Sometimes what life is about is wanting More Cowbell

Thanks to HG for the clip. You can see a longer than 44 second version at the above link from SNL.

The Black Boxes

Investors411 has been beating the drums over the control Black Box Entities have over your money.

The Will Ferrell link was short, simple  and funny. This link is long, technical and boring.

But if you are at all invested in stocks or concerned about market regulations  you should skim/read this piece about the High Frequency Trading that black box entities use from Zero Hedge by Tyler Durden

Black box traders have rewritten the whole concept of investing. Money quotes -

• “can clearly demonstrate that HFT is having an increasingly large impact on the microstructure of equity trading dynamics.
• Values which were once only present on the orders of several hours or days are now commonplace in the timescale of  seconds or minutes.”

Bottom Line – Competing with the Black Boxes is impossible for the ordinary trader/investor. They win. However, because they are so big they leave tracks. The problem is before the whales (big investment entities) used to move slow and the black boxes move fast. When markets crash again there will be a HUGE investigation into this kind of trading. There should be now.

I’ve tried to see some patterns that the folks who control these black boxes use. Examples – the dollar & the MO seem to have a high correlation with the majority of their algorithms. But not yet sure that these forecasting tool will work as well as in the past. Even Black Box Traders can’t ignor long term fundamentals forever.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week (revised a little) Earnings Season begins this week. - How markets react to news has usually been the key. If a stock shrugs and goes nowhere on good earnings news you know there’s trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

Caution Black box traders that make up 50% (high volume days) to 80% (low volume days) of all trades seem to follow their own market technicals, and often eliminated volume as a major factor in price moves for indexes & sectors.

Volume rose on the AA earnings news, but was sill below average. This shows a few more traders/investors did buy. = Bullish

Intel computer like last quarter had an outstanding earnings report. Shares of the mother of all chip stocks were up +8% in pre market trading. = Bullish

Fundamentally it comes down to who do you believe – Intel says the worldwide recession is over especially in China and emerging markets and the BDI says we are falling into a double dip or extended recession especially in China and emerging markets. = ??????

Significant Indexes-

• McClellan Oscillator (MO) rose dramatically to +65.41[+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. The Black Boxes have not allowed the MO to rise above 80 since 3/09 = Bearish
• US Dollar –  The dollar fell -0.67% yesterday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. This inverse relationship is part of their algorithmic system. For stocks = Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China.) BDI is in free fall from a high of @4200 to 1790 Monday. This is a huge -57% drop in 7+ weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -2.72% yesterday. You have to go back to April of 2009 to find a lower BDI. Fundamentally this is very BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

I will be nibbling on an ETF(s) that Shorts the market today on a rally in stocks.

Hope to buy as S&P 500 rallies to resistance levels 1105, better 1112 or best @ 1125 (June high) S&P closed at 1095.  Probably use SDS. (-200% what the S&P 500 does) I will be adding ETF that short 300% when/if the market moves higher.  See yesterday’s Investors411 for options.

Logic – Intel & BDI are presenting two different fundamental pictures of world growth. You could write volumes on all the fundamental factors. The bottom line is that Black Boxes that have taken control over US markets. They have sold when the the MO got up to 80 four times this year. That’s a pretty strong resistance level.

Perhaps zillions of fresh investors will now come off the sidelines and take control. Some will, but my read the tea leaves is any rally will get sold into.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Not Fit for Democracy

It seems that our brains are hardwired against democracy. “It’s one of the great assumptions underlying modern democracy that an informed citizenry is preferable to an uninformed one” A truly fascinating article in the Boston Globe about how the mind works by Joe Keohane concludes-

When misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs

This is why appeals to emotionalism, hatred and fear  in politics and with media sources that the moneyed class own works so well. Rush Limbaugh, Glenn Beck, Fox news, the Tea Party Patriots, Sarah Palin etc. all embrace this emotional bias and hatred. They keep pounding on it day after day. 20 years ago news casts used to report and analyze facts. Times have certainly changed. (See Popeye in comment section of blog)

Now It Gets Interesting

It seems that shadow bank lobbyist were able to to gut or seriously water down the Volker Rule, The Lincoln Derivative amendment and almost all of meaningful bank reform, but they forgot or overlooked the Kanjorski Amendment. I never heard of this amendment before either, but Simon Johnson has – “In essence, Kanjorski proposed that a group of 10 federal regulators be given the explicit power to break up big financial firms when they pose systemic risk.”

