For Tuesday, May 15, 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 1.1% on Monday with volume below Friday and lighter than the 30-day moving average volume.  The decline was sufficient to again trigger the stop-loss algorithm of our automated forecasting process, turning our forecast back to an uncertain trend for US stock markets.

Subjective Comment:

We wrote in our last post the return to a growth trend forecast was from a technical recalibration within our system and a decline on Monday would likely return our forecast to “uncertain”.  Sideways movement in the market can cause false-starts in our forecasting process as the stop-loss algorithm can get confused.  This is why we incorporate the US Money Supply trends with Austrian Business Cycle Theory to provide a subjective opinion to provide you with the most investment information we have.

Our best guess for the recent stagnation and sideways movement in US markets comes from fear of the on-going debt crisis in Europe.  Nationalization of a bank in Spain, high bond yields in Spain and Italy, and political chaos in Greece have a lot of people nervous.  The possible slowing of the US money supply is what has us concerned.  Putting all of this together is why we advise a risk-off position for your investments right now.  Price inflation will continue.  If you choose to invest in hedges against price inflation make sure you’re prepared to hold for a long horizon as in the short term there will be volatility.  Continue to avoid all bonds.

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