For Monday June 3, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US stock markets right now.  Price inflation hedges remain good long-term investments.  Continue to avoid all bond investments.

 Technical Comments:

The S&P 500 declined 1.43% on Friday with volume above Thursday and higher than the 30 day moving average.  Friday was a strong-volume down-day, the 2nd in the 4 day week just past.  Typically Friday market volume is light, so the strong volume is a bit more interesting than usual.  The S&P 500 spent most of the day unchanged and then dropped a great deal near the end of the session.  The drop was almost enough to trigger our stop loss algorithm.  If the S&P 500 declines about 1 point (not percent, point) on Monday our stop loss algorithm will likely change our automated market forecast to an uncertain trend.

Subjective Comments:

The Dow index closed on Friday with the largest 2-week drop in six months.  The S&P 500 volume for the day was indeed higher than usual.  Aside from our technical observation of above average on a Friday, it was noted that “over 110,000 [of the E-Mini S&P 500 June] contracts traded in the last minute.  This is the largest non-quarter end volumes seen since November 2011 and the largest volumes since June 2012.”  Most of the volume occurred at the end of the trading day on Friday when the S&P 500 index fell over 1.4% for the day.  We have been and continue to warn that price inflation is going to happen, and it appears the Federal Reserve’s Advisory Panel released minutes from their recent meeting. noted these minutes stated “there is also concern about the possibility of a breakout of inflation”.  The minutes also noted the possibility “of an unsustainable bubble in equity and fixed-income markets”. thinks these comments could have spooked the market.  We hope these comments do not surprise our regular readers.  We have been writing about price inflation and the increasing risk of the bubble-boom in US markets ending for quite some time now.  There has been a recent rally that appears to have ended in the past two weeks, and for longer than that we have been advising readers to avoid US markets.  The missed opportunity of the gains of this recent rally were not worth the risk, and what we’ve been warning about for at least the past couple of months is now becoming obvious to others.

Our technical analysis is proprietary and we combine it with tracking of the US M2 money supply.  There are other technical analysis techniques that are non-proprietary that are followed by many traders.  We don’t know all of them, and many of them make no sense because they are simple correlations without a solid connection to human action.  There is a rare technical event called the “Hindenburg Omen” that predicts a market decline, and the technical development of that pattern did occur on Friday. explains the Hindenburg Omen and provides interpretation we agree with.  We encourage you to read it.

Continue to hold and accumulate cash.  We think a market crash is coming, but not quite yet.  Our pattern recognition software will most likely identify the pending crash when it gets closer.  If you have cash available at that time you’ll be able to invest in leveraged index funds that grow when the market declines.  Other investment opportunities that make sense right now are price inflation hedges, but only if you can hold them for a very long time.  We expect bond prices to continue to fall, so stay away from all bonds.

Welcome to our new readers!  We are always excited to learn of new followers.  We are confident you’ll find the information we publish useful and hope you’ll consider recommending us to your friends.  Have a great weekend!

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