Now the fun begins –  two Republicans have said they would vote for the bill two democrats against – Senator Feingold (D) does not think it does enough.  The bill does contain a consumer protection agency. Imagine that – something to protect you and me the consumer. More

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. – How markets react to news Will be key. If a stock shrugs and goes nowhere on good earnings news you know theirs trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

Pathetic volume  & flat market. = Neutral

Alcoa (AA) reported last night and slightly beat expectations – How the market reacts to this news is VERY important. Are slightly better than expected earnings built into stock prices? Will find out today with AA. Futures trding up = Bullish

A downgrade of Portugal’s debt did not hurt stocks yesterday – Bad news not hurting stocks shows that it is already built into market prices or expected by investors. = Bullish

The MO (see below) fell 20+ points yesterday. This gives bulls between 30 and 50 points to move higher on the MO before encountering resistance at +60 to +80. Translation another 2 to 4% move higher in the benchmark S&P 500 s possible before resistance is encountered.

Significant Indexes-

• McClellan Oscillator (MO) fell to +32.57[+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. This index is just a wee bit overbought  = Neutral
• US Dollar –  The dollar rose +0.31% Friday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. The big move was breaking the support level two Friday’s ago which set up the rally for stocks. The swings in prices are smaller, but growing and therefore right now = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  1840 Monday. This is a huge -56% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -3.26% yesterday. Rate of decline increased yesterday. = BEARISH

The dip in the MO & the good reaction to bad news (Portugal) means that the bulls are back for another run higher.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

Unfortunately, for us, the MO fell 20+ points. Bringing it down from almost overbought territory. The more overbought the better time to invest in one of the short ETF’s. Right now our best opportunity is to go short in an overbought market – However conditions are not yet appropriate

We missed a chance to go long when the MO went below -50 and  I hope we did NOT miss a chance to go short when the MO was above +50.  The area around +/- 60 has been our go long/go short point. Obviously this line is NOT written in stone. – Only time will tell – But be patient - There will be lots of opportunities to go long and short this year

Here’s a list of some Proshare and Direxion ETF’s that short sectors/indexes. You can find a much more complete list clicking here and scrolling down until you find each funds name and LINKS.

• SDS - @200% short the S&P 500
• QID – @ 200% short the NASDQ (basically tech stocks)
• SH – Short S &P 500
• FAZ – @300% short financials
• TYP – @300% short  technology
• EPV – @200% short Europe

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Fatwa Against Vuvuzela

Anyone who watched the World Cup in South Africa over the last few weeks knows what a Vuvuzela is. Perhaps we are all Muslims now. The UAE issued fatwa # 11625 against vuvuzela’s whose beehive sound is too noisy at soccer matches.

Congratulations to Spain for their 1-0 victory over Holland.

YOUR comments

I received an email that contained the following statement over the weekend - “After clearly demonstrating Friday how Bush’s tax cut did nothing in raising net tax revenue next to Clinton. After factoring in inflation and population growth Bush has lost us revenue by 2009. Then you make a the completely contradictory statement ‘There are cases where cutting taxes can raise tax revenue.’ Why? “

Because its true and a well recognized fact by most economists. – However there is a balance between lots of different factors and  obviously you can’t collect no taxes and expect revenues. Maybe it will help to think the Obama Tax cut in 2009 It gets no press because a Republican did NOT make it. This works especially for almost every middle class American. Here’s how it can in the long term raise taxes.

• You cut the taxes of a working American (Say under $100,000) That person goes right out and spends the money especially those well below the arbitrary $100,000 a year figure. They buy something and this generates money and t from sales taxes to income taxes. It bounces some folks up to higher tax brackets because their busisnesses grow. They spend more. Bottom Line – money flows faster and this generates tax revenue.
• It also used to generate jobs. Lower taxes would create more demand and jobs would grow creating more taxpayers. However globalization has virtually killed that. If corporate taxes or payroll taxes decline a bit it does almost nothing to create jobs in the USA. These jobs go to China or another faster growing emerging market country where you can get the job done at 1/4 the price.

Right now the S&P 500 companies are sitting on a mountain of cash $1,800,000,000,000 If they wanted to they could generate millions of jobs in the USA They are simply far more interested in spending this money where it will make them more money and that’s in emerging markets.

