For Wednesday October 30, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US markets and watching closely to see if an up-trend develops before investing.  Cash positions (including currency) and price inflation hedges are recommended right now.  Our subjective opinion remains unchanged, but we’re moving away from our prior bearish position on US markets and now hold a neutral opinion that is becoming more bullish based on recent market data.

Technical Comments:

The S&P 500 advanced 0.13% on Monday with volume above Friday but below the 30 day average.  On Tuesday the S&P 500 advanced 0.56% with volume above Monday and above the 30 day average.  Both Monday and Tuesday were strong-volume up-days.  If the S&P 500 were to drop about 61 points on Wednesday (-3.4%) our market forecast would likely change to an uncertain trend based on the current stop loss baseline.

Subjective Comments:

The rapid accumulation of strong-volume up-days continues.  This type of daily market data is typical when markets are growing and will continue growing.  The more strong-volume up-days that continue to occur quickly the more likely US markets will continue to rally based on historic patterns.  We have noted the uptick in the US money supply growth rate recently.  The fact this has happened and strong-volume up-days have begun accumulating quickly on the S&P 500 at the same time points to the potential for another bubble-boom as explained by Austrian Business Cycle Theory (ABCT).  This is the type of market action that we were watching for to confirm the money supply acceleration was real and not a data anomaly.  Our investment opinion is becoming more bullish but we will not recommend investing until we see the money supply data and banking reserve data scheduled for publication this Thursday.  We’re also interested in the FOMC announcement scheduled for 2:00 PM Eastern Time on Wednesday.  If market data continues to show strong-volume up-days and the money supply continues to accelerate, we will recommend investing for growth in the near future.  There is no telling how long a bubble-boom could last or how high markets could grow, but ABCT does help confirm when our technical analysis identified market turning points. Remember, the acceleration of money printing is not something we neither desire nor advocate for.  Price inflation will eventually accelerate as a result and the economy will become even more misaligned with consumer desires, leading to a bigger crash down the road.

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