For Wednesday, October 17, 2012, We Recommend Investing for Growth

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

Technical Comment:

The S&P 500 advanced 1% on volume above Monday and above the 30 day moving average volume.  The S&P 500 would have to decline about 20 points on Wednesday (-1.3%) to change our automatic forecast to an uncertain trend.

Subjective Comment:

Tuesday was a second consecutive day of a large index advance for the S&P 500 along with higher volumes.  Strong-volume up-days occur when the market strengthens.  Our pattern recognition software has not identified a predictive pattern, but the advance in the market now places the index further above our stop-loss trigger.  Based on Austrian Business Cycle Theory, as the US money supply grows faster a bubble-boom will cause the market and economy to grow.  In the long run this bubble-boom will pop because the cheap interest rates causes business to invest and produce in products and services that will fail to have sufficient demand from customers.  The bubble-boom can only last as long as the money supply grows at an accelerating rate.  We appear to be at the beginning of another business cycle as the M2 money supply growth accelerates.  Now is the opportunity to invest in leveraged index funds to take advantage of the bubble growth that will occur.  Price inflation is the unhappy consequence of aggressive money supply growth, so investing in price inflation hedges is also a wise investment choice right now.  Eventually interest rates will increase, causing bond prices to fall. This is why we encourage you to sell all your bond positions now and avoid them for a long time.

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