For Wednesday May 01, 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.  Continue to avoid all bond investments.

 Technical Comments:

The S&P 500 advanced 0.25% on Tuesday with volume above Monday and higher than the 30 day moving average.  Tuesday was a strong-volume up-day, marking the first such day in just over a week.  This could be the start of another pattern vacillation between negative and positive market conditions.  Sometimes a single strong-volume up-day can occur during a negative pattern, and vice versa.  The technical swings back and forth leave the current situation uncertain.  It will take a sustained pattern of either positive technical data (strong-volume up-days) or a sustained negative before a prediction can be made.  If the S&P 500 declines about 34 points on Wednesday (-2.2%) our automated forecast could change to an uncertain trend based on the triggering of our stop loss algorithm.

Subjective Comments:

Nothing has occurred to change our interpretation of our technical indicators, nor has there been any news to change our subjective opinion.  We remain uncertain regarding the future direction of US markets.  There is plenty of economic data indicating the economy is slowing down, and this is consistent with the US M2 money supply stagnating at an average growth rate of 7.5%.  At the same time the US stock market continues to creep up with the S&P 500 achieving another record high.  It is likely market participants are waiting to see what monetary policies will be announced by the Federal Reserve and the European Central Bank.  The Federal Reserve Open Market Committee began meeting today and will announce the results of their deliberations Wednesday afternoon.  The ECB meets on Thursday and there has been speculation of a rate cut for the Eurozone.  If a rate cut occurs, Eurozone markets are likely to advance.  If a rate cut does not happen, Eurozone markets are likely to decline.  There could be spillover from Europe to US markets.  Time will tell.  Continued patience is necessary.  Our apologies if waiting is frustrating.  We share this sentiment.

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