For Thursday, Aug 4, the market forecast is uncertain

We recommend selling your equity positions.  Avoid money market funds as a cash alternative due to exposure to European sovereign default risk.

Technical Comment:
Today’s volume was unusually high compared to recent market action. The last time the S&P 500 had volume higher than today was December 7, 2010. Looking carefully at the intraday volume and price action shows slightly more than half the volume drove the market index up. Upward motion on high volume might signal more upward motion in the market. The decline pattern in progress could still develop, but so could a growth pattern. It is common for both types of patterns to develop at turning points.

Subjective Comment:
The growing US money supply strongly suggests a market boom is coming. Today’s upward motion is consistent with coming growth. With both growth and decline patterns developing, it is best to wait for the patterns to develop before taking action. Economic news continues to be negative. It is often the case that near a market top, economic news is good and everyone is investing. Conversely, near a bottom news is bad and everyone is worried. This is why turning points see both growth and decline pattern formation. We’re providing these comments to demonstrate this phenomena, and we’ve emphasized that the patterns are forming but not fully developed. When a pattern fully develops, our forecast changes. Note our forecast today remains “uncertain”. News from Europe is bad. The Italian stock market has been declining, perhaps crashing, with Italian banks stock prices dropping so far and so fast that trading has been halted more than once over the past several days. Money market exposure to European banks is real, so hold your cash positions in cash and not money markets.

Comments are closed.