For Wednesday, September 19, 2012, We Recommend Against Investing

Market conditions are changing.  Please read our entire post to fully understand our current recommendation and the potential for changes in the near future.

Technical Comment:

The S&P 500 declined 0.1% on Tuesday with volume lighter than Monday but higher than the 30-day moving average.  The S&P 500 would have to decline about 37 points (-2.6%) on Wednesday to change our forecast to an uncertain trend.

Subjective Comment:

The mild decline in the S&P 500 index was insignificant on Tuesday in the creation of any type of technical pattern.  The Fed Funds rate has remained at 0.16% for the past 4 days and it is very unlikely any of the new QE3 money has been released by the Fed.  International tensions might also be muting stock markets right now, but it is impossible to know what investors are thinking.  Our guess is the uncertainty regarding the size of QE3, the effectiveness of the “transmission mechanism” (aka fractional reserve money multiplier), the Eurozone debt crisis and now international tensions in the Mideast and between Japan and China are likely creating a tremendous amount of uncertainty.  “Wait and see” appears to be the dominate theme right now for US investors.  We continue to advise a “wait and see” combined with “be ready to invest quickly” strategy.  So far there remains no good data to use for making any decisions.  If you want to move investments out of cash now, research price inflation hedges.  Continue to avoid all bonds.

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