Investors 411 Blog

by Barr Jozwicki
June 30, 2008

Market Update – Oil Prices

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , ,

Reminder – Anything that is underlined and in blue is a link to a site.

Oil Prices

OPEC Chief Oil minister predicts $170 before the end of the year . The story is rom Business Intligence Journal. One striking quote on speculators driving up oil prices at the end of the story.

The US House of Representatives on Thursday overwhelmingly approved legislation that directs the Commodity Futures Trading Commission to use all its authority, including the agency’s emergency powers, to “curb immediately” the role of excessive speculation in energy futures markets.

Peak Oil is the root cause of higher oil prices . Both the role of speculators and the falling dollar also contribute to higher oil.

If congress were to succeed in limiting speculation on oil we would see a pretty significant fall. Wild guesstimate 25% (there is no consensus out there some say 0% and others 50%) The major problem here is if you put specific regulation one commodity market what about all the others? My guess is that this is congress blowing wind, or laws do not allow them to get involved.

Anyhow oil prices responded Friday by going up. So I guess speculators are not too worried about what congress did.

Stocks

Index % Change Volume

Dow -0.93% up
NASDQ -0.25% up
S&P500 -0.37% up
Russell2000 -0.04% –

US Markets

There is good technical news in yesterday’s trading. Thursday saw a major meltdown and the major indexes held added a bit to those losses. That’s usually bad technically. However, Friday saw huge volume. Considering summer trading is historically light this makes the volume even more significant. Huge volume days where the markets move very little is called “churning” and technically indicates a reversal.

Part of all this volume may be due to the fact that today is both the end of the month and the end of the quarter. Portfolio managers are taking profits and buying what they think investors want to make their portfolio’s look good.

Officially the Dow reached a “Bear market status” – this is usually defined as a loss of 20% from a high. The Dow closed just a fraction above a 20% loss. Chart of Dow

The VIX

All the major indexes once again are near the lows of the year – a major support level. There is a certainly possibility that this level will not hold. In bear markets the VIX which measures the amount of fear/volatility becomes a very accurate indicator in predicting bottoms. Three times the VIX went over 30 (showing an increase in fear) and touched 35. Each time the markets reached 35 we had a significant reversal.

Chart of VIX Scroll down for weekly chat

Reading the Tea Leaves – Any further breakdown in the major indexes will change the long term outlook to BEARS RULE. That’s the lowest possible long term outlook.

OIL RULES

Basically oil prices are going to inversely impact what stocks do. This AM oil is up about 1.5%+. Talking head on CNBC just said there are lines in China three blocks long for gas.

Recommended Sectors (Long Term)

More here on after the last day of June (today) We’ll look at last month’s results and make some projections on the future.

Bottom Line

Long Term Outlook CAUTIOUSLY BEARISH – High oil prices are holding back potential rallies. Unemployment jump of 0.5% in May – biggest in decades. (Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

The question for Wall Street is not whether there will be a recession or not, but how long will it last.

Asset Allocation/Recommended Sectors (long term)

* 40% Cash
* 35% Energy-
EWZ, (Brazil) & RSX (Russia) two energy rich countries. TRAMX – mutual fund for oil rich Mideast
PBW and GEX (alternative energy).
XLE (energy companies) OIH (oil services)
USO (oil prices) UNG (natural gas prices)
KOL (coal companies)
* 15% Commodities – MOO Agribusiness, XME (mining & minerals)
* 5% Steel – SLX (Steel)
* 5% Gold – GLD (Gold)

Chief Strategy – Buy the dips of trending sector
Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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June 26, 2008

Market Update – Danger Will Robinson Danger Danger

Author: Barr Jozwicki - Categories: Uncategorized - Tags:

The Dow has broken down through its support level and is trading at its low for the year.

If it closes below the current level we are in technical deep do do. So keep your fingers crossed. Dow down 189 points.

Technical indicators are very important to folks on Wall Street.

All the bells and whistles are flashing – Danger Will Robinson Danger Danger

Barr

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June 18, 2008

Market Update – Celtic Green

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

A little after midnight last night my grandson and I opened the back window and listened to sounds of hundreds of thousands of screaming, horn blowing, fireworks exploding Boston Celtic fans as they celebrated the Boston Celtic’s basketball championship over their rivals the LA lakers. The euphoria was palpable both in our house and in the metro Boston valley below.

Needless to say, too exhausted to write a Market Updates and I’m joining my grandson to bask in Celtic Green

Barr

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June 17, 2008

Market Update – Hidden Costs at Pump

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Just the Facts on Peak Oil

You can find a clear short presentation on the myths and facts of peak oil in big bold easy to read type and charts in pdf format here

This is easy to understand and you can send it to any skeptical friends.

