Russian and Stock Bears

START

Strategic Arms Reduction Treaty (Part 1)

Background

If we survive as a species, President Ronald Reagan, will be remembered as a true hero for placing in motion the first START Nuclear Arms reduction treaty between the USA and Russia (the symbol for Russia is a bear) that was eventually signed in 1991. Key to this treaty were Reagan’s words Trust but Verify.

Today – Russia’s Economic status is more improved than the vast majority of countries since 1991. Russia has vast natural resources and oil/gas exports account for much of that growth and a trade surplus of $10.4 billion in Sept. Russia fell further in the world wide recession and last quarter under performed other emerging markets when its GDP growth fell from 5.0 to 2.7%. Great source for economic data is Tradingeconomics.com

Two significant problems in Russia

  1. Corruption – On the list of the 178 most corrupt countries rated by Transparency International in the world Russia comes in #154. For all Investors411 chides the USA for its growing corruption (we have, for the first time fallen out of the top 20) we still come in a respectable - #22.
  2. Terrorism - Russia has had 4 separate major terrorist incidents in 2010 resulting in at least 67 deaths and over 300 serious injuries.

Background and problems in USA

  1. The USA has 5113 nuclear warheads Virtually all them dwarf the 2 atomic bombs that destroyed Hiroshima and Nagasaki in Japan and ended WW2. The smallest weapons today are at least 7 times more powerful than the first rudimentary bomb that leveled Hiroshima Although the # of Russian weapons vary according to source, they are thought to have slightly more. Video of  57,000,000 ton Russian Tsar bomb – compare to 15,000 ton Hiroshima bomb. Tsar Bomb about 4000 times more power.
  2. We are, by far, the most militant country on the planet. Only country in 3 declared wars – Iraq, Afghanistan, Terrorism. Who knows how many attacks in other sovereign countries from Pakistan to Yemen.No country even comes close to our 1000 military bases/installations around the world. Multiple sources indicate if you include homeland security, and other appropriations like nuclear weapons that fall outside of listed “defense spending” we create over 50% of the worlds military budget.

tomorrow (part 2)

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!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Index Percentage Volume
Dow -0.42% up
NASDQ -1.07% up
S&P -0.61% up
Russell 2000 -0.67% -

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

World Stocks -

USA – Volume up & Stocks down. Benchmark S&P 500 fall to 1181. Just above major support at 1173. Falling through 1173 will probably intensify selling. Lots of economic data released today, but the big report is Friday’s monthly jobs number.

China – FXI (ETF for China) is down over 10% from its high and trending down. But manufacturing numbers (just out) rose.

BAC – US giant shadow bank dramatically broke through  a major support level (down -3.14)on rumors that it was the next target of WikiLeaks.  BAC has an opaque accounting system, so selling here could intensify on the rumor. = Bearish

Europe – Worst month since May and the 50 Euro STOXX Index break below “upward trading channel”

Significant Shorter Term Forecasting Indexes

  • The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar rose significantly again +0.63% yesterday The dollar has risen 5 out of last 6 days. The weakness in Europe is the major factor behind the dollar rally.  Surprisingly the  rally is not negatively impacting stocks in a big way. But still = Bearish
  • The Baltic Dry Index (BDI[measures cost of world trade. Also proxy for China, emerging markets,&  exporting countries]Rate of fall increased to -2.14% yesterday. Clear trend= Bearish
  • McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] fell to -48.98 = Neutral/Bullish

Reading The Tea Leaves -

Look above – There’s lots of red Bearish signs.

  • Combination of BDI and FXI (most important emerging market) along with Europe trending down is trouble in the long term.
  • Dollar rally hurts
  • BAC breakdown and AAPL one day fall (-1.81%) are two leaders that got smacked yesterday

The Bad news . If/When  the S&P major support level (1173) falls, selling usually intensifies.

The Good NewsTrend exhaustion  -49 on the MO shows we are technically reaching a point where there are fewer and fewer sellers out there.

There are other indicators I use to show trend exhaustion and one of the best was created by Tom DeMark. His nine day trend analysis is right more than its wrong and some of the more important forecasting tools used above concur with his theories. If you are trading short term and have NOT reviewed his system or one of his books be assured almost every hedge fund manager has. Investors411 tries to “Keep It Simple” but if you trade as oppose to invest this is one system to know.


Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions).

Current ETF Positions.

  • EEM - (Emerging Markets ETF) -
  • UWM – (2x small cap stocks ETF) -

We’re at or approaching “buy the dip” territory. I’d love to see another 20 points cut from the MO before I nibbled.  However, I’m afraid the High Frequency Traders that dominate trading are probably going to see “trend exhaustion” like I do. Right now emerging markets are ripe for an oversold rebound, and the dollar is also close to trend exhaustion. This means at least a short term oversold bounce.

Would love to see a clear buy the dip opportunity arise today or later this week, but afraid we might not get the chance.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including “YOUR Stock List.” -

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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