For Friday April 11, 2014, We Recommend Against Equity Investing


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 dropped 2.09%! That’s a big one-day drop, and it was on volume higher than Wednesday and above the 30-day moving average. This is a continuation of down-days on strong-volume with up-days on light-volume. A fully formed predictive pattern has not appeared, but the general market data is more consistent with a market about to decline as compared to anything else. The drop on Thursday was more than enough to again trigger our stop-loss algorithm and change our automated forecast to an uncertain trend. The S&P 500 would have to advance about 19 points on Friday (+1%) to change our forecast back to a growth trend.

Subjective Comments:

The increase in day-to-day market volatility will likely keep changing our forecast back and forth between a growth trend and an uncertain trend. This is the triggering and trigger-reversing of our stop-loss algorithm and should be ignored. Given the continued accumulation of strong-volume down-days we continue to recommend avoiding US equity investments.

The updated US M2 money supply was published on Thursday, and it is still not clear if the growth rate is going to continue to accelerate or not. Recall from last week that US banking required reserves are down and the Fed has tapered. This means the money supply growth should slow. It’s possible that M2 might indeed slow, but from week to week there is enough variability that it can take several weeks for a clear growth trend to be identified. If M2 continues at the current growth rate, the market is likely to move sideways for a while before crashing. If M2 growth slows, then we expect a crash sooner than later.

We still expect price inflation to accelerate. The money supply is still growing; it is just not growing as fast. The speed of growth drives to boom-bust cycle, but the overall growth is what will eventually drive up price inflation. In addition the Fed meeting minutes appear to indicate the new Fed Head Janet Yellen is highly likely to accelerate printing (quantitative easing) if there is a crash. This means we could have a market crash and price inflation. Price inflation hedges remain good long-term investments.

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 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:

The editor of 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, 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. is intended for professional traders. There is a larger staff at, so you will find it updated more frequently than, 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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