For Tuesday December 11, 2012, We Recommend Against Investing

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Technical Comment:

The S&P 500 barely changed, closing up 0.03% on Monday with volume below Friday and lighter than the 30 day moving average.  If the S&P 500 declines about 10 points (-0.7%) on Tuesday our stop loss algorithm could be triggered, changing our forecast to an uncertain trend.

Subjective Comment:

S&P 500 volume was very light on Monday.  Typically Friday is the lightest volume day of the week, but Monday’s volume was below last Friday, which is not typical.  US markets were little changed, and if we had to guess we think it’s because participants are waiting to see what the Fed will announce mid-day on Wednesday after the FOMC policy meeting.  The lack of market activity results in daily market data that has no detectable patterns by our software.  Our subjective opinion has not changed and we will have little new to say until after the FOMC meeting and then again on Thursday when the money supply data is updated.

Start preparing to invest in leveraged index funds that grow with US markets.  Our subjective recommendation is currently to “Hold Cash”, but we are likely to change to “Invest for Growth” very soon.  This will not be a recommendation to sell price inflation hedges.  On the contrary, any price inflation hedges you have in your portfolio should be investments you’re willing to hold for a long time.  Sell all bonds if you haven’t already and avoid them altogether.  When price inflation accelerates lenders will demand a higher interest rate to compensate, and at that point bond prices will fall.  It is up to you to choose the overall balance of your portfolio.  When we change our position to “Invest for Growth” we are suggesting to our readers to strongly consider moving cash holdings into leveraged index funds.  Leverage does involve risk.  It is unfortunate the massive money printing combined with increasing capital gains taxes is leaving investors few options, but leverage and a good market forecast are among the few options to achieve a real gain.

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