What’s Up? Mullah’s at war – Split in Shia Muslim Orthodoxy – Obama’s financial Fix – Change in Market Outlook & Why – Iran want’s nukes – IAEC’s #1 – The dollar, BDI & other forecasting tools – Reading the Tea Leaves and more.

Major Develops in Iran

photo of yesterday’s opposition demonstration -Huffington Post

List of Major Devlopments

• The “Assembly of Experts” Top Mullahs in Iran that choose the Supreme Leader will hold an “Emergency Meeting”
• Massive demonstration again yesterday (see photo) More scheduled
  
• Continued violence/deaths and signs that some elements of Army are supporting/protecting demonstrators.
• The most Senior Ayatollah is backing the opposition.
  
• It’s like the cardinals of the Roman Catholic Church split into two large different warring faction. Perhaps like when Martin Luther and the Protestant reformation split Christianity centuries ago. Remember this is the Shia branch of Islam.

The three key sources continue to be The Huffington Post’s live blog . Andrew Sullivan’s blog and the BBC .  News breaks there well before cabal or networks. The first two are 24 hours a day bringing live twitters and videos.

One Caution – Like many I’ve been caught up in the “fascist” oppression of the Iranian people. (one of your posts – “One suggestion. Instead of calling Ahmadinejad a holocaust denier, why not label him a fascist beast who would kill anyone from Israel to his own people to rule the world.” )

What if the opposition wins and still wants nuclear weapons? How different are they from their predecessors?

Iran wants nukes – Mohammed ElBaradei – Nobel Prize Winning head of International Atomic Energy Commission.

New Financial Rules

Obama is announcing the new financial rules and regulations today. Lots of it has been already leaked. This is just a start, but at first blush it looks like they are weaker than many expected . NYT’s lead story on this.  Basically think economist Robert Reich has clearly defined the changes we need. “The Three Changes We Need” is his Tuesday, June 16th editorial.

Sorry, have not spent enough time on analysis and time is short (more tomorrow)

This is just the start – Congress is going to debate this over the summer.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Markets took a less sever, but still significant hit yesterday. Again the volume was below average. (The NASDQ was close to average) Volume is NOT confirm the breakout of the trading pattern over two weeks ago and volume has not confirmed the move back into that trading patten. The benchmark SPX (S&P 500) closed at 911 and has several significant support levels around 900. (see charts)

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down-stocks and oil prices go up and visa versa. After two significant days where the dollar was up a total of over 2% it fell -0.58% yesterday The dollar broke to higher through a resistance level (see chart). Investors 411 mantra is Dollar rallies = Oil & Stock prices fall. Yesterday was one of the rare days this did NOT happen.

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. -1.73% in increased but weak volume

WTIC – Oil prices down -0.21% yesterday. Closed at $71.15

BDI - The Baltic Dry Index measures the flow of goods (world trade). 24 up days in a row, 6 down day in a row, & now a 4 day rally. Bullish sign.

Reading the Tea Leaves

Monday’s lead statement - Expect a tired low volume market to retreat this week . This technically still looks like a market that just got too over extended – went up too far too fast and needs a breather.

The rising dollar is technically the most important influence on stocks. The correlation between the dollar rising and stocks doing the opposite is perhaps greater than 80% over the last few months.

Because we have fallen back into the old consolidation pattern, technically we have had a failed or false breakout. Therefore the Long Term Outlook is changed back to NEUTRAL

You have a Grand Central Station of support levels all converging around SPX 900. SPX now at 911. Then the last line in the sand the May low @875 Taking out  these levels would be a bearish. If 900 falls expect 870/875.

NB – Volume is confirming Nothing. So it looks like the support levels will hold. View this as an opportunity to buy (especially for traders) Longer Term investors IFN (India)  is beginning to look like a buy the dip opportunity. Strong volume is the enemy of bulls.

