For Tuesday, August 21, 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 0.03 points, which is virtually unchanged.  Volume was below Friday and lighter than the 30-day moving average volume.  A decline of about 10 points on Tuesday (-0.7%) would likely be enough to change our automated forecast to an uncertain trend.

Subjective Comment:

The very light volume continues in US markets and is probably why the indices have been little changed for the past week.  We still see no patterns emerging, but the declining volume is pulling down the 30-day moving average.  When light volume is persistent it is possible for strong-volume down-days to occur.  This does not mean the market is about to decline, it just means it is easier for patterns to develop if markets do begin to decline.  The stop-loss algorithm is catching up to the current level of the market, so any decline is more likely to change our automated forecast.

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