The New BRIC’s

The term BRICK’s has been used for years to denote the faster growing big emerging market economies = Brazil, Russia, India, China and sometimes South Korea.

Now a new acronym for mid level countries leading the globalization GDP growth – CIVETS - Columbia, Indonesia, Vietnam, Egypt, Turkey, & South Africa. LINK

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. – How markets react to news Will be key. If a stock shrugs and goes nowhere on good earnings news you know theirs trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

We had another rally (mostly in post 2:00 EST trading) in decreased volume. 40% below average. These Black Box rallies can go on for a while in low volume  Mom & Pop investors have long since left the market.

While its difficult to understand collectively what the black boxes will do, we do have two signs indicating a reversal should be ahead.

• The BDI (see below)
• The MO is near overbought levels.

Here’s the bulls case for good earnings For stocks –  Bad economics can be balanced out by good earnings

Significant Indexes-

• McClellan Oscillator (MO) rose a to +53.14 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. This index is on the boarder of being overbought = almost Bearish
• US Dollar –  The dollar rose +0.14% Friday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. The big move was breaking the support level two Friday’s ago which set up the rally for stocks. The swings in prices are smaller and therefore right now = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  1902 Friday. This is a huge -55% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -1.92%Friday. Rate of decline is slowing – perhaps a good sign. but overall still = BEARISH

Monday’s Fearless Forecast - Even the black boxes have not been able to push the MO over +80 for over a year. The economic news from employment in the USA to world trade & China (BDI) is not good. We seem to be running into an economic wall that even the Black Box traders will have difficulty penetrating.

The earnings surprise would have to be HUGE to penetrate over +80 on the BDI. So I’m shorting any significant rally and expecting a down week. Were still in wait and see mode. See Positions

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

Short Term Traders - Those of you who love risk could nibble on the Direxion funds that short markets 300% (see POSITION Section at very top of blog) Some ProShares also do 300%.  I’m waiting till the +53.14 on the MO turns into over +60.

Caution – last time I waited for -54 to become -60 and missed last weeks rally.

Monitor didn’t – see comments section of blog. Also check out the in depth technical analysis of the BDI and other indexes that The Critic sent in

Investors – Sill waiting for the market to reach overbought levels (Close to +60 on the MO) but no cigar yet. The further ovesold the better. See list of ProShare that short market 200% in POSITION Section of blog. You can start to nibble when/if we get over +60 on the MO. The higher the better. Remember this may be only a trade that lasts a week.

The probability of making $ on a short (ETF that shorts an index of sector) is getting better.

Lets say there’s a 200 point rally in the Dow today – you can bet the MO will be  close to +8o or above.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Lincoln Douglas Debate

Great Debate

The comment’s section is often the best part of Investors411. Jobs, China, Deficits and revenue have highlighted this debate. Jsovjani has come up with an informative data base on revenue deficits, & revenue.

How much tax revenue growth was there under Clinton vs. Bush vs. Reagan?

I look at the numbers relatively, so this (mostly) avoids having to compensate for population growth, inflation etc. I used the year each President took office as the base. Each new president built on what was already there.

• Clinton inherited Bush Sr.’s budget and by the end of his first year 1993 it was $1,i54 billion.
• During his 8 years in office he raised tax revenue to $1,991 billion in 2001
• The total gain in revenue under Clinton was $837 billion or @ +72%
• Bush Jr. started from the Clinton base of 1,991 and ended in 2009 with yearly tax revenue of $2,105.
• The total gain in yearly revenue under Bush was @ +5%
• Reagan in 1981 yearly tax revenue was $599 billion and when he left office in 1989 it was $991 billion
• Reagan gained @ +65% Of course he did raise taxes many times. Something Republican forget.

You  use the previous year as a base number but the stats come out basically the same. There are cases where cutting taxes can raise tax revenue. But when you consider what Bush inherited and what he left us with and compare it to Clinton or Reagan – Bush tax cuts over 8 years in no way raised significant revenue.

• Clinton beats Reagan and their is a vast improvement in tax revenue building.
• Bush comes in last by a wide wide margin.

As Robert H says numbers are relative.

Stocks

The Black Boxes want to take this market higher. They did yesterday confirming the previous day’s rally.

