For Tuesday April 9, 2013, We Recommend Against Investing

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Investment Recommendations:

Avoid US stocks right now.  Price inflation hedges remain viable alternative investments.  Continue to avoid all bonds as they will fall in price when price inflation eventually accelerates.  Avoid TIPS bonds and municipal bonds too for the same reason.

 Technical Comments:

The S&P 500 advanced 0.6% on Monday with volume below Friday and lighter than the 30 day moving average.  As a light-volume up-day on Monday, the S&P 500 continues to display patterns consistent with a weak market.  Up-days are occurring on light volume combined with down-days on stronger volume.  A fully developed pattern with predictive value continues to elude our detection software, but this type of market action does not suggest markets will advance.  If the S&P 500 declines about 12 points on Tuesday (-0.7%) our stop loss algorithm could trigger a change in our automated forecast to an uncertain trend.

Subjective Comments:

ZeroHedge.com has noted a daily pattern in US markets recently. Every day at 3:30 PM (Eastern Time) US markets have been moving up for the remainder of the day.  They have been commenting on this for a while now and it is worth noting they speculate the plunge protection team could be intervening to keep US markets up.  In line with their observation, US markets were down most of the day and then moved into positive territory to finish ahead.  Regardless of any such attempts to manipulate the market the pattern recognition software we’ve designed is not fooled.  The market volume on Monday was very light, so the change in the index is of less significance to our process.  When high volume occurs it overwhelms the action of attempted manipulation, and this is why we look for patterns over several consecutive days.  Nothing material has changed and we still are unsure about the future direction of US markets.  US banks are not lending rapidly enough to sustain a bubble-boom, so a market crash could occur even with the Federal Reserve printing $85 Billion Dollars every month.  In time it will become clear which direction US markets will go, but for now we see too much uncertainty to recommend investing in stocks.

2 Responses to For Tuesday April 9, 2013, We Recommend Against Investing

  1. Charles says:

    For those of us who have purchased Bonds through a fund a year or so ago; do you recommend coming out of those bonds and going to cash?

    • Yes, we recommend to all of our readers the full liquidation of all bond positions. This includes bond funds. Bond prices might stay where they are for a while, but there is very little upside in bond prices. Interest rates will eventually go up from one of two causes. The Federal Reserve will raise them, or price inflation will cause future buyers of bonds to demand a price-inflation discount. It is possible both could occur. When one or both of these events happen, bond prices will fall. Cash is not a great alternative when prices are expected to go up from inflation, so consider price inflation hedges as alternative investments. Until you find the price inflation investments that are best for your circumstances we suggest cash is a better position than being exposed to bonds.