For Wednesday June 19, 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 advanced 0.78% on Tuesday with volume below Monday and below the 30 day moving average volume.  Tuesday was a light-volume up-day.  When markets advance on strong volume it is an indication of an upward rally.  There has been very little market advance in the past several weeks where volume was strong.  Instead there have been some strong-volume down-days, although not enough to indicate a market decline when considering only our technical analysis.  The growth forecast from our software system should be disregarded for anyone considering entering the market.  Should the S&P 500 decline about 33 points on Wednesday (-2%) our stop loss algorithm could trigger and change our market forecast to an uncertain trend.

Subjective Comments:

US President Barack Obama appeared on the Charlie Rose show yesterday and said Ben Bernanke has been Fed Chairman “longer than he wanted”.  This has been seen as a clear signal that a new person will be appointed to the Fed Chair when Bernanke’s current term expires on January 31st, 2014.  The FOMC meeting concludes tomorrow and an announcement on monetary policy will come in the afternoon.  There has been a lot of speculation the Fed will slow the printing press to “taper” back the QE stimulus.  There are many writers (here, here, here and here) who think bond prices will fall when the Fed scales back on money printing (aka QE).  We agree and think bond prices have already started to fall.  Exit all bond positions ASAP.  Our regular readers have heard our comments on bonds for a long time and should already have their portfolios divested of bonds.  To our new readers we implore you, sell your bond positions now.  If you want to short the bond market, be sure to do additional research and know when you would want to exit the short position.  We will not offer signals about bond investing as a regular feature.  Our focus is on US stock markets.  We do not see US markets going much higher than they have been recently.  There is likely to be sideways movement for a while, but we’re not sure for how long.  We continue to guess a market decline is highly likely, even a crash.  Our best guess has been for a market crash in July or possibly October.  If the US money supply does not accelerate its growth rate, then markets will crash soon.  We do not advocate nor endorse the policies of central banks.  We oppose printing money.  We do know how money printing will cause the boom-bust business cycle, and that is why we are very concerned a market crash could be coming.  We hedge our opinion by noting that US banks have almost $2 Trillion of excess reserves and could accelerate fractional reserve lending anytime they choose.  Another hedge to consider is the ego of Ben Bernanke.  He might try to influence monetary policy to delay the crash until after his term is over.  We doubt he can succeed at this given recent history, but anything is possible at this point.  It is very much a guessing game, and we do not want our readers to invest on a guess.  When our software recognizes a pattern that predicts a market direction consistent with the money supply growth, then we will recommend investing.  Until then we suggest maintaining a cash position so you are ready when the market opportunity comes.  Alternative investments include price inflation hedges, but only if you can hold them for a long period of time.

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