CAUTION – “This is not your parents buy and hold forever market” We have moved away from the edge of the financial cliff, but the long term structural problems still exist in the world’s # 1 economy and fixing those is going to hurt economically.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

What’s UP? - Battle for the soul of the Shia branch of Islam continues in Iran between forces that back the militants and those that back change. Going Green like leading blog in support of the millions of protestors for greater freedom in Iran – Reactions from outside self centered USA media – Battling Mullahs-  The dollar rises = stocks fall – major meltdown – why- and more

Battling Mullah’s

Protester standing for freedom in Iran

from http://andrewsullivan.theatlantic.com/

Following the battle for the soul or future of the Shia branch of Islam is critical to our future.

The militant faction is the #1 backers of  Hezbollah, Hamas and others taking a more violent approach. al Quaeda and others radicals are Sunni’s not Shia.  Therefore, Arab Sunni news outlets like al Jazeera are reporting on the violent Persian Shia revolution in Iran. No love lost between Shia and Sunni’s.

The Asian Times is the #1 English news outlet in Asia. Pepe Escobar is arguably their most outstanding reporter.  The American media imprints our values on their reporting. If you want the REAL story that of the battle between religious mullahs in Iran see this LINK Escobar – “This is no less than “1979 all over again.” Those of you who are too young to remember the 1979 Iranian revolution should definitely read this editorial.

The biggest danger we pose to those who are dying and demonstrating for freedom is to over react. Already Ahmadinejad and state controlled TV is fear mongering FOX TV video quotes and claiming that the protestors are tools of the Americans. I’m sure FOX news means well, but they and anyone who gives Ahmadinejad an excuse to fear monger the freedom fighters as tools of  outsiders is hurting the cause.

Obama has said that “the whole world is watching” The real battle is between the mullahs. There is a huge split that has torn the Shia branch of Islam in two.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Yesterday’s lead statement – Breakout is not an accurate description of what’s happened to the market.  We have “INCHED FORWARD”  There is no real conviction in the volume behind the move higher. Yes markets have remained above “breakout levels” for about a week, but it seems like a very hesitant bunch of investors waiting for a massive counter attack.

The “attack” came. US and most world markets fell over 2%. However the attack was NOT massive. Volume was well below average. Volume did NOT confirm the fall. This is a strong indication that the meltdown was technical – Markets had rallied too far too fast and some sort of technical correction is happening. This also does not mean stocks will move lower, but the fundamental events are probably not behind yesterday’s fall.

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa. Dollar rallied significantly again +0.97% on Friday & +1.18% on Monday. The dollar broke to higher through a resistance level (see chart).  Investors 411 mantra is Dollar rallies = Oil & Stock prices fall

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. -2.56% in increased but weak volume Friday

WTIC – Oil prices down -1.98% yesterday

BDI - The Baltic Dry Index measures the flow of goods (world trade). This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) 24 up days in a row, 6 down day in a row, & now a 3 day rally. Bullish sign.

Reading the Tea Leaves

Yesterday’s lead statement t - Expect a tired low volume market to retreat this week .

The rising dollar is fundamentally the most important influence on stocks. The dollar falls because we are just printing money/paper at a rapid rate so the dollar becomes less valuable. However we are a relatively stable country and perhaps the Green Revolution in Iran reminds investors that even though we are rolling out money like toilet paper to fix our economic mistakes, we are a relatively stable country to invest in.

The above is an oversimplification – Obviously there is a lot more going on that moves the dollar. Bottom Line – The dollar has a heavy counter influence on the movement of stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Many Thanks to posts from d , E Wanapat, & JB on how to follow the coup/revolution in Iran. Great stuff! “Neither Free or Real” from the NYT – Intent & Twitter break news while networks/cable sleep  Day #3 of Coup in Iran – Important Summers/Geithner editorial – Outlook for stocks and more

Dorm Room Door in Iran’s Ishfan Technical University

“Neither Free or Real”

The NYT headline editorial entitled “Neither Free or Real” about the elections in Iran.

