For Wednesday, May 9, 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 declined 0.4% on Tuesday with all US indices down for the day.  S&P 500 volume was higher than Monday and above the 30-day moving average volume.  Our automated forecast remains uncertain with the stop-loss trigger having been invoked.  The S&P 500 would have to advance about 9 points on Tuesday to change our forecast back to a growth trend, but that would only be a reversal of the stop-loss algorithm and not a pattern predictive of growth.

Subjective Comment:

Tuesday was a strong-volume down-day.  This begins the formation of a new pattern that we will track and is a bearish indicator.  Europe continues to be a mess of uncertainty with Greek and French markets down sharply over the past two days.  The political and monetary uncertainty in the Eurozone is having a mild spillover impact in the US for now.  We don’t know if the spillover will get worse or not.  The major reason for the stagnant US stock market is the continued steady growth of the US money supply.  Without accelerating growth the bubble boom ignited last summer will stall and eventually turn into a bust.  There is no avoiding a bust once a bubble-boom starts as explained by Austrian Business Cycle Theory.  Should US money supply growth accelerate the bubble could be extended.  If not, the bust and commensurate decline will occur sooner.  Continue to invest in hedges against price inflation and avoid all bonds.  Maintain a cash or risk-off position relative to US equities.

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