For Wednesday September 18, 2013, We Recommend Against Investing


Investment Recommendations:

No Change: 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 advanced 0.42% on Tuesday with volume below Monday and lighter than the 30 day moving average.  Tuesday was a light-volume up-day and overall market volume remains very light.  If the S&P 500 declines about 54 points on Wednesday (-3.2%) our market forecast could change to an uncertain trend.

Subjective Comments:

Tomorrow the Federal Reserve will publish its regularly scheduled update on monetary policy.  The investment world is watching closely to see if the Fed will keep printing money at the current $85 Billion per month, or if the Fed will taper back by slowing the rate of money printing.  Articles published speculate how much the taper might be, and if the Mortgage Backed Securities will be tapered more or less than the Treasury purchases.  As a reminder, since the beginning of 2013 the Fed has been printing $85 Billion per month and using $45 Billion to purchase Treasuries (US Government Bonds) and the remaining $40 Billion to purchase Mortgage Backed Securities.  Doing the math, the Fed is printing just over $1 Trillion Dollars per year right now.  The Fed is under the delusion that money printing is a good thing.  They are under the further delusion that quibbling over how much to print or not print, and what to buy with what they print, is somehow important.  It’s important to those who sell stuff to the Fed, but for the rest of us the money printing creates price inflation and causes the boom-bust business cycle.  The next crash and depression is the Fed’s fault.  Sure, banks have to share in the blame for their practice of fractional reserve lending, but it is the cartel of banks created by the Fed that makes the problem so much worse than it would be without a central bank.

Even though US markets are advancing it is occurring on very light volume.  Strong market rallies advance on strong volume.  Light volume advances must be treated very cautiously.  Unless multiple strong-volume up-days occur close together our pattern recognition software will not identify a growth pattern.  There have been strong-volume up-days recently, but not yet enough and volume remains so light that the 30 day average is below 3 billion shares on the S&P 500.  Now is not the time to get into the market.  Continue to avoid US markets and stay out of all bonds.  The current bubble-boom will end in the near future and we’re very likely to see a market crash.  Consider price inflation hedges for part of your portfolio, and hold cash for an opportunity to short the market as the crash draws closer.

Welcome to all the new subscribers!  We’re glad you have chosen to join us.

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