For Monday January 13, 2014, We Recommend Investing in US Markets


Investment Recommendations:

It is time to invest in US stock markets.  Price inflation hedges should be held for the long term and remain a good idea as we expect price inflation to accelerate in 2014.  Avoid all bonds.

Technical Comments:

The S&P 500 advanced 0.23% on Friday with volume below Thursday but above the 30-day moving average.  Every day this past week saw trading on above average volume and the S&P 500 index was up from last week.  Although there have been several strong-volume down-days recently, a negative pattern has not formed.  5 consecutive strong-volume days with an up-week is consistent with an advancing market.  If the S&P 500 should decline about 21 points on Monday (-1.1%) our stop loss trigger could change our market forecast to an uncertain trend.

Subjective Comments:

The continuing acceleration of the US money supply growth rate combined with our technical analysis is why we are bullish on US markets right now.  As recently as this past October we saw US markets very near a crash, but in mid-October there was a sudden acceleration in bank lending and since then there has been an accelerated growth of the money supply.  Since we were near a crash the current bubble-boom is fragile.  If the money supply growth rate slows the current bubble-boom might not last very long.  After 3 months of accelerated growth the markets will continue to grow and will not crash right away if the money supply growth were to slow.  Investors should be long in US markets and use leverage to stay ahead of price inflation.  Accelerated money supply growth eventually leads to accelerated price inflation, and this is why price inflation hedges are good long term investments and also why all bonds should be avoided.

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