For Wednesday, November 21, 2012, We Recommend Against Investing

Technical Comment:

The S&P 500 advance 0.1% on Tuesday with volume below Monday and lighter than the 30 day moving average.  If the S&P 500 declines about 21 points on Wednesday (-1.5%), our forecast could change back to an uncertain trend.

Subjective Comment:

With the coming Thanksgiving 4-day weekend it is notable that historically this week US markets have had below average volume.  Low volume now is not unusual.  We thought US markets might decline on Tuesday after the very large advance on Monday, but instead US markets held Monday’s gains.  Holding on to gains is typically a sign of a strengthening market.  Our pattern detection software still has not identified anything with predictive value.  We are guessing the slowing accelerating growth of the US money supply will eventually drive market prices higher and ignite another bubble-boom in the economy.  We think the growth rate needs to accelerate more than what the most recent data shows for this to happen, but it is very unpredictable what will happen as the Fed accelerates money printing.  With QE3 directed at the purchases of Mortgage Backed Securities, data is showing the next bubble-boom is starting in housing already.  It is too difficult to really guess what the market trends will do right now.  Continue to avoid all bonds and international stock markets.  Avoid US equity index funds for now but be ready to move part of your portfolio if conditions change, which we think they will around January.  Price inflation hedges are also a good investment for the long term.

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