inflation hedges and accumulate cash.  This is a defensive recommendation to help preserve your wealth against a likely market decline.  Continue to watch Europe closely as the debt crisis will continue to impact the US.