For Tuesday, October 23, 2012, We Recommend Against Investing

Technical Comment:

The S&P 500 advanced 0.04% (less than a point) on Monday with volume below Friday and below the 30 day moving average volume.  The small advance was just enough to reverse the stop loss trigger in our forecasting algorithm, so our automated forecast has returned to a growth trend.  If the S&P 500 declines just more than 1 point on Tuesday our forecast will likely return to an uncertain trend.

Subjective Comment:

US markets spent most of Monday lower than Friday’s close and then managed to end the day virtually unchanged.  The light volume combined with what was shaping up to be a down day is probably diminished investor interest after poor earnings last week.  The Federal Reserve’s Open Market Committee meets this week but monetary policy is not expected to change.  The reverse in our automatic forecast is what we’ve warned about when the market moves sideways.  Our stop loss algorithm can get confused and frequently change our forecast.  The change in our forecast is not something we recommend reacting to right now.  Please see our previous post for a detailed discussion of our current investment recommendations.  Continue to hold and consider acquiring price inflation hedges.  Avoid all bonds and for now be prepared to invest in US equities but stay out of the market for the time being.  Subjectively we are unlikely to recommend investing until after the US elections.

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