For Wednesday August 7, 2013, We Recommend Against Investing


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 0.57% on Tuesday with volume above Monday but below the 30 day moving average.  Our pattern recognition software classified Tuesday as a strong-volume down-day, and there have now been enough strong-volume down-days occurring in a short period of time that our system has identified a 50-50 pattern.  The 50-50 pattern predicts a 50% chance US markets will increase with a 50% chance US markets will decrease.  This pattern was originally developed as a predictor of market declines.  After further research we determined the pattern was correct only half the time.  If the S&P 500 declines another 11 points on Wednesday (-0.6%) our market forecast could change to an uncertain trend.

Subjective Comments:

The 50-50 pattern we detected today is very informative, even though it might seem unhelpful at first glance.  Historically when this pattern has appeared the US market went up half the time, and down the other half.  The appearance of this pattern now combined with the collapse in US money supply growth over the past 7 months provides multiple clues that US markets are heading for a decline.  The appearance of predictive patterns from our software is rare, but when patterns start to appear they tend to appear in clusters.  We could see additional predictive patterns appear in the next several days.  Another clustering of signals occurring right now is the Hindenburg Omen.  This technical indicator appeared yesterday, and it appeared again today.

Based on Austrian Business Cycle Theory (video of ABCT here) and the collapse of US Money Supply growth from 9.2% in 2012 to less than 2% annualized since the start of the year, it is an economic fact US markets will eventually crash as a result of the money printing boom that is now ending.  This cannot be avoided, although it could be delayed if the US Money Supply were to grow suddenly and strongly.  We doubt this will happen and we continue to guess the timing of the coming crash is before the end of October.  Get out of the US stock market now!  Avoid all bonds.  Tell your friends and family to move their investments into cash so as to preserve their wealth from the coming crash.

We know price inflation is a serious problem, and holding cash is undesirable when its purchasing power is declining.  We think the market crash will be a much larger loss over the next few months when compared to the rate of price inflation.  We also see this as an opportunity.  As the crash draws closer our pattern detection software should provide a signal.  When this happens we will recommend investing in leveraged index funds that grow when US markets decline.  This will be a risky investment but highly profitable.  Having part of your portfolio available to invest quickly will allow you  to take advantage of this coming opportunity.

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