For Monday October 07, 2013, We Recommend Shorting US Markets

Short_Recommendation Decline_Image_v02

Investment Recommendations:

Our automated forecast is predicting a decline for US markets!  It is time to invest in leveraged index funds that grow when US markets crash.  If you’re going to short US markets, take action ASAP.

Examples of inverse leveraged index funds are SDS and SPXU, as well as others.

Technical Comments:

The S&P 500 advanced 0.71% on Friday with volume below Thursday and lighter than the 30 day moving average.  Friday was a light-volume up-day.  When markets decline the prevailing daily patterns are strong-volume down-days and light-volume up-days.  This is precisely what has been present the past 2+ weeks.  Our market forecast is for a decline.  When our system forecasts a decline we use a different stop loss algorithm.  If US markets should happen to advance our forecast will eventually change to an uncertain trend.  However, it will take a daily pattern that predicts growth before our system will predict market growth.

Subjective Comments:

Continue to watch markets carefully.  Watch how markets react to news as well.  The money supply growth has been at 6.3% annualized for 5 months after having been at near 0% since the beginning of the year.  The net annualized growth for all of 2013 (year to date) is 2.1%.  Both of these growth rates are below the 9.2% annual growth in 2012, so the slower growth rate must eventually lead to a market crash.  Since the past 5 months has seen a 6.3% growth, US markets are in an interesting period.  The economy is showing signs of slowing as is typical prior to a crash, but the mild acceleration in money supply growth could delay the crash we know is coming.  Now that our technical system has identified a pattern that predicts a market decline, we remain very confident US markets will go down from here.  Our system is not perfect, so all of our readers who have chosen to invest in leveraged index funds that grow as US markets crash must remain very vigilant.  If you have chosen to avoid short investments right now, please move to a risk-off / cash position as the odds of a market decline are much higher right now.

The market advance Friday was on light volume and does not change our confidence regarding the coming crash of US markets.  Austrian Business Cycle Theory explains why a crash must occur given last year’s accelerated money supply growth followed by the slower growth so far this year.  Our pattern recognition software identified the prediction of a market decline this past week.  When these patterns have occurred historically the market usually declines within a few days or weeks.  This is the nature of forecasting, and to be successful the prediction needs to come before the event and be correct more often than incorrect.  The “market decline” pattern was just detected.  If you have not yet invested in inverse leveraged funds there is still time to make such an investment.  If you are going to take this risk, do it now.  Otherwise remain in cash or other risk-off positions.

We expect the Federal Reserve will continue printing money at the current pace or even faster.  The absence of economic statistics from the Federal Government propaganda bureaus could be cited as a reason to delay the dreaded “taper”.  What we think is more likely is the Fed will react to a market crash by providing additional emergency measures to save us, meaning printing even more money faster.  This will result in higher price inflation down the road.  For this reason we recommend holding on to your price inflation hedges.  If you’re not going to use your investable cash to short US markets, consider accumulating more price inflation hedges instead.

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