For Thursday December 12, 2013, We Recommend Against Investing


Investment Recommendations:

Avoid US markets and watch closely to see what trend develops.  Cash positions (including some currency outside of bank accounts) 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 1.13% on Wednesday, almost enough to trigger our stop loss algorithm.  Volume was above Tuesday and higher than the 30-day moving average.  Wednesday was a strong-volume down-day.  Following 3 such days last week this is the 4th strong-volume down-day in the past 8 trading sessions.  A fully formed predictive pattern has not appeared, but the formation is continuing to build.  We could see another 50-50 pattern in the next few days if strong-volume market declines continue.  If the S&P 500 declines about 5 points on Thursday (-0.3%) our automated market forecast could change to an uncertain trend.

Subjective Comments:

Bitcoin follow up…  Just the other day we wrote a post about the virtual currency called Bitcoin.  We mentioned as an investment it was potentially susceptible to a pump and dump scheme.  Today published this post with details about the possibility of pump and dump risk for Bitcoin.

The daily market data is showing pattern development more consistent with a pending market decline.  As a purely speculative guess, it is possible the talk of a “taper” by the Fed at next week’s FOMC meeting could be spooking the market a bit.  Wouldn’t it be interesting if all the “taper” talk pushed US markets down for the rest of this week, only to see the Fed not taper next week?  We’re not making a prediction about what a group of central planners (AKA central bankers) might do.  If a lot of selling continues to push the market lower, our technical analysis will evaluate the data for patterns and we’ll make predictions on that.  We will also continue to look at the money supply and interpret the potential for bubble-booms or crashes based on Austrian Business Cycle Theory.  The money supply growth rate accelerated recently, but it is not following a steady rate.  The money supply has grown in zigzags since the beginning of 2013 and has zigged again here at the end of the year.  We think US markets are very close to a crash, but the crash could be delayed and a bubble-boom resumed if money supply growth were to suddenly surge upward.  This leaves us at present with no subjective prediction for US markets.

One Response to For Thursday December 12, 2013, We Recommend Against Investing

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