For Wednesday January 15, 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 1.08% on Tuesday with volume below Monday but above the 30-day moving average, making Tuesday a light-volume up-day.  A predictive pattern suggesting markets will grow developed today.  Our technical system watches for patterns that can take several days to fully develop, and both bullish and bearish patterns can develop at market turning points.  A bearish pattern is still developing and may or may not complete its full formation.  If the S&P 500 declines about 20 points (-1.0%) on Wednesday our stop loss algorithm could trigger and change our market forecast to an uncertain trend.

Subjective Comments:

We have been watching the accumulation of strong-volume down-days with concern and missed that a bullish pattern was forming as well.  This is an advantage of having a technical system divorced from human subjectivity.  When our technical system identifies a predictive pattern it only predicts the future direction of the market.  It does not predict how far the market index will move or how long the trend might last.  Fully developed patterns do not occur very frequently within our system, so this is a noteworthy event.  We will continue to watch for a bearish pattern and will watch the money supply data to formulate our subjective opinion.  For now we remain bullish and recommend investing for growth in US stock markets.

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