It is essential that Obama recognize the plight of the young revolutionaries in Iran. This view is held by most from the far right Weekly Standard to all the liberal blogs following the “green revolution.“

Huge kudos and Thanks to those of you who listed sites that readers could go to to witness the videos of the violence, brutality and oppression  by the dictators in Iran . You can follow what’s happening live by going to those sites or on suggested Twitter sites. The videos are in many cases horrific and brutal. See posts on left hand side of blog.

Brutalized Iranian protestor – Both photos from Andrew Sullivan’s blog

Some Significant Points

• There is a huge reform movement among the Iraq people who genuinely desire freedom. This is a majority of the Iranians. Unfortunately the dictators have all the guns.
• This coup by holocaust denying dictator Ahmadinejad (fronting for militant Iranian Mullahs) was well planed down to the details of the Interior ministry surround the place the count the votes before elections were closed.
• News coverage by networks and cable TV is slow and out of focus compared to the internet. While watching the brutality happen CNN’s Larry King was asking Ahmadinejad questions about his kids.
• Most likely, in the short term, Iran is going to move in the direction of N. Korea. Editorial analysis here
• Lots of decent coverage on internet that you all sent in. Perhaps the best is Andrew Sullivan’s blog The Daily Dish He writes for the Atlantic magazine. Their weekend wrap up of what happened can be found here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Breakout is not an accurate description of what’s happened to the market.  We have “INCHED FORWARD”  There is no real conviction in the volume behind the move higher. Yes markets have remained above “breakout levels” for about a week, but it seems like a very hesitant bunch of investors waiting for a massive counter attack.

The situation in Iran is not going to help markets. Asia & Europe down 2% as I write

Obama is going to lay out his concepts of regulations on financial markets and that also is  probably not going to be bullish for the stocks. This happens on Wednesday. Obviously some kind of regulation is needed to keep the greed of unregulated free markets from self destruction.

Larry Summers & Tim Geithner have a  must read for investors in the Washington Post entitled “A New Financial Foundation” Geithner and Summers have often been treated negatively in this blog, but the outline in decent. It makes the Fed the systemic risk regulator & all derivatives are “subject to” ( not – will be) regulations.   The devil is in the details.

This is all going to be a huge mess in front of congress. Lots more as this gets worked out this summer.

Reading the Tea Leaves

Expect a tired low volume market to retreat this week.

The battle over regulations on a unsupervised shadow banks will probably halt any short term rally.  The medicine is going to taste bad, but unless confidence in the financial system is restored we have no real long term stabile economic future. Right now we (the taxpayers) are socializing the risk while they rap the gains.

Technically – The BDI is bullish, and is a good long term indicator of the trend. How the dollar moves is now the most critical factor behind current     stock movement. Dollar rising = stocks & oil prices dropping.  Another reason to expect a down week.

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa. Dollar is up in pre market rally and up a significant +0.97% Friday

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. + 0,64% in weak volume Friday

WTIC – Oil prices down -0.99% Friday

BDI - The Baltic Dry Index measures the flow of goods (world trade). Stated before -  This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) 24 up days in a row, 6 down day in a row, & now 2 day rally. Bullish sign.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Holocaust denier Ahmadinejan and the militants have launched a Coup and stolen the elections in Iran. Widespread protests and violence

Democracy Hopes

 Dictators Reply

The elections in Iran were a fraud and the militants are using the elections as cover for a coup.

The following sources are much more complete than anything I could say.

1. Professor Cole (Informed Comment Blog) is an expert in this field and outlined top 6 reasons elections were stolen on Saturday post. In his Sunday post he concludes/believes we’ve ” been had by a hard line constituency of at most 20% of the country, who claim to be the only true heirs of the Iranian revolution, and who control which ballots see the light of day. “
2. Laura Secor’s (experienced inside Iran reporter from within country) editorial “Iran’s Stolen Elections” in the New Yorker
3. Gary Sick – Mid East expert and served under 3 presidents on US National Security Council – In Talking Points Memo blog – editorial - “Iran’s Political Coup.”
4. Nate Silver – Perhaps the best poll analyst out there runs the ultra respected FiveThirtyEight polling blog. His editorial headline “Rigged Iranian Election is Flawed.”

