For Wednesday January 2, 2013, We Recommend Investing in US Markets

Technical Comment:

The S&P 500 advanced 1.7% Monday with volume above last Friday but below the 30 day moving average.  The advance was sufficient to reverse the stop loss trigger and change our automated forecast to a growth trend.  If the S&P 500 drops about 9 points on Wednesday (-0.6%) our forecast would likely change back to an uncertain trend from our stop loss algorithm.  US markets are closed New Year’s day, so our next update will be Wednesday.

Subjective Comment:

There were two things that likely drove the large advance in US markets on Monday.  The first occurred during a political press conference concerning the contrived non-emergency of the “fiscal cliff”.  When the President suggested a deal was near, stocks advanced quickly.  At the end of the trading session it appeared no political solution was in fact ready to pass congress, yet the market advanced even more during the final 1 to 2 hours of trading.  This end-of-the-day advance was likely from professional funds seeking to increase the prices of their existing holdings so they can have the best possible annual report using the closing numbers on December 31st.  What we want to point out is the fact the market continued to advice despite the negative news about the “fiscal cliff”.  Some market participants are nervous about how US politics will influence the economy and stock markets, but they are not aware of the incredible power of the accelerated money growth combined with nearly $1.5 Trillion of excess banking reserves.  The money printing will overwhelm any impacts of the “fiscal cliff” and any subsequent political policy changes.

The accelerated money supply growth is highly likely to accelerate further going into 2013.  This will drive all asset prices higher with housing and stocks leading the way.  Price inflation will also occur, so please prepare accordingly.  Investing in leveraged index funds that grow with US markets is a good way to take advantage of the coming stock market rally while trying to stay ahead of the purchasing power erosion that price inflation will bring.

Happy New Year!

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