For Tuesday, October 9, 2012, We Recommend Investing for Growth

We recommend investing with leveraged index funds to take advantage of growing US stock markets.

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Technical Comment:

The S&P 500 declined 0.35% on Monday with volume below last Friday and lighter than the 30 day moving average volume.  If the S&P 500 declines another 16 points on Tuesday (-1.1%) our automatic forecast could change to an uncertain trend.

Subjective Comment:

Volume on Monday was very light.  Typically volume on Friday is the lowest of the week, as was the case last Friday.  Monday’s volume was 27% below last Friday and 32% below the 30 day moving average.  Very light volume combined with a slight decline in the market index does not contribute to a negative pattern formation.  Our pattern detection algorithms are not seeing any patterns that predict growth nor decline for the S&P 500, but it is good to see down-days occur on weak volume when we’re expecting market growth.

Our recommendation to invest for market growth is based on Austrian Business Cycle Theory and the developments we have observed and written about in the US money supply.  It may take a while for US markets to move higher and of course there will be daily volatility along the way.  The slight decline on Monday is nothing to worry about.  In fact it is an opportunity to invest in leveraged index funds (RSU, SSO, SFLA or UPRO) if you have not already done so.  There will continue to be grim news from the Eurozone debt crisis, and we expect bad economic news to come from China as well.  The pending US elections and other geopolitical risks can and likely will create market volatility over the near term.  As long as the US money supply continues to expand, leveraged index funds will grow faster than price inflation for a long time to come.  If you seek to balance your investment portfolio, which is always a good idea, we encourage you to research and invest in price inflation hedges as well.  Avoid all bonds.

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