For Thursday, May 10, 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 0.7% on Wednesday with volume higher than Tuesday and above the 30-day moving average volume.  Our automated forecast remains for an uncertain stock market trend because the stop-loss safety algorithm remains in a triggered state.  The S&P 500 would have to advance about 1.2% or more on Thursday to reverse the stop-loss trigger.

Wednesday was the second consecutive high-volume down-day on the S&P 500.  This is a sign of weakness but not yet a predictive pattern of consequence.  We do have the early formation of a new bearish pattern that we will continue to watch for the next several days.

Subjective Comment:

The political and financial chaos in the Eurozone continues with many people speculating on a possible breakup scenarios and how they might play out.  The spillover in the US is causing some selling which is pushing stocks lower.  There is also speculation by watchers of the Federal Reserve that the Fed will resume Quantitative Easing in the future.  In this market it is very difficult to trade stocks.  What matters for the US economy and the US stock market is the growth rate of the money supply.  There has been and continues to be high growth rates of the money supply, so price inflation is going to continue.  The only way we see US stocks advancing is from acceleration in the money supply growth rate.  Without that, the US markets will remain stagnate and move sideways or decline.  If the money supply growth slows, US market will crash.  Since the US economy is in another manipulated bubble-boom from money and credit creation, a crash is in our future for sure.  The only uncertainty is timing.

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