For Monday, November 19, 2012, We Recommend Against Investing

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Technical Comment:

The S&P 500 advanced 0.5% on Friday with volume above Thursday and higher than the 30 day moving average.  The advance was insufficient to change our forecast.  Should the S&P 500 advance again on Monday by about 9 points (+0.6%) our forecast could change to a growth trend by the reversal of the stop loss trigger in our automated process.

Subjective Comment:

On Friday the market was down early then advanced after an announcement of possible political compromise in Washington D.C.  A large portion of the market’s volume on Friday occurred early, so the advance has to be considered carefully.  Our automated process still identifies Friday as a strong-volume up-day, but we see no reason to be excited about the potential for near term market growth.  As discussed yesterday there does appear to be acceleration in the US M2 growth rate, but there is still a lot of uncertainty and the M2 growth has not accelerated much compared to the past 18 months.  We think it is likely M2 will grow at a much faster rate in the near future.  Until it does we recommend avoiding investments in leveraged index funds that track US markets.  Continue to be prepared to invest, but not just yet.  Avoid all bonds and Eurozone markets.  Price inflation hedges remain a good investment for part of your portfolio.

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