For Wednesday, July 11, 2012, We Recommend Against Investing

We recommend selling your equity positions or hedging for a risk-neutral position.

Technical Comment:

The S&P 500 declined 0.8% on volume above Monday but below the 30-day moving average volume.  If the S&P 500 declines another 10 points on Wednesday (-0.8%) our forecast will likely change to an uncertain trend.

Subjective Comment:

The market decline on Tuesday was stronger than Monday both in the drop of the index and the daily S&P 500 volume.  While volume was lighter than the 30-day average we consider Tuesday a strong-volume down-day when looking at pattern development.  Tuesday is consistent with Market weakness and continues the prevalent trend of similar days.  While market weakness is persistent, our automated process has not identified any patterns of predictive value.  This leaves us with our unchanged subjective opinion that the US economy and markets will not grow from here.  We expect volatile sideways movement from here with the likelihood of a decline becoming more probable every day.  Continue to hold and accumulate cash, avoid money market funds and all bonds, and do not invest in US markets right now.  We also recommend holding any price inflation hedges for the long term even though they could experience price volatility in the near term.  If you own precious metals in segregated or unsegregated accounts, consider taking physical possession.  There has been another company like MF Global that has been caught committing fraud by plundering precious metals in segregated accounts.

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