• The MO moved up to +27.04 NEUTRAL but approaching +60 or oversold levels.
• The BDI took another big -3.87% hit yesterday= Bearish

Looks like another 1 to 2% gain will get us to overbought territory on the MO and a time to take some short positions.

Barr

-

Jesus’ Colt 45

Louisiana Governor Republican Bobby Jindal just signed into law that it was legal to carry guns into church. My how religion has changed in the USA.

Deficits

What to do about the deficit? The Center for Economic Progress and Research using non partisan Congressional Budget Office data has come up with some concepts and their impact on the deficit. Thanks to Sherwehe for the site recommendation and Jsovjani for the below insightful  comments on this data

“Very interesting; fin. spec tax raises the most. My question is impact on jobs. However, things I want, like means testing ss and medicare are not included. Gas tax interesting, but I do not trust gov’t to use it for deficit reduction. History has not proven that they would keep their promises. I think trust in gov’t  is major issue to reform. Till then,  spend less (personally) and maybe buy gold. I am not hopeful in healing US till maybe a real depression and massive public riots. Does sound very negative, doesn’t it. I’m very concerned.”

Check out the site and you can see dozens of different possibilities

Jobs Now…Deficits Soon

Like Andy Grove, Matt Miller in the WaPo has some definitive solutions. Miller has a relatively coherent vision but admittedly it would be very hard to accomplish what he calls for politically. Here’s his main point.

That means cutting payroll and corporate taxes now — and offsetting this with phased-in tax hikes on dirty energy and consumption, to take effect only once jobs and growth are back on track.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - Fundamentals rule. Old fashion fundamental earnings analysis dominates as earnings season kicks off big time next week. ”Double dip recession” has become an investment mantra starting in Europe and now echos worldwide.

Old Wall Street Axiom - The market can remain irrational longer than you can remain solvent

Yesterday stocks staged a mega rally on virtually no news and on well below (only slightly increased) average volume. Irrational, to anyone who believes fundamentals matter. The Black Boxes (giant institutions that speed trade using algorithms & make up to 80% of the trades) made these seemingly irrational trades yesterday.

Yes, the US markets were oversold and due for the predictable rebound (see Tuesday’s Investors TF&A section) But what happens is Black Boxes magnify what should have been a more mellow rally. Almost no investors returned from the sidelines or you would have seen volume spike higher. That left the Black Boxes on their own.

What’s this all means – We have to adapt to what’s happening & adjust how we make both long term investments and short term trades. In discussing Black Box trades on CNBC (the financial channel) they said that 99 stocks yesterday made up 50.1% of all trades. Also Black Box institutions were using Sector and Index ETF’s as one of their primary trades.

• Everything happens at hyper speed
• Everything is more technically based
• Moves are exaggerated both up and down
• Lots of the old rules that governed the markets are not functioning because of the hyper speed.

In the long run fundamentals are going to have their say. The BDI cannot keep falling 4 & 5% each day without consequences. The cost of shipping goods falling 52% worldwide in almost 7 weeks should be sending off at least some alarms. = Bearish

Earnings Season starts next week.

Perhaps the most important leading sector was financial stocks yesterday XLF (ETF for financials) up +4.33%. Mega shadow banks JPM up +5.01% & BAC +4.62% Perhaps a message on how weak financial reform is in the USA.

Significant Indexes -

• McClellan Oscillator (MO) rose a very significantly to -1.45 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works..= Now squarely in the middle or NEUTRAL
• US Dollar –  The dollar fell -0.32% Friday [Anything over +/- @0.50 is significant.]  Right now is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. For some reason they have changed and the dollar is now = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  2018 yesterday. This is a huge -52% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a massive and increased -5.13% yesterday. Rate of decline increased as it broke through its support level. = BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds one position at this time. (see below)

Short Term Traders – I opened a 2% of portfolio position in SDS near the close yesterday. SDS is an ETF that double shorts the S&P 500. Price 35.40.  The enormous size of the rally made me hesitate.  A better entry would be in a rally today.

Investors – Keep powder dry and wait for a clear signal from MO. Perhaps we should have gone long when the MO got not quite to -60 (oversold territory), but -54. There are no absolutes in defining oversold. This market is far too wild and Black Box dominated. Better safe than sorry.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Economic Whirlpool

Yesterday, Andy Grove described the scaling process as the reason American jobs may never return.