Beyond the violence, foreign reporters have been asked to leave, internet cut, cell phone cut, opposition figures arrested and more.

As Jaun Cole points out the standard procedure in an Iran election was supposed to be a three day wait to investigate claims of fraud before the Supreme (religious) leader proclaimed victory. Instead results were immediately authorized.

Barr

WHAT’S UP? – Iran’s Elections – The “Obama Effect” – The “Green Revolution” – The Big Hate – Paul Krugman – Home grown Terrorist and feeding their hate.

Iran

“Green Revolution” supporter – Photo by AFP

Major elections today in Iran.

Already the USA is taking advantage of the Lebanon victory (see last few Investor’s411) and US diplomats are flooding into Syria and Lebanon. Winning means nothing unless you capitalize on it.

The Wild card in Iran Election: Obama by Christian Science Monitor’s Howard La Franchi lists some of the changes. It is one thing for the “Obama Effect” (Link to polling results on Obama effect ) to influence an election in a more liberal Lebanon and quite another to influence an election in hard line Iran. A sitting president has never lost a bid for a second term and Ahmadinejad is heavily favored.

You can read a lot more on Iran elections at Professor Cole’s site , including The Iranian American’s voting in these elections. Iran is a quasi democracy and the real leader is the head Ayatollah.

Our hope here is that there is a strong vocal alternative to Ahmadinejad in the “Green Revolution.” They probably will not win, but it consists mostly of younger Iranians and that’s the future.

The Big Hate

Nobel Prize winner, Paul Krugman editorial in today’s NYT is titled The Big Hate To his credit he differentiates between right wing haters in the media and those who refuse to go along with “The Big Hate.” He concludes

“Yes, the worst terrorist attack in our history was perpetrated by a foreign conspiracy. But the second worst, the Oklahoma City bombing, was perpetrated by an all-American lunatic. Politicians and media organizations wind up such people at their, and our, peril.”

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

A 1 to 2% rally melted into the close. Not a good short term technical sign. Volume still below average except for the NASDQ. This indicates that the NASDQ (mostly tech stock) still has the power of leadership position.  We are at yearly highs for most major indexes.

End of the quarter buying will begin to take place.  Many of the major players are waiting (a bit like Investors411) to buy the dip. Mutual funds and others would like to show off positions in some good performing stocks. Therefore, the end of the quarter (2nd 1/4 ends last day of June) is often bullish.  But even more so because we have rallied.

$USD – Repeat – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa. Stocks went up so guess which way the dollar went.  Actually the dollar going down is leading stocks higher. It’s the horse and stocks are the cart.

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. Financials had been leading the 2+ month long rally. Techs seem to have taken over leadership role, but hard to see any sustained move higher without financials. Yesterday financials down +0.81 %

WTIC - Oil prices exploded higher +3.01 to $73.90 Chart starting to look like it is going elliptical. Fundamentally the talking heads/ experts see no reason for oil prices to be so high.

BDI - The Baltic Dry Index measures the flow of goods (world trade). Stated before -  This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) 24 up days in a row, 6 down day in a row, & yesterday a rally.  Bullish sign.

Reading The Tea Leaves

From yesterday – Right now, markets seem to have over extended themselves and a 10% correction would be good in the long run for stocks . Trading is very light except for the NASDQ which is near average. (Summer trading is usually light)

Many US market is showing signs of stalling out. The breakouts do not seem to be getting any real traction. Watch the Dollar and the BDI.