The hidden cost at the pump

So you think that you’re paying only $4.00 a gallon to fuel that internal combustion engine. Wrong – You’re paying trillions more. Here are the top three hidden costs that American corporate media rarely mentions or associates with the vehicle you drive.

1) The environmental impact alone cost’s you trillions Everything from cancer to as breathing disorders
2) Oil Wars that started with oil rich Iraq will continue to grow and cost trillions (Nobel Pride winner put the cost of the Iraq war alone at @ $2 trillion)
3 Global Warming’s worst case scenario is a planet wide meltdown.

Honda and Hydrogen car

Honda introduced its hydrogen car this week and 200 prototypes are being manufactured for California (The state is willing to set up hydrogen stations) and Japan. Site of this fuel efficient zero emissions car here

Correction – not quite zero emissions – it emits water vapor.

Stocks

Index % Change Volume

Dow -0.31% down
NASDQ +0.83% down
S&P500 +0.01% down
Russell2000 +0.97% –

US Markets

Both the NASDQ and the Russell 2000 moved ahead in light decreasing volume. These two indexes, as predicted a month or two ago are still leading the Dow and S&P 500 in relative performance.

Chart of benchmark S&P 500

Chart of crude oil (WTIC)

Oil prices have consolidated or flattened over the last 6 trading days at around $135 a barrel Prices did briefly reached a new high yesterday, but fell back into the short term consolidation pattern.

Oil prices rule. It’s hard to see USA equities move higher unless there is a break in oil prices.

Reading the Tea Leaves – Technically the short sideways movement in oil prices is likely to be just another pause before a move higher. More often than not a sideways movement in a trending sector is just consolidation of over bought positions before the next move higher. The short three day rally in stocks has NOT had any increased volume behind it. Bad news for bulls. Looks like bears are getting ready to mount a charge.

Recommended Sectors (Long Term Outlook)

GLD – Gold ETF (5%). Market Updates used to have a much larger position in gold, but most of that was sold this spring. Gold is our hedge against a total meltdown in the US and the US dollar.

The daily and weekly chart of GLD

Technically, the gold chart is in danger of breaking its long term bullish trend. The long term weekly chart show an upward trending sector (40 week or 200 day moving average is still moving up (see chart). GLD has moved back to its 40 week moving average and that’s usually the time to buy. However, there has been a lot of weeks where big money (huge volume) has sold gold. Best guess here is GLD looks like it is entering a long consolidation period like it did from May 06 to Oct. 07.

There is some positive correlation between oil and gold prices rising and inverse correlation with the dollar. So for right now let’s wait to see if there is a breakout in the short term charts one way or the other.

Bottom Line

Long Term Outlook CAUTIOUSLY BEARISH – High oil prices are holding back potential rallies. Unemployment jump of 0.5% in May – biggest in decades. (Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

The question for Wall Street is not whether there will be a recession or not, but how long will it last.

Asset Allocation/Recommended Sectors (long term)

* 40% Cash
* 35% Energy-
EWZ, (Brazil) & RSX (Russia) two energy rich countries. TRAMX – mutual fund for oil rich Mideast
PBW and GEX (alternative energy).
XLE (energy companies) OIH (oil services) USO (oil prices) UNG (natural gas prices)
KOL (coal companies)
* 15% Commodities – MOO Agribusiness, XME (mining & minerals)
* 5% Steel – SLX (Steel)
* 5% Gold – GLD (Gold)

Chief Strategy – Buy the dips of trending sector
Changes to Bottom Line Section Bolded .

As Always Do Your Own Research Before Investing

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June 8, 2008

Market Update – Day of Economic Shocks

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Please note – Market Updates and I have a new email address – barrjozwicki@gmail.com

The Day of Economic Shocks (Friday)

1) Oil prices soared 8.41%, and broke out to an all time high. The 10.75 point rise was the biggest ever for crude oil

2) Unemployment figures for last month rose 0.5%. That’s the single biggest increase since 1986 Rates went from 5.00 to 5.50%

3) All major indexes fell about 3.00% (2.96 to 3.13%) in increased and above average volume. The only spark of good news is that stocks had risen @ 2.00% the day before.

Mea Culpa – I sure blew the call for a short term top for oil on Friday. The long term chat of oil prices was/is clearly over extended.

Now even the short term chart is beginning to show signs of going elliptical. This is when prices run up so far so fast that, at least in the short term, they have to fall because there is no one left out there to buy. We might get another day or two of panicked higher oil prices, then we should see a significant fall.

What’s fueling the sharp increase in oil prices?

The underlying long term cause is the fall in supply and the rise in demand. However the short term cause is speculators.

You and I are both speculators in oil. Updates has recommended the ETF for oil USO (Have not learned to link gmail yet so you will have to cut and paste web address for chart). USO is an ETF that tracks oil prices by buying futures.

