For Wednesday April 02, 2014, We Recommend Against Equity Investing

Hold_Recommendation

Investment Recommendations:

We have changed our subjective investment recommendation to risk-off. 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 0.7% on volume above Monday but still below the 30-day moving average. Tuesday was a strong-volume up-day and the S&P 500 set another record high. Over the past 4 months the S&P 500 formed a cup-and-handle chart pattern, and Tuesday’s breakout to a new record high can be interpreted as a technical pattern predictive of growth. The large cluster of strong-volume down-days last week still has the basis of a negative pattern, but that negative pattern is not fully formed. If the S&P 500 were to decline about 35 points on Wednesday (-1.8%) our automated market forecast could change to an uncertain trend.

Subjective Comments:

We don’t put a lot of weight on the current cup-and-handle pattern because the handle was higher than the start of the cup. The pattern is considered stronger when the handle is lower than the beginning of the cup. Additionally the theory behind chart patterns is based on past behavior repeating itself. This is not a bad theory because human beings are repetitive in their investment decisions. However, the theory is not 100% sound because human being act and make choices that can and do differ. Austrian Business Cycle Theory is 100% sound and explains, not predicts but explains why a boom occurs when money printing accelerates. It goes on to explain how a crash must happen when the money printing slows. A record-high stock market does not mean it will continue to go up. We remain very concerned the money supply growth will not sustain the current bubble-boom. If we see the money supply growth rate accelerate, we will change our subjective opinion. For now, we continue to recommend avoiding US markets.

Wind Down of Daily Blog Posts:

We will continue to post about US markets through the end of March. We are planning on suspending daily posts in early April. We will continue to update our market signals at TimerTrac.com for our readers interested in tracking our automated and subjective market recommendations. For interested readers, we have the following recommendations for finding excellent commentary:

Best Economic Blog: EconomicPolicyJournal.com

The editor of EconomicPolicyJournal.com is Robert Wenzel, and he offers a daily email subscription that is absolutely fantastic! You can subscribe at this link. We highly recommend this subscription. You will continue to get great commentary and analysis on the US money supply growth rate using Austrian Business Cycle Theory.

We also suggest ZeroHedge.com, although the blog posts there tend to be a bit snarky and often use terminology that can be difficult for the average reader to follow. ZeroHedge.com is intended for professional traders. There is a larger staff at ZeroHedge.com, so you will find it updated more frequently than EconomicPolicyJournal.com, but that’s not always a good thing.

These recommendations will serve you well as we continue to wind down our daily commentary.

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