For Friday February 28, 2014, We Recommend Against Equity Investing


Investment Recommendations:

Sell US equity positions and hold cash, but be prepared to move investment funds back into US markets.  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 bond scheme from the Feds.  Ignore the propaganda.

Technical Comments:

The S&P 500 advanced 0.5% on Thursday with volume below Wednesday and lighter than the 30-day moving average, making Thursday a light-volume down-day.  Thursday also saw another all-time high for the S&P 500.  There are no predictive patterns currently developing in our technical analysis, but breaking an all-time high can be interpreted as breaking through resistance.  If the S&P 500 were to decline about 21 points on Friday (-1.3%) our stop-loss algorithm could trigger a change in our automated forecast to an uncertain trend.

Subjective Comments:

6 weeks ago the US M2 (not seasonally adjusted) money supply peaked and then declined sharply for 3 weeks.  In the past 3 weeks the sharp dip has been completely reversed and M2 has reached a new all-time high as of 2/17/14.  This is zero growth over the past 6 weeks, but the trend suggests a growth rate that could remain positive.  If the money supply dips again and we see up-and-down movement without an overall up-trend, then the markets will be at a higher risk of crashing soon.  It is not time to declare a green light for investing, but we are becoming more bullish.  If the M2 growth rate continues upward at a sufficiently strong rate, we are going to recommend investing.

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