For Thursday February 06, 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 declined 0.2% Wednesday with volume above the 30-day moving average but below Tuesday, making Wednesday a light-volume down-day.  The above average volume trend continues.  The high frequency of strong-volume down-days recently has created two 50-50 patterns that suggest there are equal odds US markets will advance or decline from here.  Additional patterns are forming that could predict market decline, but those are not yet fully formed patterns.  The S&P 500 would have to advance about 9 points on Thursday (+0.5%) to reverse our stop-loss trigger and restore our forecast to a growth trend.

Subjective Comments:

If the S&P 500 advances enough to change our automated market forecast to a growth trend tomorrow, we would subjectively continue to recommend against investing right now.  We will be looking at the money supply data carefully tomorrow to see what, if anything is happening to the growth trends.  This will also influence our subjective recommendation but we doubt the money supply data will cause us to recommend equity investing right now.  Stay away from all bonds and consider price inflation hedges.

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