Last Post for Week

Arab Awakening

Investors411 has covered many different points of views of the Arab Spring or Arab Awakening

Often the fear mongering Islamophobia of the Murdoch/American based media was contrasted with how much like us arabs are in just wanting freedom and better living standards.

Tom Friedman, in the NYT, has an especially relevant editorial, especially in light of Syria’s major attempted crack down against democracy. The money quote –

I still believe that the democratic impulse by all these Arab peoples to throw off their dictators is heroic and hugely positive.

YOUR Comments

4 of you have debated if corporations should be allowed periodic tax holidays to repatriate foreign earnings. The majority view seems to be that loop holds should be closed and/or taxes reuced rather than the “once evey 5 year holidays that cut 85% of the tax. “

Add YOUR view on this, stocks and other subjects in Investor’s411 comments section.

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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 -2.19% up
NASDQ -2.75% up
S&P 500 -2.56% up
Russell 2000 -3.26% -

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Technicals, Fundamentals & Analysis

Shorter Term Outlook.

day/days/week

  • Massive meltdown in big time volume. Benchmark S&P down 8 days in a row and less than 0.50% away from breaking through major support level – this year’s low.
  • Mea CulpaI should have had a better insight into yesterday’s meltdown.  I’ve instituted a longer term Outlook call for the US economy as bearish, made the May 20th call, but my timing was poor.
  • What the bond market is saying – Economic Weakness, low bond rates, Debt deal stinks. – From Seeking Alpha’s Cullen Roache
  • Like always, after a major move on one day the next confirms or deies the move. All that has to happen for confirmation is holding onto most of the losses. Actually we, have had a series of high volume losses over the last 8 days get confirmed and that’s bearish.
  • Two of our most successful technical forecasting tools listed below -
  • The McClellan Oscillator (MO) chart fell to to -88.61(-30 somewhat oversold, -60 oversold, -90 OMG oversold). MO just 1 point away from OMG Oversold levels. Only 5 times in three years has the MO gone lower. (@-135+ was the lowest in May 2010 -after QE 1 ended and before QE 2 was introduced)  So it could get worse. However Current LevelBullish
  • $USD The Dollar rose again +0.34% yesterday (+/- 0.50 is a significant move and the dollar is usually a contrarian indicator) Technically we are sitting near bottom of a trading range. A minor two day move higher. Overall = Neutral
  • Reading The Tea Leaves - I’ve mentioned DeMark Indicators before. He has a nine day indicator that says US markets should at least take a break today (this would be the 9th down day in a row for S&P). Also the volume looks like its reaching climax sell off levels (when taken as a whole over 8 days) and the MO is almost at OMG levels.  All this shows a bottom approaching, but their is some downside wiggle room between a -89 MO & -135 MO (see explanation above)
  • Never Forget its is High Frequency Traders (This group is made up of high net worth individuals and entities) that now account for the vast majority of trading. You’re average investor has left a long time ago. Another $32.2 billion of less wealthy traders left mutual funds last week. (see yesterday’s update)

Longer Term Outlook

weeks, month, months

  • Repeat – Some serious damage has been done to the US political structure as a functioning body. Even though we didn’t default everyone now realizes that there are a sizable number  of US politicians who are willing to hold the US economy hostage to their ideological beliefs.
  • Repeat – For Main Street USA this means uncertainty. This will be devastating.  The debt crisis deal will cost jobs rather than create them. If you contract the money supply in the USA it means less jobs.  Investors411 mantra - How do you fix any deficit without jobs?
  • May 20th forecast still stands. The recent Washington debt crisis debacle has focused everyone on cutting the money supply.  Simple math – The less money that’s out there = less jobs = greater chance the “Great Recession” returns. European debt and emerging market’s inflation fears add to this. Quantitative Easing (QE #1 & 2 plus stimulus kept our economic heads (especially the stock market) above water.
  • JP Morgan seems to have recently overtaken Goldman Sachs as the #1 prognosticator out there and their chief economist says –

“FISCAL POLICY WILL CUT OUR 2.7% 2012 GDP FORECAST TO SUB 1%”

Until the Fed comes up with QE #3 or some other liquidity measure, stocks and especially the US economy are beginning to look like a double dip recession.

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Paul’s Corner Extra

This past week we looked at evaluating the market using Bollinger Bands (BB). Briefly if a stock is above the middle of the band good, if below the middle of the band bad.

I use a product called EdgeRater each evening to count the number of stocks in the S&P 1500 that are above the middle of their Bollinger Band or below the middle of their band. Last evening the results were shocking. Only 7% of stocks closed with a %B above 0.5. (Above the middle of their BB) Even more impressive 50% of the stocks in the S&P 1500 closed below the lower BB.

This shows an extremely over sold market. Numbers comparable to the flash crash and the ripping 08 down turn.

Barr likes to use the MO for market evaluation. Yesterday the S&P 1500 had a MO of -133, All Securities Index -80, NYSE -88, and the Amex -60. The MO summation index is pointing straight down and needs to bottom and start pointing up before is really safe to play. If you wish to bottom fish, good luck.

Oh for those of you who really don’t believe in chart reading, indicators and spending the $60 a month that I do for HGSI, July 27 HGSI gave a strong exit signal for the market.

My friend Ron Brown from HGSI sums it up nicely this morning:

“the markets are extremely oversold, but on the other hand, we have not yet seen a washout day where there is heavy selling at the open and the market reverses intraday to form a hammer. If you step in front of this moving train, make sure you know where you’re getting out if the balance does not materialize.”

So what’s the market going to do today, is this a new morning in America? Let’s load up ThinkOrSwim………here we go folks another day of fun!

Remember, you are responsible for your investment decisions, and I am not. Please do your diligence, and please take ownership for your actions because I‘m sure not going to.

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Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500.

NLYAnnaly Capital Mgt. Ultra high dividend stock – It’s been shaky, but so far NLY has held up reasonably well through current stock market slide.

In  my personal portfolio I still have a Put position to protect NLY. (strike price $17.00 for 3rd Friday in Sept)

GLD(Long Gold ETF) Bought at 157.1 last week. (see last weeks blogs and comments section) –  Getting way too over extended above its 50 day moving average.  Have put stop in at 157.15. Yesterday up 2.41%.

If you’re a short term trader, you probably should take your profits in a rally for GLD.  Longer term investors probably should wait for better dip to buy opportunity.

Disclaimer - Personally I own  a group of dividend stocks including NLY. I have placed puts on one ETF of a major index and a couple of dividend stocks. I buy everything in the hypothetical Investors411 portfolio. I own some TZA & SDS (ETF’s that double and triple short the market) as hedges.

Mea Culpa – Bad move yesterday to remove some short positions.

JS in the comment section has used the term ”insurance” to describe the way ”Puts” are used protect long term investments. – email me if you want to know more or post a question in the comments section.

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Long Term Outlook (for US Economy)

BEARISH

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Look for an enlightened Paul’s Corner every Tuesday & Thursday and the always informative Comments Section every day.

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Long Term Outlook (for US stocks)

NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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