For Wednesday February 05, 2014, We Recommend Against Equity Investing


Investment Recommendations:

We are changed our subjective recommendation.  Sell US equity positions and hold cash.  Price inflation hedges should be held or accumulated for the long term as price inflation is starting to accelerate.  Avoid all bonds, including the new MyRA bonds announced recently.

Technical Comments:

The S&P 500 advanced 0.76% Tuesday with volume above the 30-day moving average but below Monday, making Tuesday a light-volume up-day.  The above-average volume trend continues and the light-volume up-day does nothing to reverse the negative patterns forming.  Should strong-volume down-day continue to occur we could see a pattern that predicts a market decline develop.  Decline patterns are rare, but conditions have developed and it appears likely such a pattern could form.  Tuesday’s advance was not sufficient to reverse the stop-loss trigger and our automated market forecast remains uncertain.  If the S&P 500 advances about 6 or 7 points on Wednesday (+0.4%) our forecast could return to a growth trend by reversing the stop-loss trigger.

Subjective Comments:

If our stop-loss trigger reverses on Wednesday we would still recommend against investing in US markets right now.  The 50-50 patterns recently put an equal chance the market could advance or decline from here.  At a minimum we will not change our subjective recommendation until we have updated money supply data this Thursday.

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