For Tuesday, May 8, 2012, the market forecast is uncertain

Our forecast for US stock markets is an uncertain trend.  If you choose to liquidate and hold cash, please avoid money market funds as they have exposure to European sovereign default risk.

Technical Comment:

The S&P 500 advanced 0.04% on Monday with volume below Friday and below the 30-day moving average volume.  If the S&P 500 advances about 4 points on Monday our forecast could flip back to growth.

Subjective Comment:

The minor advance in the S&P 500 Monday on light volume was after the index spent most of the day in negative territory.  The elections in Greece and France appear to have impacted Eurozone markets and there could have been some carryover into US markets which as a group (S&P, Dow, Nasdaq) finished Monday mixed with little change.  (The Greek and French elections create uncertainty regarding continued austerity measures in those countries, and market participants dislike uncertainty.)  Our stop-loss algorithm remains susceptible to frequent changes in our automated forecast when the market moves sideways.  There are currently no predictive patterns under development and we continue to hold the same subjective opinion regarding the future direction of US markets: There’s a 50/50 chance of growth or decline.  We don’t know what happens from here.

We have a great deal of respect for the information posted at EconomicPolicyJournal.com, including a brief comment today regarding the US money supply and the uncertain future direction of the US economy and stock market.  The analysis at EPJ.com is consistent with Austrian Business Cycle Theory (ABCT).  Our automated forecast has recently produced the 50/50 uncertainty signal, and the money supply interpretation via ABCT also supports the uncertainty about the near-term future of the US markets.  We advise continued positioning to hedge against price inflation and avoidance of all bonds.

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