Position s – (See positions section of blog for more)

• FXI – our major position rose +2.43% yesterday. BREAKOUT to new high, but volume did not confirm the move. For the second day in a row the FXI was actually up 2% more and then pulled back.  This is a weak breakout.
• GEX – alternative energy - +0.38 yesterday. Dollar/Oil trade influences this. If oil goes up so doe GEX.
• PBW – We are going to change from GEX to the other major ETF that does alternative energy PBW- chart This alternative energy ETF is more liquid and its also outperforming GEX. We have been in PBW in past years and went with GEX because it outperformed then. This will be a slow transition over the next month. Already sold 1/2 position in GEX and will add that $ to PBW on a small (5%) dip.  Then sell other 1/2 and wait for a dip.
• The HEDGE – Little change again.  You can get a rough idea how this position does by looking at the difference between the NSDQ and S&P 500 – (-0.11% and multiplying it by 2) instead of looking up SDS and QLD

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Another terrorist attack in the USA – Rachel Maddow editorial on terrorism – O’ Reilly,  Boss Limbaugh, left and right wing anti Semitism, hate groups and those who water them – Obama as the #1 target. – Reading Stock tea Leaves – Change in GEX position – and more.

Terrorism in the USA

Rachel Maddow Editorial Linked Below

Photo – Virginia Sherwood for NBC

• Gun loving terrorists ambush/kill 3 Pittsburgh cops. They were afraid Obama may limit gun rights.
• Abortion Doctor killed by pro life terrorist at his church
• Army recruiter killed by newly converted Muslim Terrorist
• Latest headline – Security guard a holocaust museum killed by anti Semitic, right wing, anti government, anti black terrorist, who believed Obama was not born in the USA.

These are the last 4 major terrorist incidents involving loss of life that American Corporate media has splashed on the front pages.  Of course they missed all the deaths/terrorism due to domestic violence.  This mostly involves killing women, who may have it better here than in many other countries, but are still second class citizens in the USA.

Many in the USA are part of a violent, gun loving culture that preaches hate, loves it torture, & and is conditioned by fear mongering. Boss Limbaugh (Talk show host Rush Limbaugh) according to a recent USA Today poll is #1 person on the list of the leaders of the Republican Party (To be fair a majority thought the party leaderless) Limbaugh preaches that Obama is more dangerous that al Quaeda.

Another influential hate monger Bill O’Reilly repeatedly likened the deceased abortion doctor to Nazi doctors and called him “Baby killer.”  Even members of the far the left wing in this country has started using anti Semitic statements referring to all Jews. While its hard to prove a direct link, People like Limbaugh,  O’Reilly and others  water the ground of this hatred.

Is the threat of right wing extremism getting worse? Economic turmoil and our first black president have further enraged the hate. Rachel Maddow has an excellent editorial on her MSNBC show last night.

Obviously, the major target of all these haters is Barak Obama.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

$USD – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa.

XLF - The ETF that tracks financials (mostly shadow banks ) have been flat for three weeks. Financials has been the leading sector and as financials go so go the markets. Financials are lagging Techs. Yesterday financials down -1 .52%

WTIC - Oil prices closed up +1.89 to $71.33 As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade). Stated before -  This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) Down for sixth day in a row, but the rate of decline is slowing. This follows 24 days of going up. So extended moves the normal this index.

Reading The Tea Leaves

Volume has Never really confirmed the breakout we had last week. Even though staying above breakout levels is a confirmation, one would really like to see an increased above average 1%+ gain for major US indexes.  We keep bumping up against another breakout level and failing.

Right now, markets seem to have over extended themselves and a 10% correction would be good in the long run for stocks . Trading is very light except for the NASDQ which is near average. (Summer trading is usually light)

Conclusion – Very light trading – This is a traders market and traders move fast.  Still expect and hope for a slight pull back or consolidation.  As stated before looking for entry points/dips to buy back into  some or all of the following –  QLD, EWZ, IFN and PBW (see GEX below) –

China, India & Brazil are growing and they are leading the world out of the recession. The USA has some “green-shoots” of hope, but there are big long term problems here.

