For Monday July 22, 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 crept higher on Friday by 0.16% on volume below Thursday and lighter than the 30 day moving average.  Thursday was a light-volume up-day for the S&P 500 while the Dow and Nasdaq closed down.  For the week only one day was above average volume, and only barely.  Our pattern detection software identified two strong-volume up-days and one strong-volume down-day.  There is still no fully formed pattern of predictive value.  The overall low volume suggests the upward trend is unlikely to be sustained.  If the S&P 500 declines about 30 points on Monday (-1.8%) our market forecast could change to an uncertain trend.

Subjective Comments:

We think US markets will crash sometime before the end of October.  By “crash” we mean a market decline strong and sudden enough that it will be broadcast by mainstream news outlets, possibly even as the lead story.  We admit the timing of this prediction is a guess based on historical similarities and assumptions.  The fact a crash is coming is based on the economic reality described by Austrian Business Cycle Theory (ABCT).  US M2 (not seasonally adjusted) money supply grew 9.2% in 2012, and so far in 2013 the annualized M2 growth has been less than 2%.  This has setup the classic conditions for a bubble-boom followed by a crash.  A long but excellent description of this process can be found at this link to the Ludwig von Mises institute.

Welcome to our new readers!  Everyone enjoy your weekend.

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