For Friday, Aug 5, the market forecast is uncertain

We recommend selling your equity positions.  Avoid money market funds as a cash alternative due to exposure to European sovereign default risk.

Technical Comment:
The large drop in the S&P 500 on Thursday was on lower volume. The decline and growth patterns are both still forming, but neither one has fully developed.

Subjective Comment:
The slowing growth of the Euro money supply has been having the typical deflationary “bust” impact on the faltering countries in the Eurozone. Today Italy halted all trading on their stock market briefly due to continued crashing. Italian authorities even raided the offices of Moody’s and Standard and Poor’s alleging these rating agencies were responsible for some falling stock prices. It is common for governments to direct blame away from themselves, and the root cause of the problems is too much sovereign debt. It has become so bad that panic selling is occurring in US Markets, and the mainstream media news outlets have begun to notice. The drop in US Markets was the lead story on the networks with “contagion” from Europe blamed. Italy and Spain have cancelled bond auctions, but in reality this is a face-saving gesture because reality is investors will not buy their bonds even at the very high rates being offered. US Money supply growth continues to accelerate. 75% of US companies that have reported earnings for the most recent quarter have beat expectations. Luxury industries are booming. Eventually this will cause a boom in US Markets. Keep watching our forecast for a signal of when to get back into the market.
We have been commenting recently about money supply growth and its expected impact on the markets. We believe it is best for the economy for central banks to abstain from money printing and interest rate manipulation. However, this is what central banks do and have done for many decades. The coming boom in US Markets will only delay the downward correction that is eventually going to happen. The money printing in the US will only make the “bust” that much worse.

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