For Monday, November 12, 2012, We Recommend Against Investing

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Technical Comment:

The S&P 500 drop 0.17% on Friday with volume below Thursday but still above the 30 day moving average volume.  If the S&P 500 advances about 13 points on Monday our forecast could flip back to a growth trend.

Subjective Comment:

The very mild up-tick on Friday was on volume lighter than the days following the election.  The market decline for the week was 2.4% on strong volume.  Our detection software has identified the initial formation of both types of predictive patterns in the daily market data.  We see the formation of growth indicators and decline indicators, but neither formation has completely formed.  This is common at market turning points because there tends to be large swings and high volume days.  Based on our analysis of the US M2 money supply growth rate, we think a decline is more likely unless the growth rate accelerates.  We also think there will be various downward pressures on the market for the rest of the 2012 calendar year from the Eurozone and uncertainty about the political decisions in the US regarding taxes and federal government spending.

Our advice to our readers is to stay out of all bonds and avoid Eurozone stock markets.  Be ready to invest in US markets if conditions change, but for now avoid index funds that track the US markets.  We expect the growing money supply to continue to drive up price inflation, so long-term investments in hedges against price inflation make sense.

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