Positions – (See positions section of blog for more)

• FXI – our major position here rose +2.89% yesterday. This is the third failed attempt at a breakout. FXI was actually up 2=% more almost at a new high and pulled back.  It looks like FXI has formed a short term top.
• GEX – alternative energy - +0.77 yesterday. GEX is trading at or near anew high for the year. We are going to change to the other major ETF that does alternative energy PBW . This alternative energy ETF is more liquid but its also outperforming GEX. We have been in PBW in past years and went with GEX because it outperformed. This will be a slow transition over the next month. Already sold 1/2 position in GEX and will add that $ to PBW on a small (5%) dip.  Then sell other 1/2 and wait for a dip.
• The HEDGE – Almost no change. You can get a rough idea how this position does by looking at the difference between the NSDQ and S&P 500 – (-0.03% and multiplying it by 2) instead of looking up SDS and QLD

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING G !

WHAT’S UP? – Ballots over Bullets – Oprah, that’s right Oprah Winfrey – Healthcare vs. for profit illness care – Our Positions – The new Hedge is starting out with positive results – FXI, QLD, EWZ & IFN

Ballots Over Bullets

Tom Friedman has a Ballots Over Bullets editorial in today’s NYT. He echos what Investors411 has described as the results of Obama’s speech, and the relationship to the Lebanon elections. Like the economy, there are a few green shoots of hope in the Mid East. They may get crushed, but at least we’re not locked into the "you’re either with us or against us" mantra.

Oprah and HealthCare

Never thought you’d see Oprah Winfrey in Ivestors411. She is one hell of a business women. But Ophra also is setting a standard in health care. It may not be perfect, but what her show deals with is heath care and what we in the USA deal with is a for profit illness care .

Oprah promotes "wellness,  prevention, and alternative medicine" far more than our conservative, for profit medial establishment. Our mainstream medical establishment is addicted to drugs, surgery, and pills  like Cheney is addicted to bullets, hate and torture. There are alternatives that work.

Dr. Deepak Chopra , who I had the privilege of spending some time with decades ago, is now one of the loudest voices for change in the medical establishment. Take a look at his "Mainstream Medicine and the Oprah Factor"

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Remember – Forecasting what markets will do is all about how potential investors feel about the  fundamental aspects of stocks and the economy. Technicals (looking at chart patterns) gives us some idea of where the traffic signals are. It all about predicting attitude.

NASDQ is again separated from the pack.  The distinction may look small, but over time is has and hopefully will continue (see our "hedge" position) to outperform.

Volume was below average. No confirmation of a price move.

Reading The Tea Leaves

• Oil prices now over $70 a barrel - WTIC
• The BDI (measures world trade) has fallen 5 days in a row
• Interest rates of 30 year fixed mortgages have risen over 0.50% in last month.
• Chrysler’s bankruptcy deal and possible GM’s could get bogged down in supreme court. = Way more unemployment and foreclosures

There is fundamental long term trouble brewing just under the surface. The above factors is they continue in the same direction combined could crush a budding economic recovery.

What’s moving this market is a falling dollar. Russia did/said something this AM to cause the dollar to fall further – So stocks and oil prices should move higher this AM.

Position s – (See positions section of blog for more)

• The Hedge – Q LD went up +1.68% and SDS went down -0.54 %. This means our latest and second largest position made +1.24% yesterday.
• FXI – China -1,25% yesterday.  #1 position has dramatically clobbered the benchmark SPX this year. This ETF is falling in decreased volume and a new buying opportunity is/may arise.
• Looking to buy  into IFN (India) EWZ (Brazil) on dips.
• Looking to buy back into QLD (a separate position from "the Hedge")

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTIN G !

