For Thursday, November 29, 2012, We Recommend Against Investing


Technical Comment:

The S&P 500 advanced 0.8% on volume above Tuesday but below the 30 day moving average volume.  If the S&P 500 were to decline about 29 points on Thursday (-2.1%) our forecast could change to an uncertain trend based on the settings of our stop loss algorithm.

Subjective Comment:

While volume remains light compared to the 30 day moving average, volume was above Tuesday and that made Wednesday a strong-volume up-day on the S&P 500.  It is common to see strong volume days cluster, even strong volume up and down days.  After two strong-volume down-days on Monday and Tuesday, a strong-up happened Wednesday.  This creates a common situation where the patterns of market growth and market weakness are developing at the same time.  Usually both patterns fail to fully form.  Given the accelerating growth in the US money supply we expect to eventually see a pattern that predicts growth.  We’ve been guessing such a pattern will not emerge until early 2013 given the political uncertainty with the so-called “fiscal cliff”.  We’ve also speculated the accelerating money supply has not yet been strong enough to ignite another bubble-boom in the US economy and stock market, and this remains our current opinion.

Continue to avoid all bonds and the Eurozone markets.  Price inflation hedges are good investments for part of your portfolio.  Be ready to invest in US stock market index funds in the near future but not yet.

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