Here’s how it works. On all commodities like oil corn, oranges etc. you can buy "futures" and hold that product for a period of time because delivery of that product is in the future (say August) So a whole bunch of traders buy and sell what they think oil futures will be in August and actually own a specific amount of that commodity for a limited amount of time. In the end someone accepts delivery of that August oil. (see investopedia.com for more – type in futures)

USO and UNG (natural gas) are ETF’s that will never accept delivery of oil and natural gas, but the ETF is driven totally by speculators. Of course huge amounts of $ from other speculators flood the market outside of these ETF’s.

The good news

On the whole Market Update’s suggested list of ETF’s (and one mutual fund) has held up far better than the US stocks for the beginning of May to now. In some cases the rise has been spectacular, +20% for the month. (USO XME KOL UNG) While the benchmark S&P 500 fell, almost all recommended positions moved higher.

The bad news

Do not expect the next month or so to do as well as the last. As stated before technically oil prices are going elliptical and a pull back is around the corner. Traders should take profits and long term investors in those area that went up 20%+ in the last 5 weeks should take some money off the table.

No one ever went broke taking profits. You can always buy back in at the next dip.

Long term energy is still the place to be. Commodities #2. Cash and gold is still king because the intense volatility due to rising oil is too hare to accurately predict. The single biggest worry is rising energy prices damaging global growth.

As Always Do Your Own Research Before Investing

Bottom Line

Long Term Outlook Cautiously Bearish – High oil prices are holding back potential rallies and unemployment figures for May were a disaster. The chances of a world wide recession and inflation grows as oil prices increase. (Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors).

The question for Wall Street is not whether there will be a recession or not, but how long will it last.

Asset Allocation/ Recommended Sectors (long term) – Buy on dips

* 35% Energy –
Energy rich EWZ, (Brazil) & RSX (Russia) two recommended countries. TRAMX – mutual fund for oil rich Mideast
PBW and GEX (alternative energy).
XLE (energy companies) OIH (oil services) USO (oil prices) UNG (natural gas prices)
KOL (coal companies)
* 40% Cash
* 15% Commodities – MOO Agribusiness, XME (mining & minerals)
* 5% Steel – SLX (Steel)
* 5% Gold – GLD

Chief Strategy – Buy the dips of trending sector in bull markets

Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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June 6, 2008

Market Update – The Truth About War

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , ,

Sorry limited time this AM – No time to format.

The Truth About the War

Finally, after years of Republican stonewalling the Senate’s Intell Report has become public. It is the lead editorial of the NYT. Finally we are getting the facts about of all the propaganda, fabrications and lies that sold the American public on the Iraq war. Last week Scott McCllelen, Bush’s press secretary revealed his insider’s view and now the Senate has published the facts. Most Update readers of are already aware of that the causes of the Iraq war were fabricated propaganda. But the more sources that bring these injustices to light the better it is for our country, democracy, morality and the world.

From the NYT

The report shows that there was no intelligence to support the two most frightening claims Mr. Bush and his vice president used to sell the war: that Iraq was actively developing nuclear weapons and had longstanding ties to terrorist groups. It seems clear that the president and his team knew that that was not true, or should have known it — if they had not ignored dissenting views and telegraphed what answers they were looking for.

Over all, the report makes it clear that top officials, especially Mr. Bush, Mr. Cheney and Defense Secretary Donald Rumsfeld, knew they were not giving a full and honest account of their justifications for going to war.

NYT editorial

Stocks

Everything moved higher. Oil prices gushed higher and stocks exploded to some of the best gains of the year

Obviously something is not right when oil prices rise 4.49% and major stock indexes also explode about 2% higher. You would expect stocks to fall if oil rises and visa versa. Volume was a bit above average for both stocks and oil – so volume did not confirm either move. The big question is which one will continue to go higher?

Reading the tea leaves – Answer – In the short term stocks should go up and oil go down. Oil prices are so extended above their 200 day or 40 week moving average they need to take a breather.

Every technical analyst on the planet knows that oil prices are way over extended. What probably happened yesterday is that a lot of traders (traders as opposed to longterm investors) got caught shorting oil and had to buy to cover their shorts when oil gushed higher. 4.49% is a huge move for oil. There was no major fundamental of story behind the price increase. Best guess is a bunch of major oil speculators colluded to drive oil prices higher and when a resistance level fell everyone was thrown into panic.

Short term it looks like energy related ETF are going to flatten or fall because oil prices are so over extended are way over extended.

NEUTRAL – Long Term Outlook

Barr

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June 5, 2008

Market Update – Jaw to Jaw

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Updates has tried to give you sources and views outside the 5 major companies that run American corporate media and their advertisers that are an echo chamber of right wing politics. The boards of directors of the 5 major media conglomerates are almost exclusively made up of rich, white, right wing men. Updates features sources outside mainstream media. The sources used for the following piece is Slate (internet) and McClatchy (only newspaper chain to oppose war in Iraq when even the NYT parroted the pentagon.)