What’s Up – Sorry overslept this AM – Abbreviated update & having technical problems – Iran – Elections – North Korea – Mortgage rates – No change outlook

Iran

Elections in Iran are generating a lot of buzz within the country and the world. Ahmadinejad, lost a chunk of support when Hezbolah (his supported group) lost in Lebanon, The “green revolution” or major opposition candidate would take a somewhat more cooperative stance toward the rest of the world. His name is Mousavi. Photo and editorial from The Economist

North Korea

Both the left wing and right wing have it wrong. North Korea is not going to be sweet talked or bullied into anything. They realize the USA is in a weak position just like it was in the Vietnam war. We are still up to our necks in the quicksand with the Muslim world (Palestine, Iraq, Iran, Pakistan and Afghanistan, Therefore they feel they can get away with whatever they want.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Biggest problem out there right now is rising mortgage prices. Scroll down at following site & you will see data. showing interest rates for 30 year fixed mortgages going from 4.96 to 5.48% in May.

No real changes from Monday’s outlook. BDI continued to fall.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

WHAT’S UP? – Is Obama’s charisma and message starting to make a difference? – Major Economic caution – The Hedge – Reading the Tea Leaves

The Obama Effect?

Just maybe Obama’s charisma and message is making a difference. The elections in Lebanon may be the first example of this in foreign policy.

The more radical, pro Syria & Iran Hezbollah led coalition was, according to many, supposed to win. But the US backed side won about 68 to 57 with 3 independents (sources differ sightly on this result) Lots of outside money/influence by Syria & Iran vs Saudi Arabia & USA. 

Mideast expert/commentator Jaun Cole and Washington Post on this.  Now if only heavily favored Ahmadinejad would loose the elections in Iran next week.

The AP is is also carrying a story directly on Obama’s Cairo speech having a positive impact.

Major Caution on Economics

So far stock have risen on a charismatic president, hope, a few “green shoots” of economic news, truck loads of money shoveled at shadow banks/insurance companies, a tax cut, stimulus packages here and abroad. None of the problems that created this problem have been addressed is a substantive way. Too big to fail, transparency, and how to stop creating Shadow Banks have failed to be addressed. 

A point by point NYT article “We’re Still on the Brink.”

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

Major indexes closed mixed on Friday and we had a bullish week.

Good Unemployment figures should have moved stocks higher. They didn’t. How markets react to news is a good forecasting tool. – In this case little positive reaction to an improving jobs number is NOT good for stocks.

Credit Markets are tightening  over the last week or two.  Major debate between two economic camps over why this is happening.

• Side one – The economy is recovering
• Side two – Inflation is blooming.

Don’t know whose right. Perhaps both.

The Bottom Line - Interest rates are rising. That’s NOT good for housing prices and or stocks.

$USD - The Dollars fall significantly impacts the rise in oil prices (oil , for the most part is traded in dollars) Dollar rose strongly yesterday +1.63% The falling dollar has been inversely proportional to a rising stock market over the last few months. If this keeps up it may impact stocks negatively

XLF - The ETF that tracks financials (mostly shadow banks ) fell -0.88%. Unlike major stock indexes the XLF has not broken out of its consolidation trading pattern.

WTIC - Oil prices fell - 0.45% to $68.54 –  As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade).  After what seems like almost a month of consecutive up days in a row the BDI has fallen sharply two days in a row. It is typical for this index to go many days in one direction. The reversal is not good for bulls. After @24 up days in a row, you may see this start to negatively impact stocks after about 5 down days. 

Reading The Tea Leaves  

From Friday – The longer we stay above breakout levels, the better it is for the bulls. Lack of volume is a concern and we have to watch the BDI to see if the reversal grows. Until we fall back into the consolidation pattern the new CAUTIOUSLY BULLISH outlook holds.

For about a month Monday has been the big bullish day of he week for stocks. A break in this trend would be technically bearish.

If the short term bearish reversals in the BDI and the Dollar continue to build we could see stock markets slip back into their consolidation pattern. Credit markets have tightened.  Add rising interest rates to this and at least for the short term it looks like the bears are back.

Expecting a down week.

