For Wednesday December 04, 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 for a few weeks.

Technical Comments:

The S&P 500 declined 0.32% Tuesday with volume above Monday and higher than the 30-day moving average.  Tuesday was a strong-volume down-day, the second such day in a row.  A predictive pattern has not formed, but two consecutive strong-volume down-days does warrant close attention to see if a pattern develops soon.  If the S&P 500 were to decline about 35 points on Wednesday (-2%) our automated market forecast would likely change to an uncertain trend.

Subjective Comments:

If you currently own US equities and want to hold through the end of the year for tax purposes, you’re probably safe.  However, we don’t recommend buying stocks right now.  Our forecasting process identified a few weeks ago equal odds of a market advance or decline, and there has been no new predictive pattern since.  Also, we continue to be worried about the US M2 money supply growth rate and the implication vis-à-vis Austrian Business Cycle Theory.  We are also concerned that price inflation will eventually accelerate as a result of the massive amounts of money printing done by the Fed over the past several years.  For this reason we continue to suggest investing in price inflation hedges for the long term.  We will continue to watch our technical indicators and the money supply growth rate and will change our stock investment recommendation when a future trend appears reliable.

We received a request to discuss Bitcoin from a reader.  This is outside our normal scope of commentary but we decided to we will answer the questions sent to us since we accept Bitcoin as a form of payment.  We will give this some thought over the next few days and include commentary in the near future.

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