For Wednesday January 30, 2013, We Recommend Investing in US Markets

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Technical Comment:

The S&P 500 advanced 0.5% on Tuesday with volume above Monday and higher than the 30 day moving average.  The market decline on Monday was on light volume, and the advance on Tuesday was on stronger volume.  The pattern of weak volume on down-days combined with strong volume on up-days continues.  This pattern is typical during bull markets.  Based on its continued persistence it is likely the current market rally will continue.  Should the S&P decline about 2 points on Wednesday (-0.2%) our forecast could change to an uncertain trend based on the stop loss algorithm within our automated process.

Subjective Comment:

In addition to the technical pattern which is consistent with a market rally, the US money supply growth rate has accelerated to 13.5%.  Austrian Business Cycle Theory explains how an accelerated growth of the money supply will cause the business cycle and with it, the bubble-boom in asset prices including stocks.  This is why stocks will continue to advance in the US and there will be additional signs of economic improvement.  Price inflation will also grow higher as a result of the expanding money supply.  Avoid all bonds and invest in price inflation hedges and index funds that grow with US markets.

A month ago we updated our subjective investment recommendation and advised our readers to “Invest for Growth”.  Prior to this change we had been discussing for weeks the signs we saw that were leading up to our recommendation to invest.  If we use the opening prices for 12/28/12 and the closing prices for 1/29/13 we can see what the market performance has been for this short period to date:

These are nominal gains.  Your real gains will be reduced by taxes and the declining purchasing power from price inflation.  The government does not give you credit for price inflation.  They tax you on the nominal gains.  We recommend leverage to stay ahead of the taxes and purchasing power erosion.  Leverage adds risk.  If the market declines, leveraged investments will drop more just as they grow more when the market advances.  Continue to follow our updates and track the US money supply and you’ll have plenty of advance notice when the bubble-boom is ending.  For now, the bull market bubble-boom is in full swing.  You can still invest now and get into the market before many others realize the 6% increase in the past month is the beginning of an on-going trend.  Right now there are likely a lot of investors who are thinking the market is about to move lower again.  They are wrong.

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