For Wednesday, September 12, 2012, We Recommend Against Investing

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

Technical Comment:

The S&P 500 advanced 0.3% on Tuesday with volume above Monday and higher than the 30-day moving average volume.  The S&P 500 would have to decline about 27 points (-1.9%) on Wednesday to trigger the stop-loss algorithm and change our forecast back to an uncertain trend.

Subjective Comment:

Tuesday’s advance is a strong-volume up-day of some interest.  We have not yet detected a fully formed pattern of any predictive value, but this is the first strong-volume up-day of note in a while.  There is wide speculation in the financial press of a QE3 announcement by the Federal Reserve on Thursday, and this could be causing some speculation in advance of the announcement.  While interesting, we do not advise reacting to such speculation.  It is much better to wait and see what the Fed actually announces and then verify their actions by tracking the US M2 money supply.  For now we continue to advise a wealth preservation strategy for your portfolio by avoiding stocks and bonds.

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