For Friday, Sep 23, 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:
On Wednesday the S&P 500 dropped almost a full 3%. On Thursday it dropped 3.2% on much higher volume than Wednesday and the 30-day moving average volume. The last time daily volume was higher than Thursday was back on December 7th, almost a full year ago. The downward motion of the market triggered the stop-loss algorithm and shifted our forecast to uncertain. The S&P 500 would have to increase about 15 points on Friday to return our forecast to growth. Thursday also marked 3 days in a row of downward motion on higher volume which is the beginning of a pattern that precedes further downward motion in the market, although that pattern is not yet fully developed.

Subjective Comment:
There seems to be little positive to say about the downward motion of the market. Subjectively we still are of the opinion the rapidly expanding money supply in the US will eventually drive up US stock markets along with serious price inflation. Wednesday’s comments from Fed Chairman Bernanke combined with the extreme weakness of Chinese and European markets is clearly dominating the action of US markets.

It is very likely markets will continue to bounce up and down. Should this happen, our automated forecast is susceptible to frequent shifts between growth and uncertain. We will continue to comment on the development of patterns that precede further declines to give you all of the information available from our system. We stand by our analysis of the US economy and the influence the money supply will eventually have on markets, but clearly the money supply growth is currently not the major factor influencing the market. Now that our forecast has shifted to uncertain combined with 3 days in a row of large declines on increasing volume, it is wise to move out of US equities and wait until the growing money supply causes a clear up-trend to develop.

We expect Chinese and European markets to decline, probably pulling the US market down for the ride. Our system has not yet indicated a decline is forecasted for US markets. We’re still concerned about the exposure of US money market funds to European banks and sovereign debt. Given the downward motion in European and Chinese markets combined with those economies slowing (and stopping) the growth of their money supplies, an alternative investment right now would be any ETF that grows as those markets shrink. We do not have an automated system generating forecasts for those markets. This is purely a subjective suggestion based on current trends and constricting money supplies. Please do additional research if you are going to consider such an investment.

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