• Even if we had another internet revolution those jobs would go to an educated emerging market country. In fact the environmental green jobs are going there now.
• Grove himself points out his solution may/would lead to a “trade war.” Jsovjani (in comments section) accurately reminds us it was “one of the major causes to the Great Depression.” It would also lead to inflation.

This puts us in an economic whirlpool-The kind that forms when you let the water out of the tub. The USA is traveling in ever shortening economic circles leading to the dark hole or drain. China ( as well as other countries) obviously employs tariffs, manipulates its currency and severely restricts foreign ownership. We simply go on taking it on the chin for decade after decade.

Winners

• The people in emerging markets that get jobs and improve their economic situation (yes sadly often slave labor)
• The power and money oligarchy in the USA that profits from globalization.
• The politicians that can pit anyone who is foreign or different against whites for the diminishing # of jobs in the USA (think TTP’s)
• The concept of a strong (dictatorial) central government  and tightly managed capitalism (tariffs, monetary policy, censorship, foreign restrictions, etc.) – China’s communist party
• Global companies that find cheap labor abroad.

Losers

• The USA economic growth and jobs.
• Companies that hire US workers andplay by the rules.
• Democracy in both the USA and China. (more on this most important factor later)

Bottom Line – China is the big winner Look how easily they are manipulating a trans national company like Google out and their own BIDU in. The looser is the USA that fears its own shadow and becomes ever more dependent on China’s restrictive capitalism and one party system for its own economic well being. Maybe the Intel CEO is right. Shouldn’t we at least take some further steps to combat “scaling” in the USA

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - Fundamentals rule. Old fashion fundamental earnings analysis dominates as earnings season kicks off big time next week. ”Double dip recession” has become an investment mantra starting in Europe and now echos worldwide.

Reading the Tea Leaves – To analyze what happened in the US stock market yesterday I’d have to read the minds of millions of people including those big Black Box traders who control 80% of the market. For forecasting future price moves, yesterday’s, below average volume trading was both irrational and  irrelevant in the longer term.

In the short term, you could say traders saw an oversold market so they bought. Prices got too high and they panicked and sold. The black box traders who follow currency (dollar vs. Euro) saw a falling dollar and bought in the last 1/2 hr. giving most US indexes a gain for the day.  Most relevant data is rally did not last long = bearish

Here’s What’s Important

The BDI’s (see below) increased its daily decline through its support level is the most significant economic indicator/forecast out there.  What this is saying is that world trade is drying up. More specifically trade of emerging markets – China. Those of you who have followed Investors411 for years know that emerging markets/globalization has been leading world wide growth.

If you look at the 3 year of the BDI below, you’ll see what technical analysts call a triple top, a broken support level and a red line that is descending almost vertically. This s NOT good. The BDI is at @2100 and in the depths of the 2008 meltdown it was at @600 so there is still a long way to fall before we reach that level.

Nevertheless, without the interdependence of world trade [globalization & I realize globalization has its bad, good, & ugly] we face the danger of recession part 2. The BDI says YES worldwide recession part 2 is coming.

Significant Indexes -

• McClellan Oscillator (MO) rose a bit to -45.22 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. .= Still NEUTRAL, but close to oversold
• US Dollar –  The dollar rose a significant -0.62% Friday [Anything over +/- @0.50 is significant.]  Mantra - right now is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. Two weeks ago a -0.62% move in the dollar would have meant an easy 100+ point move in the Dow. This could/will change, but right now dollar is = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  2217 yesterday.( This is a huge -49% drop in 6+ weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a massive -4.02% Monday. Rate of decline increased as it broke through its support level. = BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO POSTIONS at this time.

Investors – Investors411 recommends no long position at this time. Wait for the MO to fall below -60. The further the better. (see past Investors411). Remember – Since 4/23 US markets have formed a bearish pattern of lower lows and lower highs. Hopefully, we will be buying at a low, but the 5 to 7% guideline (sell 1/2 for a 5% gain) because of the bearish trend.

Traders - There is some space to make a trade with a short ETF like SDS. The best read of the tea leaves is because the BDI is rapidly sinking & markets according to the MO are not yet oversold some room for a short exists. So I’d short any rally in stocks.

