For Monday April 29, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US stock markets right now, even though our automatic forecast predicts market growth.  Price inflation hedges remain good long-term investments despite last week’s drop in the price of precious metals.  Continue to avoid all bond investments.

 Technical Comments:

The S&P 500 declined 0.2% on Friday with volume below Thursday and lighter than the 30 day moving average volume.  Friday was a light-volume down-day, and this completes a full week of daily market data where the patterns were consistent with market growth.  In the past 4 weeks the S&P 500 produced alternating weeks where daily patterns were first consistent with a declining market, then for a growing market, then decline, and finally this week the patterns showed growth again.  This indicates uncertainty from our technical analysis and the future direction of US stock markets are not at all clear.  Our automated forecast predicts growth, but this should be considered suspect given the technical details over the past month.  If the S&P 500 were to decline about 25 points on Monday (-1.6%) our automated forecast would likely change to an uncertain trend based on the current status of our stop loss algorithm.

Subjective Comments:

Just like our technical analysis is not producing a clear indication for which way US stocks will go from here, our subjective interpretation of the US M2 money supply also paints an unclear picture.  3 months ago US M2 dropped over a 3 week period.  This decline slowed the average growth of the money supply, and as Austrian Business Cycle Theory explains, this puts a bubble-boom at risk of ending.  Over the past 3 months US M2 has been growing again, but we don’t know if the current growth will be enough to sustain the bubble boom.  US banking reserves indicate US banks have scaled back lending, so this will translate into slower US M2 growth.  Continue to avoid US equity market index funds for now and consider price inflation hedges for part of your portfolio.

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