For Monday, June 18, 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 Friday 1% on volume above Thursday and higher than the 30-day moving average volume.  For our forecast to change back to an uncertain trend a substantial decline of 2.5% on the S&P 500 would need to occur on Monday.

Subjective Comment:

After several weeks of decline and sideways motion, the uptick of the S&P 500 on Thursday and Friday was interesting.  The upward motion both days was on increasing volume.  This is strong-volume occurring on up-days for the index.  Two consecutive days does not mean a predictive pattern has formed, but it is indeed interesting.

There has been a lot of talk that the G-20 might announce coordinated central bank action to combat the Eurozone debt crisis and help the economies of various countries continue to recover.  There is also a Federal Open Markets Committee (FOMC) meeting this week where the Fed will decide on the future direction of US monetary policy.  The elections from Greece have a lot of people worried.  It appears many of the central banks are about to begin new coordinated programs of liquidity injections, also known as money printing.

In the US the M2 (not seasonally adjusted) money supply has been flat for 3 months following almost a year of annualized 7.5% growth.  Various economic indicators are starting to show the slowing effects associated with a bubble popping when money growth slows.  These data combined with the situation in Europe might be used as justification by the Fed to initiate QE3 or some other form of money printing.  The past two trading sessions might be reacting to the discussion of these possibilities.  The market has figured out that money printing causes stock prices to rise.  If large enough money is printed fast enough, the bubble boom in the US could resume.  The consequence will be price inflation.  Money printing has not yet started, and who knows what the bureaucrats in charge of printing money will decide?  We don’t know.

Our advice remains to wait and see.  Holding and accumulating cash is the best short term strategy we can advise right now.  This goes against our automated forecast.  Hold your price inflation hedges for the long term.  If money printing actually resumes, stocks will move higher.  Any such move will be short lived if the amount of money is not enough.  Our advice is to wait and see if the central banks resume printing, and if it will be massive enough.  If they do print enough, there will still be enough time to get into the stock market and make a tidy profit.  If they fail to do enough, it is best to be in a defensive position to avoid the decline.

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