For Tuesday January 22, 2013, We Recommend Investing in US Markets

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Technical Comment:

The S&P 500 advanced 0.34% on volume higher than Thursday and above the 30 day moving average volume, resulting in a second consecutive strong-volume up-day.  Friday is usually a below average volume trading day, so the fact volume increased above Thursday demonstrates again the daily market data patterns are consistent with a growing market.  Should the S&P 500 decline about 15 points (-1.0%) on Tuesday our automated forecast could change to an uncertain trend.  US markets are closed on Monday (1/21/13) for the MLK Jr. Holiday.

Subjective Comment:

The US market is at a 5-year high with the S&P less than 100 points below its all-time high.  The increasing frequency of strong-volume up-days with diminishing strong-volume down-days is a clear indication US markets are booming again.  By combining the technical data patterns from the S&P 500 with the accelerated US M2 (not seasonally adjusted) growth rate of 14% (annualized) and it is clear the expanding money supply is causing another bubble-boom.

It is time to invest in leveraged index funds that grow with US markets.  More sophisticated investors can consider trading using margin loans.  There has been enough money printing for the new bubble-boom to last for months.  We’re basing this on the recent history of US money supply growth observed in the summer of 2011.  In two months that summer about the same amount of growth occurred as has happened in the past three months.  In 2011 as the summer turned to fall the market continued to boom even though money growth slowed.  Unlike the summer of 2011, this time US banks are aggressively accelerating the originations of new loans.  Fractional reserve lending grows the money supply via the money multiplier effect.  The Federal Reserve would have to conduct a dramatic reversal of their current monetary policy to stop the current bubble, and there is no indication they intend to do so.  Keep watching the US M2 (NSA) growth rate and follow our automated forecast for clues when the bubble might end.  Until then, avoid all bonds, hold your price inflation hedges and accumulate leveraged index funds.

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