The Hedge - New major position. See Positions section of blog. Also looking for entries/dips to EWZ (Brazil) & IFN (India)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

“The significant problems we face today cannot be solved at the same level of thinking we were at when we created them.

Albert Einstein

Barack Obama addressed (video & Transcript) the Muslim world yesterday in Cairo Egypt. He earned a standing ovation from the crowd of 2500 many with “tears in their eyes” (al Jazeera report) and no one threw shoes.

If you think in one dimensional fundamentalist terms like Osama Bin Laden and others you hated the speech. True fundamentalists everywhere believe your “either with us or against us.” In fact, Obama did not even once dignify the radical extremists  by  mention the word “terrorist” in his address. Instead he mentioned the word “peace 29 times.

“I have come here,to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect; and one based upon the truth that America and Islam are not exclusive, and need not be in competition. Instead, they overlap, and share common principles — principles of justice and progress; tolerance and the dignity of all human beings.”

Yesterday the USA started building a bridge or, for those old enough to remember, you might call it introducing”detente.”  Extremists need growing hate to swell their numbers. Obama took that away.  al Jazeera, the #1 media outlet in the Arab world, editorialized Obama’s speech “was more than just soaring oratory and soothing words.”   This was just one small speech of a man, but perhaps one giant step for mankind.

For more see David Levy’s 10 Comments, or David Corn’s Obama’s Tough Tour de Force

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

The NASDQ was the only index that had confirming (the price move) above average volume. Volume is still not confirming the price move for both the Dow and the S&P 500.

8:30 AM EST Unemployment Numbers for May -345,000 Much less than expected and a 154,000 drop from previous month. Last two months revised down @80,000 and unemployment rate at 9.4% Wow! Blow out numbers for stocks.

$USD - The Dollars fall significantly impacts the rise in oil prices (oil , for the most part is traded in dollars) The fall of the dollar influences a  lot more (stuff for future posts)

XLF - The ETF that tracks financials (mostly shadow banks ) rose +3.58%. 

WTIC - Oil prices rose +4.07% to $68.81 – A new high for the year. As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade).  After what seems like almost a month of consecutive up days in a row the BDI fell yesterday.  A one day drop from 4,291 to 4080 in itself is not significant, but a 5 day trend to the downside would be. 

Reading The Tea Leaves -  

The longer we stay above breakout levels, the better it is for the bulls. Lack of volume is a concern and we have to watch the BDI to see if the reversal grows. Until we fall back into the consolidation pattern the new CAUTIOUSLY BULLISH outlook holds.

The Hedge

This is both a new concept and a new position for Investors 411. It’s really not that complicated and does not involve you buying puts and calls. It’s simple and if it works you could money no matter if the market goes up or down.

Basically your investment is that the NASDQ 100 will outperform the S&P 500.  If markets rise the NASDQ will go up faster (it did today by +0.17% – see above chart) If the markets fall, hopefully the NASDQ will fall less.

Reasoning – A large part of the top 100 NSDQ are well capitalized tech companies and tech usually outperforms the S&P in up markets. The S&P 500 contains a lot of insurance and financials that already have had a massive run. In the future there will be a battle over how to regulate these companies. This should negatively impact these stocks. 

Technically this hedge has been working over the last two months.

Here’s the trade – Buy equal dollar amounts of the following two issues.

QLD -Does @2x long what the NASDQ 100 does (ProShares Ultra ETF of QQQ)

SDS – Does @2x short what the S&P 500 does (ProShares Ultra Short S&P 500)

Because the NASDQ outperformed the S &P by 0.17% this hedge probably made @0.34% yesterday. Caution there is rarely a 100% correlation to the the two major indexes do. Basically it aproximates.

Either QLD or SDS is going to make money over time the other will loose. You probably will not make as much $ as you will in going all long or all short. But my read of the tea leaves is this stands a good chance of being a winner,  I’m personally committing @15+% of portfolio to this hedge.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !