For Tuesday January 15, 2013, We Recommend Investing in US Markets

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Technical Comment:

The S&P 500 declined 1.4 points (-0.09%) on Monday with volume below Friday and below the 30 day moving average.  The decline was very minor and on much lighter volume, and that continues the pattern of market advances on strong volume with declines on light volume.  This pattern is common when markets are in an overall up-trend, as is now the case.  Our automated market forecast remains at a growth trend, and our stop loss algorithm has begun adjusting downward to minimize the likelihood of a false signal.  The S&P 500 would have to decline about 4 to 5 points on Tuesday (-0.3%) to change our forecast to an uncertain trend.

Subjective Comment:

We remain firmly convinced the accelerated growth of the US money supply is driving a bubble boom in the US economy.  Many asset prices will advance, including stocks.  The money creation will drive price inflation and cause interest rates to climb (and bond prices to fall).  Avoid all bonds.  Invest in US markets aggressively.  Consider margin or leveraged index funds that grow with US markets, but do your own research to make sure you understand these investments and the risk involved.  We also recommend holding any investments you own in price inflation hedges.  We’re convinced price inflation hedges will advance, but many market factors will have an impact and it could be a while before they advance appreciably.

With the end of 2012 the politicians in Washington DC gave us the pseudo-drama of the “fiscal cliff”.  After they gave us a tax increase posing as a “solution” to the wretched fiscal cliff, now we have the “debt ceiling” to content with.  This will create more drama for the news, but the debt ceiling does not matter to the stock market and economy.  Some market fluctuations are likely as there are folks in the market who actually think the debt ceiling matters.  With the US M2 money supply growing around 14% annualized after having been half that or less for years (excluding 2 months in the summer of 2011), the accelerated money growth rate will cause a bubble boom as described by Austrian Business Cycle Theory.  Dips in the market should be considered stock sales and an opportunity to accumulate larger positions as US markets trend upwards.  Like all bubble booms, this one will not last forever.  Every bubble must burst.  Keep your eye on the money supply growth rate and keep following our posts.  Our automated forecasting process combined with our tracking of the money supply will give you ample warning of when to sell before the bust crashes the market.

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