For Wednesday December 26, 2012, We Recommend Against Investing


Technical Comment:

The S&P 500 declined 0.24% on Monday with volume below Friday and below the 30 day moving average.  Monday’s volume was very light because of the shortened trading session.  The decline on light volume does not present an indication of a weakening market.  However, the minor decline in the S&P 500 was just enough to trigger our stop loss algorithm and change our automated forecast to an uncertain trend.  If the S&P 500 advances about 1 point on Wednesday our forecast is likely to return to a growth trend.

Subjective Comment:

Our stop loss algorithm is designed to catch downtrends early.  Based on decades of daily market data this algorithm does a reasonably good job, but it does occasionally cause false indications of a market decline.  We see US markets beginning a very strong uptrend as a direct result of the accelerating money growth (M2 money supply) early in 2013.  Price inflation will also be a result of the money printing, so leveraged investing is unfortunately necessary to stay ahead of the eroding purchasing power of the US Dollar.  The political uncertainty in the US regarding tax rates and federal spending (aka Fiscal Cliff) is causing some market volatility.  This will be temporary as eventually the money supply growth will overwhelm and drive markets higher.  It’s also likely when the political resolution is passed the market will respond with a rally.  The last week of December is an opportunity for aggressive investors to accumulate holdings of leveraged index funds that grow with US markets.  More cautious investors can wait until January.  All investors should be assessing their situation to determine how much they want to invest in US markets.  Move your money to your brokerage account(s) and make sure you are setup to trade leveraged index funds.  Some brokerages require you to sign additional paperwork acknowledging the risk associated with such funds before they will let you trade those ETFs.  We also recommend holding your price inflation hedges for the long term and avoiding all bonds.  Bond prices are at their peak and will fall as more people become aware of the accelerating rate of price inflation.

To our readers we want to say thanks for your interest and occasional donations.  Merry Christmas!

Comments are closed.