For Wednesday October 02, 2013, We Recommend Against Investing

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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 0.8% on Tuesday with volume below Monday but above the 30 day moving average.  Tuesday was a light-volume up-day even though volume was a little above average.  In the past 8 trading sessions there have been 4 strong-volume down-days, and the light volume days in between do not break the development of the negative pattern.  More strong-volume down-days in the near future could complete the formation of a predictive pattern.  If the S&P 500 should decline about 18 points on Wednesday (-1%) our market forecast could change to an uncertain trend.

Subjective Comments:

The US government “shutdown” appears to be having not much effect yet, but it remains a source of investor concern.  In a little over 2 weeks the US Treasury will exhaust its “extraordinary” looting measures to keep the government running given the current statutory debt ceiling.  The debt ceiling is more likely to spook investors.  The longer the shutdown and political gridlock persists, the more nervous investors will become about the possibility of a default if the debt ceiling is not increased.  Beyond the political theatrics there are technical indicators of market weakness in addition to our pattern detection software.  There are additional news items that continue to support the classic pattern of pre-crash weakness, such as GM vehicle sales falling.  As the money supply growth slows down, interest rates go up.  This means the sectors of the economy sensitive to interest rates (housing, cars, and capital goods) experience the downturn before the other sectors.  Indications continue to point to a pending crash for US markets.

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