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Robert Kuttner

Financial Regulations

D. In the comments sections brings up a generally favorable view of the Financial Regulations in the NYT. Here’s another glass is half full view from left wing TalkingPointsMemo. This is certainly, the most significant financial reform package in decades but it does NOT solve the major Too Big to Fail and transparency problems. Nor does it address problems within quasi government institution – Fannie and Freddie that are singlehandedly holding up the US mortgage market. That comes next.

Also much of what is legislated depends on regulators. Tea Party Patriots ‘s basically want NO regulators/regulations and the Obama administration has a far less than stellar reputation in regulators and regulations (think BP)

In a past Investors411 the Baseline Senerio revealed 4 largest shadow banks have $7.7 trillion in assets. Imagine what happens if a $2 trillion dollar over leveraged shadow bank goes down – one 5 times the size of Lehman Brothers. Simon Johnson, today, explains how JP Morgan has made itself invulnerable to financial regulation

“The reason global megabanks will get bailouts in the future is simple – policymakers will fear the chaos that would ensue when competing bankruptcy claims swarm over a defaulted institution, much as happened for Lehman (e.g., in London) in September 2008.”

The fact that Shadow Banks lead the markets higher Friday is verification that investors (those who put their money down, instead of talk) think shadow banks won.

America Speaks

America Speaks is a “bipartisan” organization that organizes American town meetings. It just had major Town Meetings across the USA on June 26th. This group was founded by a Wall Street mogul and two foundations. They “scientifically selected groups” came up with some “overwhelming” eye brow raising results.

  • Raise tax rates on corporate income and those earning more than $1 million.
  • Reduce military spending by 10 to 15 percent,
  • Create a carbon tax and a securities-transaction tax

Bob Kuttner also goes into depth on America Speaks and Jobs Jobs Jobs.

KISS & Stocks (Keep It Simple Stupid)

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


Index Percentage Volume
Dow -0.o9% up
NASDQ +0.27% up
S&P 500 +0.29% up
Russell 2000 +1.89% -

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 Upcoming Battle-

Friday’s Investors411 Outlined the sides in the Upcoming Battle. Stock Market /Currency Trading War Broke Out Friday. Major US markets had  an above average big, increased volume day - so both sides committed lots of troops (buyers and sellers) to the fight. There was lots of blood

The green army (long stocks & short the dollar) launched the first attack – led by Shadow Banks GS & JPM (the whole banking sector rose almost 3%) The dollar took it on the chin and is now sitting a mere $0.24 away from its rising front line/support level.

The red army (short stocks & long the dollar) got caught a little off guard, because so many technical analysts predicted the downfall of stocks. Despite being beat back as the dollar fall (see below) and stocks pushed marginally higher the red army support levels have held.

The MO is NEUTRAL. The BDI has turned flat So No advantage for either side here. In fact BDI’s possible turn slight advantage to greens

For fundamentals details of last week and this week see Jeff Miller in Seeking Alpha or on Friday’s monthly jobs report ( the big news of the week) and another outlook by SA’s Ophir Chandor

Fearless Forecast for the Week

Just about every technical analyst out there is bearish for stocks. However if bulls (the green army) can build Monday on Friday’s modest gains in big volume then they have a shot at moving markets higher. Last week too started out with China announcing a currency devaluation, only to learn that this was no wher near as substantive as first though.

The Shadow Banks victory in financial reform should help bulls.

Housing figures are in shambles. Investors411 mantra over the last two years has been the economic worldwide situation created by the US Shadow banking 2008 meltdown is “far far far far” worse than expected. Logic says that Friday’s employment numbers will be worse than expected. Bears should growl.

The Shadow Banks have reinforced the bulls and if they can get a follow through rally today this could help stocks for the week.

The key again is the US Dollar/EURO relationship. UUP (ETF that tracks the dollar) is the key to watch. Since there are so many expecting markets to tumble, if the Dollar breaks through support you could see a sharp rally as Black Box investors “buy to cover their short positions.”

Happy to be on sidelines for this war. Best read of tea leaves is a contrarian up/flat week into lackluster jobless figures.

Today is day 2  of the dollar falling to a key support level war. Day 1 was dominated by the green army.

Significant Indexes

  • McClellan Oscillator (MO) rose significantly to -1.34 [+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.= NEUTRAL
  • US Dollar –  The dollar fell s yesterday -0.57% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar up = stocks down and visa versa. The dollar has fallen for the last 3 weeks, but has consolidated (traded sideways) over the last 6 days as the 50 day moving average/support level moves higher. This is where the Black Boxes have focused their attention. Dollar at $85.28 directly above major support/ 50 DMA at $85.04. Friday’s drop = Bullish
  • BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped. BDI is in free fall from @4200 to  2501 yesterday. This is a huge -40% drop in 6 weeks.  Often a leading indicator for stocks. Now at/just above a major support level. Rate of fall declined again yesterday. This index often makes slow changes, so diminished decline  could be the start of a reversal. However, clearly long term. (decline from 2502 to 2501 is smallest possible)  = Long Term Bearish Short term Bullish


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.

Still watching DGP (ETF that’s double long gold) for a dip close to its 50 DMA) – Will buy.

Don’t plan any buying or shorting (ETF that short the market) until MO reaches overbought or oversold



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