Answer for Monitor’s Question – I believe Paul R is away till Monday. The 5% rule is really a 5% guideline. Happy you made $$$ and I usually set a stop/loss at the price I bought it for.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Looking at  pretty pictures – reference below *

Drawing by 8 year old granddaughter Emma

The Glamor of Greed

-

Andrew “Andy” Grove,

Andy Grove the co founder of Intel uses a different title than The Glamor (profitability) of Greed. This former CEO calls his editorial “How to Make an American Job Before It’s Too Late” Grove uses the same megatrends Investors411 uses.

His editorial is a well researched, clear, outlined and offers a job centric solution. Here are some major points. [Many thanks to Robert Howetser who is a sometimes contributor to the comment section of blog and brought this editorial to my attention.]

• The Bay Area in SF (Silicon Valley), the innovative machine of the country hasn’t been creating jobs in the USA lately. It has a higher unemployment rate than the rest of the country.
• The scaling process is no longer happening in the US And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.
• From Apple to Dell computer there is a 10 to 1 jobs ratio for former (Silicon Valley) high tech jobs in China vs. the USA. The largest of these is Foxconn ($62 billion in revenues – makes and assembles for Apple, Dell, etc.) and employs more people than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp combined.

Without bringing scaling back to the USA, American companies are going to continue to make profits by shifting jobs abroad. –  That why Grove is calling for a jobs centric government.

“We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars — fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations…”

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - Fundamentals rule. Old fashion fundamental earnings analysis dominates as earnings season kicks off big time next week. “Double dip recession” has become an investment mantra starting in Europe and now echos worldwide.

Technically the benchmark S&P 500 is down 9 of the last 10 trading days and way overdue for at least a  technical short term rally. = Bullish

The BDI See below) is still in free fall (-47% see below) clear evidence of worldwide economic  (trading) meltdown. = Bearish

Pre market trading in Europe & China is way up @2% (as of  8:00 AM EST)Those of you who took Friday’s read of the tea leaves to heart (you had to love risk) and bought as markets dipped at close – should at least be rewarded in the short term this AM. = Bullish.

*Looking at Pretty Pictures-

Technical analysis is looking at pretty pictures or patterns of stock charts. None quite as wonderful as a grandfather’s view of his 8 year old granddaughter’s work. Who knows why technical analysis works? Perhaps

• We are all creatures of habits, and the trading herd follows patterns
• So many folks think it works and therefore it does.
• We all like to look at pretty pictures.

The bottom line – Investors411 on the right side of the blog offers different financial  charts. Also daily updates on certain charts in text of blog each day.  Those charts on the right side of the major US indexes all show one pattern – a series of lower lows and lower highs for stock prices that started on April 23 2010. If you’re a Bear you love this pattern.

We are currently in one of the lower lows of this pattern.

Fearless Forecast for the Week-

Some kind of technical rebound seems inevitable. If it doesn’t last at least couple of days we’re in big trouble. Some poor earnings results may already be built into stock prices. The accelerating downside of the BDI is a gathering storm. What to watch for is how the markets react to the first few earnings reports. How markets react to news is usually our #2 indicator (see STRATEGY Section on top of blog)

Best read of tea leaves - Good start poor finish = down week.

Significant Indexes –

There’s hundreds of charts, oscillators, systems out there to measure trading patterns and flows. The BDI & MO were chosen because they work extremely well right now for different reasons. (Click on STRATEGY section at top of blog for more) The dollar accuracy as a forecasting tool was shaken last week. If it’s accuracy rebound’s Investors411 will continue to use it.

• McClellan Oscillator (MO) fell a we bit to -53.38 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. In May the MO reached two lows – one at -120 and the other close to -130. Therefore, potential for more downside risk. Even after last week’s disaster for stock the MO is still NOT below -60.= Still NEUTRAL, but almost oversold
• US Dollar –  The dollar rose a bit +0.19% Friday [Anything over +/- @0.50 is significant.]  Mantra - right now is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. Last week this got crushed by bad fundamental news as regular investors fled the market. Dollar flat last two days. = Neutral
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  2216 yesterday.( This is a huge -47% drop in 6+ weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell -2.81% Friday. Rate of decline increasing as it nears support level. Looks like support level will get crushed today =Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekends – Investors411 holds NO POSTIONS at this time.

