For Wednesday, May 16, 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 again on Tuesday by 0.6% with volume higher than Monday and above the 30-day moving average volume.  The stop-loss algorithm in our automated forecast remains triggered.  This is why our forecast is for an uncertain trend.  High volatility or sideways movement in the market could reverse the trigger if the S&P 500 gains about 16 points on Wednesday.

Subjective Comment:

US markets spent part of the day in positive territory before closing down for the day.  Tuesday’s decline was a strong-volume down-day.  Many such days have been accumulating close together again, which is the basis for predictive patterns.  We are currently at 5 strong-volume down-days in the past 9 trading sessions.  No pattern is fully formed, but this action is bearish for the market and investors are advised to avoid US equities for the time being.  Cash or a risk-off position is advisable.  We will be watching the US money supply update this Thursday to see if the growth rate continues to show signs of slowing as has been the case for the last two weekly updates.  The US economy and stock markets have been in a bubble-boom since last summer.  That bubble is running out of air and we appear to be entering a period of stagnation or possibly decline.  The negative and on-going events in the Eurozone debt crisis will continue to have minor spill-over effects in the US, mostly psychological for some investors.  What will really determine the direction for US markets is the money supply.

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