"It’s Better To Go Jaw to Jaw than War to War."

Barak Obama has been criticized for his willingness to talk with "the enemy". Before Bush we used to conduct diplomacy with an agenda, but without preconditions. It is crucial that we return to the diplomatic path that won the cold war. You are going to hear repeatedly till November elections Clinton, Bush, McCain and other war hawks argue that Barak and taking with your enemy is somehow naive. Below are two excerpt of the exact remarks Obama made. You will notice how these remarks are constantly taken out of context. See whole Slate story here http://www.slate.com/id/2192940/

The notion stems from the Democrats’ CNN-YouTube Debate of July 23, 2007, when a viewer named Steve asked the candidates "whether—in the spirit of Egyptian President Anwar Sadat’s bold trip to Jerusalem—they would be willing to talk with the leaders of Iran, Syria, Venezuela, Cuba, and North Korea "without preconditions" during their first year in office.

Barak has stated has stated he would obviously have an agenda,but sets no preconditions to talks. Here is his exact reply in the debate -

I would [be willing to meet with those leaders], and the reason is this: The notion that somehow not talking to countries is punishment to them—which has been the guiding diplomatic principle of this administration—is ridiculous. … [Ronald Reagan and John Kennedy talked with Soviet leaders because] they understood that we may not trust them, and they may pose an extraordinary threat to us, but we have the obligation to find areas where we can potentially move forward.

McClatchy news service is giving a taste of how Clinton is going to be used by Republican’s against Obama on this crucial issue of foreign policy. See Obama’s Clinton Problem Already Surfaces in Republican Add at http://www.mcclatchydc.com/homepage/story/39811.html

Index % Change Volume

Dow -0.10% up
NASDQ +0.91% flat
S&P500 -0.03% down
Russell2000 +0.64% –

US Markets

Major US stock indexes closed mixed as oil prices continued to fall. Volume continued to be heavy, which is a bit surprising because in the summer volume usually declines. This indicates that there is a kind of war going on between the major players over the direction of the markets this summer. The increased volume is the casualties on both sides. The Bulls major ally right now is the fact that oil prices have dropped almost 10% from their high. The stock market bulls and bears see the 50 day moving average of oil as the price barrier or support level that oil must fall through for the market to move ahead.

Notice that both the NASDQ and Russell 2000 seem to be leading the other two major indexes. This is a good sign for bulls because these two indexes usually lead and charge.

Chart of the benchmark S&P 500

Chart of oil prices (WTIC)

Recommended Positions (ETFs)

Short Term Traders

If you look at your positions daily you’re a short term trader. Of course there are traders who watch stocks minute by minute.

Updates features a strategy of buying the dips of a trending sector or ETF. What you do is to sell when the ETF is climbing after it reaches a new high. and buy when it dips back down to a major support level or 5 to 10%. There are a zillion criteria to use to define a dip from Bollinger bands to MACD. Look these terms upon Investopedia.com if you do not understand them. Updates keeps it simple and uses the 50 moving average of a stock as a dip criteria.

Long Term Investors

If you look at your positions weekly you are a long term investor. Note well the term investor vs. trader as in short term trader. If you do not look weekly you are making a big mistake, because its your money.

The time to sell is after a long term run or the fundamentals have broken down and the sector is no longer viable. What is suggested is that you nibble or add to a position in a trending sector when it falls 10+% or drops to, or below its 50, or close to its 200 day moving average. At this point you nibble or add to your position.

Hopefully the sectors (ETF) chosen is in a multi year bull market. Example EEM (emerging markets) was a preferred position of Market Updates for years because of the mega trend of globalization. EEM was dropped in favor of the energy rich countries early this year because of peak oil or the supply/demand imbalance in oil. Some emerging markets have little energy resources and will do worse than those that have energy resources. (EWZ and RSX)

Technically there are signs of a long term breakdown. But this will be covered in another update.

Bottom Line

Long Term Outlook NEUTRAL – High oil prices are negatively impacting US equities (Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors).
The question for Wall Street is not whether there will be a recession or not, but how long will it last.

Asset Allocation/ Recommended Sectors (long term) – Buy on dips

* 35% Energy –
Energy rich EWZ, (Brazil) & RSX (Russia) two recommended countries. TRAMX – mutual fund for oil rich Mideast
PBW and GEX (alternative energy).
XLE (energy companies) OIH (oil services) USO (oil prices) UNG (natural gas prices)
KOL (coal companies)

* 40% Cash
* 15% Commodities – MOO Agribusiness, XME (mining & minerals)
* 5% Steel – SLX (Steel)
* 5% GLD
Chief Strategy – Buy the dips of trending sector in bull markets
Changes to Bottom Line Section Bolded .

As Always Do Your Own Research Before Investing

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