For Friday November 22, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US markets and watch closely to see what trend develops.  Cash positions (including currency) and price inflation hedges are still recommended.  There is too much uncertainty in US markets right now to make an investment recommendation, although it is probably safe to hold any currently owned equities through the end of the year.

Technical Comments:

The S&P 500 advanced 0.81% on Thursday with volume above Wednesday but below the 30 day moving average, making Thursday a strong-volume up-day.  This week has seen one strong-volume up-day and one strong-volume down-day, and the past 9 trading sessions have all been below average volume.  The daily market data continues to show both bullish and bearish data which is common at turning points, but so far a clear pattern that predicts which way the market will go has yet to fully develop.  If the S&P 500 declines about 49 points on Friday (-2.8%) our market forecast could change to an uncertain trend.

Subjective Comments:

US M2 (not seasonally adjusted) money supply weekly data has been published.  M2 growth had been 6% annualized for 22 weeks through the end of September when it suddenly accelerated to 26% annualized for the first 2 weeks of October.  After that 2 week spurt, the annualized M2 growth rate for the past 4 weeks has been 0%.  4 weeks is a very short period of time to measure an annualized rate, but with M2 continuing to present the same 4-week sub-cycle, we are now becoming concerned that M2 growth might remain at or near zero percent.  The 2-week 26% burst we think will be enough to delay a market crash through the end of 2013.  The next several weeks will show if M2 will remain at 0% or do something else.  Recent comments by FOMC members, which should be mostly ignored, might cause banks to change their lending rates and thus change the M2 growth rate.

Given the 0% M2 growth rate and the 50/50 pattern identified by our recognition software a few weeks ago, we remain entirely uncertain if markets are going to move up or down from here.

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