For Tuesday, November 13, 2012, We Recommend Against Investing

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Technical Comment:

The S&P 500 barely changed on Monday by increasing 0.18 point (+0.01%) with volume lighter than Friday and below the 30 day moving average volume.  Our automatic forecast for US markets remains an “uncertain trend” based on the stop loss algorithm within our process.  Should the S&P 500 advance about 12 points on Tuesday our forecast could change back to a growth trend.

Subjective Comment:

Our software that analyzes daily S&P 500 data for patterns has not identified anything significant.  We think the Federal Reserve’s QE3 monetary expansion will eventually cause another bubble boom in the housing market since QE3 is being used to purchase mortgage backed securities.  This has been noticed by the financial press.  While this will inflate the prices of houses and make general price inflation worse, the current US M2 growth rate is only sufficient to keep US equity markets flat and the US economy sputtering along.  We see a lot of uncertainty for the rest of calendar year 2012.  Without a change in the US M2 growth rate we predict high market volatility with overall little movement through the 4th quarter.  Continue to avoid all bonds and international equity markets.  Stay ready to invest in US stocks, but wait until US M2 accelerates.  We also recommend price inflation hedges for part of your portfolio.

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