For Thursday December 20, 2012, We Recommend Against Investing

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Technical Comment:

The S&P 500 declined 0.76% on volume below Tuesday but above the 30 day moving average.  The S&P 500 would have to decline about 18 points on Thursday (-1.3%) to trigger our stop loss algorithm and change our automated market forecast to an uncertain trend.

Subjective Comment:

The negotiations in Washington D.C. regarding the political impasse on tax rates and government spending appears to have spooked the market a bit on Wednesday.  The timing of the announcement from the Speaker of the House and when the market reacted are closely correlated, so there is likely some causation.  However, the decline was not as large as the recent advances, and Wednesday’s decline was on light volume comparatively.  The expanding money supply is having a larger influence than the political uncertainty, and this is likely to remain the case going forward.  The decline on Wednesday was an opportunity for aggressive investors to purchase leveraged index funds at a slight discount.

Continue to evaluate your investment portfolio and prepare your available funds for investing in US markets.  Hold your price inflation hedges such as commodities.  Commodities might take a dip in price in the short term, but the acceleration in money supply growth ensures that all price inflation hedges will eventually advance in price.  It appears the political uncertainty is nearing an end with the close of the year.  We are very likely to change our subjective investment recommendation come January.

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