For Wednesday, June 13, 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 advanced 1.2% on Tuesday with volume below Monday and lighter than the 30-day moving average volume.  The S&P 500 would have to decline about 25 points on Wednesday to cause our stop-loss algorithm to trigger a forecast change to an uncertain trend.

Subjective Comment:

The large upward movement in the S&P 500 index Tuesday occurred on light volume.  This continues the prevailing pattern of down-days with strong volume and up-days with light volume.  This is a technical pattern that occurs when the overall trend is downward for the market.  We expect the market to bounce up and down with overall sideways movement, or to actually decline.  The large volatility appears to be occurring from uncertainty regarding the Eurozone debt crisis.  News stories and speeches from politicians and bureaucrats seem to be having influence on the market as participants wait to learn if the Euro-problem is “fixed”.

After many years of printing Euros, the European Central Bank has slowed the growth rate of the Euro Money Supply.  Prior to 2009 the Euro supply had been growing in a range of 8% to 12% depending on which measure (M2 or M3) is considered.  During 2009 the growth rate declined to below 2% for M2 and below 0% (negative growth) for M3.  The growth rate in August of 2010 increased to the 2% to 2.5% range where it has stayed until just recently reaching around 3%.  This pattern of money supply rapid growth followed by zero or very low growth caused a boom and now a bust.  The recession Europe finds itself enduring is happening because of bailouts of businesses that should have gone bankrupt.  With the low growth rate of the Euro supply the malinvestments in the capital structure are unable to be sustained and bankruptcies will happen.  The only way to delay (not avoid, just delay) is rapid Euro printing.  It seems more and more likely bankruptcies of sovereign nations, banks and other businesses is what will happen in Europe soon.

The financial chaos in the Eurozone combined with the slowing of the US money supply growth is combining to create the current market volatility for US equities.  Unless and until the US money supply resumes rapid growth, there is no reason to expect the stock market in the US will climb.  Sideways or down is our prediction.  To protect your wealth we advise investing in cash and accumulating cash.  Avoid bonds as they will decline in price when the past US money printing causes more price inflation.  Our automated forecast is confused by high volatility in the market and the current prediction of a growth trend appears to be a false signal.

Comments are closed.