For Wednesday March 12, 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 declined 0.51% on Tuesday with volume above Monday but below the 30-day moving average, making Tuesday a strong-volume down-day.  This was the first strong-volume down-day in almost 3 weeks, during which time there have been 5 strong-volume up-days.  On a purely technical basis, this one down-day is not important.  What matters are trends, and overall the trend is still with the up-days.  The 30-day average volume has peaked and has started to decline a bit, indicating that the market might be at a new daily volume level.  The decline on Tuesday was almost enough to trigger our stop-loss algorithm, but a subroutine designed to minimize false sell signals kicked in and adjusted the trigger point.  If the S&P 500 declines about 1 to 2 points on Wednesday our automated market forecast is very likely to change to an uncertain trend.

Subjective Comments:

Geopolitical tensions in Ukraine might settle down as the coup-government in Kiev announced they will not act to prevent Crimea from joining Russia.  No sooner does that good news appear than tensions between Libya and North Korea flare up.  It’s very unlikely that will affect world markets, but any hostilities are concerning and can cause blips.  Market conditions in China continue to deteriorate, and a crash there would likely have spillover effects across world markets.  The crazy money printing by the Federal Reserve since late 2008 leaves conditions in the US uncertain.  The near future growth rate of the US money supply will dictate what happens with US markets and the economy.  The current bubble-boom could be near an end.  Money printing is always crazy and leads to inflation.  Just ask the Venezuelans for a current example.  Price inflation will accelerate at some point as a result of the Fed’s Quantitative Easing, also known as money printing.

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