For Thursday March 28, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US markets.  We do not know if US markets will resume their recent growth trend or if they will turn down.  US banks could resume aggressive lending and reignite a bubble-boom, but unless and until they do there is downside risk.  Uncertainty reigns and this is why we recommend against investing in US stocks right now.  As an alternative investment we suggest price inflation hedges.  Avoid all bonds as they will fall in price when price inflation accelerates in the near future.  Avoid TIPS bonds as well.

Technical Comments:

The S&P 500 declined less than a point (-0.06%) on Wednesday with volume just above Tuesday but below the 30 day moving average.  The light volume and minor movement in the index does not classify Wednesday as a strong-volume down-day.  While Wednesday does not contribute to a negative pattern formation, it does not contribute to a growth pattern either.  The decline of the market ended the formation of any growing pattern.  The direction of US markets from our technical analysis remains uncertain.  Should the S&P 500 decline about 16 points on Thursday (-1%) or stop loss algorithm would likely trigger and change our automated forecast to an uncertain trend.

Subjective Comments:

Capital controls have been imposed in Cyprus as an attempt to prevent banks from collapsing when they reopen tomorrow.  Customers have not had access to their accounts for almost 2 weeks and are likely to try and withdraw as much as they can.  In addition to withdraw limits, Cyprus is restricting the outflow of money across its borders.  While this might prevent the banks from collapsing, it will not prevent the debt crisis from continuing across the Eurozone.  The European Central Bank is still not printing new Euros aggressively and government taxes and regulations remain burdensome.  Worst of all, the companies and banks that should have gone bankrupt years ago have been and continue to be bailed out.  The depression there will continue and looks likely to get worse.  It remains to be seen to what extent this could impact US markets.  Nothing has changed and the direction for US stocks remains highly uncertain right now.

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