For Tuesday March 5, 2013, We Recommend Against Investing


Technical Comment:

The S&P 500 advanced 0.46% on Monday with volume below Friday and lighter than the 30 day moving average.  This continues the recent daily pattern of light-volume up-days and strong-volume down-days.  This technical pattern continues to predict a 50-50 chance the market will grow or decline.  Our growth forecast is based on the reversal of our stop loss algorithm which could be triggered again on Tuesday if the S&P 500 declines about 18 points (-1.2%).

Subjective Comment:

Our stop loss algorithm is susceptible to market volatility during turning points in trends.  Based on the US M2 money supply growth rate collapse from 14% to 4% over the past 5 weeks we are inclined to think our automated growth forecast is unreliable.  We encourage our readers to hold and accumulate cash for a potential opportunity to short US markets, but we are not suggesting US markets will decline.  We think this is likely, but we are waiting to see if our pattern recognition software produces a decline forecast.  We see the conditions for a decline as likely.  Price inflation hedges remain good investments for the long term.  If US markets were to crash, the Federal Reserve would likely accelerate their rate of money printing which will lead to price inflation.  As it is, the Fed is printing $85 Billion per month.  US banks have scaled back originating new loans and this is why US M2 money supply growth has slowed.  Price inflation will eventually become a serious problem.  When exactly is difficult to estimate.  Only add to your price inflation hedges if you are able to hold them for a very long time.  If you own no price inflation hedges, consider doing research to identify the right investment opportunity for your situation.  However, avoid TIPS and all bonds as we expect bond prices to fall when price inflation accelerates.

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