For Friday January 18, 2013, We Recommend Investing in US Markets

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Technical Comment:

The S&P 500 advanced 0.56% on Thursday with volume higher than Wednesday and above the 30 day moving average volume.  After several days of little change, the US market has advanced again on strong volume.  The pattern of up-days with strong volume continues with strong-volume down-days becoming more and more infrequent.  This pattern is frequently present when markets are in an up-trend.  Should the S&P 500 drop about 16 points on Friday (-1.1%) our automated forecast could change to an uncertain trend.

Subjective Comment:

The Federal Reserve published updated US M2 money supply data through January 7th.  The US M2 (not seasonally adjusted) straight-line growth rate remains around 14% annualized.  Over the past 18 weeks the 14% growth rate is double the prior growth and the largest rate since the summer of 2011.  We thought the doubling of Quantitative Easing to $85 Billion per month might result in further acceleration of the money supply growth.  This is still possible, but so far it is not evident in the data.  The 14% growth remains sufficiently strong and has persisted long enough to ignite another bubble-boom in the US economy and asset prices, including stocks.  The bubble-boom is becoming more obvious as in various economic data.  Over the next few months more and more people are going to become aware of a pickup in the economy.  Now is the best opportunity to invest in US markets to take advantage of the coming growth.  We recommend investing in funds that grow with US markets, and we encourage the use of leverage to accelerate your returns.  Margin accounts and leveraged index funds have risk.  They will decline faster if the market declines, but this is highly unlikely.  There may be occasional down days as is common in the markets, but the overall US market trend is going to be growth for the foreseeable future.  If you own price inflation hedges we suggest holding them for the long term as all the money printing and accelerated bank lending will cause price inflation.  The erosion in the purchasing power of the US Dollar is why we recommend leverage.  As your funds available for investment become available, we suggest adding to stock investments if you already have a sufficient position in price inflation hedges.

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