Shoudda, Wouldda, Couldda -

Last Friday Investors411 reccommmended a buy if markets dippped for those willing to take risks. It does look like this trade is going to make $ at the open and perhaps throughout the day. More tomorrow.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Killing Ants With

Republican Leadership

Popeye in Comments section of blog states – John Boehner Republican and next [possible] speaker of the house called the pitifully weak shadow bank fat cat financial reform bill “KILLING AN ANT WITH A NUCLEAR WEAPON.” What plant is he on?

If the Tea Party Patriots and Republicans win the next election John Boehner will be Speaker of the House – This guy thinks, that financial crisis/reform is just an “ant” John McCain made light of the financial crisis before the election and it handed Obama the election. Boehner had the benefit of hindsight.

There is still at least one Republican who has not drunk the Tea Party Kool Aid – Senator Lindsey Grahram -To Tea Partiers in a meeting: “‘What do you want to do? You take back your country — and do what with it?’…Everybody went from being kind of hostile to just dead silent.”…you [TPP's] have no vision…you will die out.”

Bottom Line – As much as you and I disagree with what Obama is doing, the Republican alternative is far worse

Cheney/Bush Won

For years Investors411 has demonstrated US media bias. Latest proof of how Cheney/Bush fear mongering patriotism to a gullible supposedly liberal media (New Your Times & LA Times)working . This Harvard study on terminology proves it – Is water boarding torture?

• NYT -If other countries waterboarded it was called torture 85.5% of the time.
• NYT – If US waterboarded after 2004 it was called torture 1.6% of the time
• NYT – Before 2004 water boarding was called torture 81.5% of the time.

YOU are manipulated daily not only by content, but choice of words and stories the media uses. Even in the NYT

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - “ Any analysis of stocks has become an analysis of what the ”Black Boxes” of  huge institutions with their high frequency trades & computer algorithms are doing.” They make up 80% of trading and right now the huge currency markets are dictating their moves.”

Clash of the Titans

Gravity/Fundamentals.

The Black Boxes got overwhelmed by gravity or market fundamentals. So has the month long inverse relationship between the dollar and US stocks. We’ve seen a lot of non black box investors panic and take their $ out of stocks this week. Bad fundamental economic news finally is trumping everything else (see yesterday’s Investors 411 for reasons)

The BDI going over a cliff (-44% see below) is further indications of economic meltdown.

Technicals – Two times in the last two days the Dow has dipped 100+ points (-152 yesterday) only to recover most of those losses. S&P down 8 of last 9 days is certainly another indication that stocks are oversold. Another is obviously the MO. It went below -60 interday (oversold territory) in the 100+ point declines – then recovered.

This is the kind of day investors hate, but short term traders love = VOLATILITY

The bulls titan has a meltdown in the dollar, an oversold market, and knowledge that large dips are getting bought.

The bears titan has a week of horrible fundamentals worldwide & the BDI. Also, Bond traders are running wild. (sorry for lack of explanation here – takes too long – but its bad for stocks)

Icing on the Cake – The Monthly Jobs Report.

The jobs report comes out this AM and anything unexpected could create wild fluctuations. Remember the jobs report is very significant to the long term economic well being of the USA, but it matters far less to the US stock market.

The JUNE Jobs Report Headlines - -9.5% Unemployed vs -9.7 in May = +0.2%, Private sector jobs up +83,000 vs +33,000 in May.

Basicaly in line or a slight positive surprise. This data does not say armegeddon, but you need +200,000 a month to ofset population growth and lower unemployment long term. Stock futures initially moved higher, but are now flat.

Significant Indexes

• McClellan Oscillator (MO) fell a we bit to -52.19 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. In May the MO reached two lows – one at -120 and the other close to -130. Therefore, potential for more downside risk. = Still NEUTRAL, but almost oversold
• US Dollar –  The dollar fell an unheard of -1.75% yesterday [Anything over +/- @0.50 is significant.] This is the single largest move in the dollar in the last 6 months probably a lot longer. The support level was more than broken it was devastated Mantra - right now is very important Dollar up = stocks down and visa versa. Yesterday stocks and dollar going down together. – A Total Disconnect - Stocks indexes should have soared – up 2 to 4% on this news.  = Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  2351 yesterday.( This is a huge -44% drop in 6 weeks.  Often a leading indicator for stocks. Here’s a week+ old chart of BDI showing broken support levels. The BDI fell -2.29% Rate of decline increasing as it nears support level =Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekends

Have not yet had a chance to Update over last 2 weekend but there are NO positions held at this time.

