For Wednesday July 17, 2013, We Recommend Against Investing

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Investment Recommendations:

Ignore our automated market forecast and avoid US stock markets right now.  Continue to avoid all bond investments. Price inflation hedges remain good long-term investments, but only invest in price inflation hedges amounts that you can leave invested for a very long time.

 Technical Comments:

The S&P 500 declined 0.37% on Tuesday on volume above Monday but below the 30 day moving average.  Our pattern detection software classified Tuesday as a strong-volume down-day.  This is the first strong-volume down-day in 2 weeks.  It would take several more such days in quick succession before a predictive pattern would form so for now there remains no predictive value in the daily market data.  If the S&P 500 declines about 30 points on Wednesday (-1.8%) our market forecast could change to an uncertain trend.

Subjective Comments:

Below average volume continues to persist in US markets.  Federal Reserve Chairman Bernanke gives his biannual testimony to Congress Wednesday and Thursday, so it is possible traders are holding back while waiting to see what he says.  Bernanke’s comments could cause a reaction in US markets, but any such reaction will be very short.  What matters is the US money supply, and it has effectively stopped growing compared to the 9% annual growth that occurred in 2012.  Central banks in India, China and Brazil are all tightening their liquidity while the Fed continues to print $85 Billion per month.  Tightening of liquidity in other countries will eventually result in a bust of their bubble-booms, and that could trigger the pending crash in US markets.  The Bureau of Labor Statistics published their official propaganda Consumer Price Index showing inflation to be low.  Actual price inflation is closer to 8% according to shadowstats.com.  Price inflation will continue to be high thanks to the prior money printing from the Fed.  Bond prices are falling (and yields are going up) as money is flowing out of bonds rapidly.  Look at the chart of bond money flows at EconomicPolicyJournal.com.  This chart shows 4.5 years of money flows into and out of bonds.  It shows just how large the recent outflows have been.  Avoid bonds as investments for the indefinite future as bond prices are sure to fall further.

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