For Tuesday January 8, 2013, We Recommend Investing in US Markets


Technical Comment:

The S&P 500 declined 0.3% Monday with volume below Friday but above the 30 day moving average.  Our pattern recognition software does not consider Monday to be a strong-volume down-day because volume was below Friday, even though it was above the moving average.  There are no patterns under formation that would predict a market downturn at this time.  If the S&P 500 were to drop about 26 points on Tuesday our automated market forecast could change to an uncertain trend based on our stop loss algorithm.

Subjective Comment:

The US market decline on Monday was mild and volume was not strong.  There is no reason to think US markets are at risk for a decline.  The amount of money created over the past 4 months has been large enough to create an accelerated annualized US M2 growth rate of 13%.  It is impossible to predict if US Banks and the Federal Reserve will continue to print and lend at current rates, faster, or slow down, but it appears the rates will increase further with QE4 kicking in and doubling the QE3 rate.  Austrian Business Cycle Theory explains what happens when new money is created.  Interest rates are driven lower than where they would be in a free market and the sectors of the economy where low interest rates have a larger impact boom first.  Housing is primary example, and US housing is indeed booming.

News from the Eurozone could spook some investors.  The Eurozone debt crisis continues to be very serious.  The US Federal debt ceiling will provide additional political drama that could further spook some investors.  This should be considered buying opportunities to increase your investments in ETFs that grow with US markets, including leveraged ETFs (Exchange Traded Funds).  When the US M2 growth rate slows, or when the daily stock market data starts showing frequent strong-volume down-days, then we would be concerned about an end to the stock market rally.  Most investors do not see a rally right now, but one has started.  Money printing causes a bubble boom in asset prices and the economy.  It will not last, but it can last for months or years.  Invest now!  Keep reading our blog and we’ll let you know if we see conditions changing.  Hold your price inflation hedges for the long term because all of this printing and lending will cause price inflation to accelerate.  When price inflation does heat up, bond investors will demand higher yields to compensate, and that will drive bond prices down.  Avoid all bonds for this reason.

We would like to welcome our newer readers!  We hope all of our readers are finding our daily market forecast useful and hope you’ll spread the word among your friends.  Thank you for your continued interest and occasional donations.

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