For Wednesday, August 15, 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 0.01% (-0.18 Points) on Tuesday with volume above Monday but below the 30-day moving average volume.  If the S&P 500 drops about 15 points on Wednesday (-1.1%) our forecast is likely to change to an uncertain trend.

Subjective Comment:

US markets were effectively unchanged on Tuesday and no patterns of predictive value have been identified.  What is interesting about the volume is Tuesday was the third consecutive market session where S&P 500 volume was below 3 Billion Shares.  On an absolute basis the last time 3 days of such low volume occurred was back in December 2011.  As a percentage of the 30-day moving average volume the past three days are not that unusual, but the 30-day moving average is very low.  This lack of trading volume suggests most market participants have established their positions and are now waiting to see what will happen.  The financial reports and opinions seem centered on the European Central Bank and if the Euro money supply will be grown at an accelerated rate in order to bailout the over indebted Eurozone countries.  Our opinion has not changed and remains opposed to our automated forecast.  Our advice is to hold and accumulate cash as a defensive position against a major decline in US markets.  Price inflation commodities are also an option, but do additional research if you choose to invest that way.  We also recommend against investing in any and all bonds.  See our posts over the past few days for additional details.

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