Short term Traders - Would buy into any big move to downside, especially if dollar is falling. Use ETF’s that go long 2 & 3 times indexes.

Investors willing to take big risks – Remember The long term outlook is still Cautiously BEARISH.

A significant fall near the end of the session could be a chance for a small nibble. Technically what’s setting up is probably a bear market rally. Realize this may only be a short term trade that you sell 1/2 on only a 5% gains and you should set a stop/loss on trade.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

You’re happy to be in cash if you’re an Investor411 reader and waiting to deploy that cash when the opportunity arises. We’re starting to get close, but how bad will the bears bite?

Fat Cat Shadow Banks Kick Ass

You’d think congress would be all for a tax on the biggest shadow banks, but Republican’s (perhaps led by my Senator Scott Brown) objected. The $19 billion dollar tax on shadows and hedge funds got taken out of Fin/Reg bill. Now who pays if one of these giants goes down? YOU

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - ” Any analysis of stocks has become an analysis of what the ”Black Boxes” of  huge institutions with their high frequency trades & computer algorithms are doing.” They make up 80% of trading and right now the huge currency markets are dictating their moves.

The last major support level gave way on the benchmark S&P 500 around 3:00 PM EST Only the Russell 2000 (small cap stocks) remains above this years low. = Bearish

Analysis – Double Dip Recession Fear Grows

• EU & GB (Obama was NOT on board with this) want to raise taxes and cut spending – This is exactly what Herbert Hover did to cut the deficit and led to the Great Depression. Combined EU alone has bigger GDP than USA so this is significant.
• BDI falling off a cliff. Now a -42% decline in world trade prices also indicates the worlds engine of growth emerging markets (China & India lead the pack) in decline. This translates into falling GDP’s for emerging markets. Jim Cramer dismissed this index on his TV show last nigh – He’s wrong.
• USA fixation on cutting deficits (tea party patriots) and not fixing transparency and over leveraging problems. We are not out of the recession woods our focus should still be jobs, jobs, jobs.

Paul R in comments section has a list of  some support levels of the benchmark S&P 500.

Significant Indexes

• McClellan Oscillator (MO) fell to -50.77 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. In May the MO reached two lows – one at -120 and the other close to -130. Therefore, potential for more downside risk. = Still NEUTRAL, but approaching oversold
• US Dollar –  The dollar fell a marginal yesterday -0.12% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important Dollar up = stocks down and visa versa. Both stocks and dollar going down together = Bearish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high@4200 to  24o6 yesterday.(2447 to 2406 yesterday) This is a huge -42% drop in 6 weeks.  Often a leading indicator for stocks. Here’s a week+ old chart of BDI showing broken support levels =Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekends

Have not yet had a chance to Update over last 2 weekend but there are NO positions held at this time.

Hold your “I wanna invest” horses. The MO is not even at - 60 yet. Just because we are all in cash (some of you still have SDS (Double short the S&P 500) lets not jump in head first when we cross the -60 oversold threshold. Reasons

• Technically – the MO reached over -120 in May
• Never make all or nothing investments enter them gradually.
• The BDI did hesitate a bit but is still in free fall -42%
• S&P is now down @-15% from high and when that happens -20% becomes more likely than not.

These red flags exist. But below -60 is a place to start nibbling on those ETF’s/Stocks that have held up better than their peers. The lower the MO goes the better. Today some ETF’s that are doing better that US markets.

• EWZ (Brazil) still about 10% from this years low.
• EWC (Canada) Like Brazil energy rich and above this years low.
• EWA (Australia) Common theme with above – higher beta, energy rich, above this year’s low.
• EWS (Singapore) Trade hub, China play – rallied yesterday despite US decline.
• FXI (China) Old favorite like EWZ has made us $$$ in the past.
• There are sectors within the USA that are holding up better than major indexes like Health Care Products, Paper, Drugs, Airlines etc. But their outperformance level is not as great as some foreign countries right now.
• GLD &  DGP (2X gold) continues to be the #1 buy the dip play – Irrelevant of MO.

Another 100 point drop in the Dow should bring us close to -6o on the MO and the least risk averse could nibble a wee bit. I’ll wait for a bit bigger fall.

Caution – Major US and most world indexes have formed bearish patterns of lower highs and lower lows. Therefore, chances are that when Investors ‘s411 buys we will only hold for a week or two. You can hope for more.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING