For Thursday, November 8, 2012, We Recommend Against Investing

Technical Comment:

The S&P 500 dropped 2.4% on Wednesday with volume higher than Tuesday and above the 30 day moving average volume.  The decline was more than sufficient to again trigger our stop loss algorithm and flip our automated forecast back to an uncertain trend.  Should the S&P 500 index bounce up on Thursday in excess of about 16 points our forecast would likely flip again back to a growth trend.

Subjective Comment:

The large drop in the market appears to be a reaction to the US election results.  For the remainder of the year there will be some stock selling by individuals attempting to avoid changes in the capital gain taxes expected at the beginning of next year.  The Eurozone debt crisis will also put downward pressure on US stocks in the near term.  The sharp S&P 500 decline on Wednesday also eliminated the forming patterns detected by our software and qualified as a strong-volume down-day.  It will take several such days to form a pattern, so one strong-volume down-day by itself is not a reason to react.  Continue to avoid all bonds and stocks right now.  Be ready to invest in the stock market if the US money supply accelerates.  Be prepared for price inflation and consider investing part of your portfolio accordingly.

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