For Wednesday April 17, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US stocks right now.  Price inflation hedges remain good long-term investments despite Monday’s drop in the price of precious metals.  Continue to avoid all bond investments across the board.

 Technical Comments:

The S&P 500 advanced 1.4% on Tuesday with volume below Monday but above the 30 day moving average.  Compared to Monday’s large strong-volume down-day, Tuesday was a light-volume up-day.  Compared to the 30 day average, Tuesday was a strong-volume up-day.  Our pattern recognition software evaluated Tuesday as a strong-volume up-day, and because of the large movement in the S&P 500 index a growth pattern was identified.  Our automated forecast is susceptible to frequent changes when the market has such large single-day changes in the index.  From both the reversal of our stop loss algorithm and the growth pattern, our forecast has returned to growth.  Even with the growth pattern identified if the S&P 500 drops about 15 to 16 points on Wednesday (-1%) our stop loss algorithm could again trigger a change in our automated forecast to an uncertain trend.

Subjective Comments:

It is common for our pattern recognition software to identify both growth and decline pattern formation at market turning points.  The large index changes and multiday trends can and do contribute to a mixture of technical signals.  This is why our pattern recognition software looks for formations over several days.  We are forced to acknowledge the growth pattern because they do not occur frequently.  This is new information that must be considered when making our subjective recommendation.  We are not ready to recommend investing based on the pattern alone.  We will still be watching the continued daily data from the market and the money supply growth.  The growth pattern puts weight on the scale to recommend investing, but this is still counterbalanced by the 2.3% drop in the market that occurred on Monday.  We will continue to provide the ongoing information and thought process as we consider changing our investment recommendation.

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