For Tuesday October 15, 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 decline.  If you’re going to short US markets, take action ASAP, otherwise be sure to move to a risk off position with your investment portfolio.

Here are some inverse leveraged index funds if you want to short the market: SDS and SPXU, as well as others.

Technical Comments:

The S&P 500 advanced 0.41% on Monday with volume below last Friday and lighter than the 30 day moving average.  Monday was another light-volume up-day and as a consequence did not change the prevailing dominance of the strong-volume down-day pattern that has persisted over the past 3 weeks.  Our stop loss algorithm was not triggered so our market forecast remains for a decline.

Subjective Comments:

US markets opened down on Monday but regained the initial losses and advanced on the day, but the advance was on light volume.  Our technical pattern detection software discounts light-volume days as less important than strong-volume days.  This is why our technical forecast remains for a decline even though US markets are up since our forecast changed to a “Decline” signal.  Money supply growth rates in the US remain weak compared to 2012, so we are still expecting a market decline/crash to eventually happen.  With October half over we will soon see if our subjective call of a crash by the end of this month comes true or if our estimate on timing will prove wrong.  Either way Austrian Business Cycle Theory explains why a boom caused by accelerated money supply growth must go bust when the money supply growth slows.  US markets will crash soon.

There is frequently a “flight to safety” when markets crash.  The typical investment is to move into bonds when stocks are seen as too risky.  Bond prices have been driven up by the massive Quantitative Easing (money printing) by the Federal Reserve.  If the Fed continues to print with reckless abandon (likely), then price inflation will accelerate and cause bond prices to fall as investors demand a higher premium to offset lost US Dollar purchasing power.  If the Fed should actually “taper” (slow or stop the money printing) then bond prices will fall from a lack of demand.  Either way bond prices are going to fall.  Now is the time to avoid all bonds for the indefinite future.  The bonds holders of the city of Detroit will suffer large losses from the bankruptcy.  This will also happen to bond holders of Puerto Rican debt.  Although price inflation will erode cash purchasing power, bond price declines will be larger losses.  If you are looking for safety, price inflation hedges remain good investments for the long term.  Right now there is an opportunity for short term gains by investing in funds that go up when US markets go down, but only invest in such funds if you can handle the risk.  We recommend such investments for those willing and able to take this risk.

Comments are closed.