Fed Chair Ben Bernanke

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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

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Index Percentage Volume
Dow +0.93% up
NASDQ +0.77% up
S&P 500 +0.82% up
Russell 2000 +1.04% -

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

  • The dollar fell enough yesterday to reach a three year low.
  • Repeat from yesterday (NB: all repeat phrases are in brown) - Stocks continued to have abysmal volume, despite the fact that we are in the middle of earnings season.
  • Volume was just above average and that average is down from the past. Low volume gives Fed’s quantitative easing more influence to move markets up.
  • Repeat - US dollar in clear long and short term bear run. – Good for stocks in short term.
  • The fall in the dollar is bullish for almost all commodities including gold, silver, and oil.
  • Bernanke speaking – markets don’t expect any major news, but the continuation of present policies -low interest rates and quantitative easing are key dynamics.
  • Markets expecting more of same from Bernanke and this is why they are in rally mode. From WSJ on Bernanke

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Shorter Term Forecasting Indexes

There are hundreds of forecasting tools, – These two tools have worked

When they stop working Investors411 will use other Indexes

  • The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] -0.20 yesterday. Not a big fall, but enough to break down to a three year low. Clear longer and shorter term bearish trend. For US stocks = Bullish
  • McClellan Index(MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] Fell to+28.63.  Getting up there but still = Neutral

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Reading The Tea Leaves

For Silver and Gold Investors – The dollar breakdown (See USD above) is one of the key catalysts behind the silver and gold trade.

Repeat from yesterday - The fundamentals, as described yesterday, have NOT changed. However, we have to wait for the bears to take a bite out of gold and silver before getting back in. Simply too many folks pilled in too quickly. Perhaps the dust will settle today/a week/ a month/ longer… I look for a shorter rather than longer meltdown.

It may be that a 10% correction in silver (SLV is the ETF) is all the correction we get.

Two Trends

  • Everything is getting compressed. We had a massive 25 – 30% run in SLV (AGQ is riskier 2x silver ETF) in April and a 10% correction in two days that may have ended the meltdown -.  Just like that what used to take weeks and even a month to work itself out may be happening in a couple days in SLV. Gold held up very well yesterday. GLD is gold ETF (DGP is riskier 2x gold ETF)
  • The dollar breakdown rulesThe dollar may not be falling like a stone, but it is breaking downThis is positive for many investment categories -gold, silver oil, commodities and stocks.

Reasoning - The rapidness and volatility of the SLV move takes your breath away. Gold should have fallen with silver and didn’t.  Frankly I expected a bigger than -4% move down in SLV yesterday. The footprints of market manipulation are all over the SLV trade. I have no idea who these entities are unlike the Fed’s manipulation of stocks through quantitative easing.   But the fundamentals remain strong for silver and gold.

For Stock Investors -

Repeat from yesterday – Bottom line is that the dollar down/stocks up trends are still in place… Bernake’s, first time Fed chair speaks after a FOMC meeting, on Wednesday is a market mover. Markets are expecting Bernanke to stay the course – this is BULLISH. You may see some selling on the news after the speech.

We are still a bubblicious market juiced  by Fed liquidity.

Technically major indexes have formed a powerful inverse head and shoulders trading pattern and a breakout here is bullish

So I’m out on a limb hereBut the call is Bullish across the board. Only major problem is if Bernanke and Fed make a dramatic change and throw a monkey wrench into investors expectations.

Arnold’s back, and he was only gone for a day. – The dollar is breaking down to lows and stocks breaking out to highs. I’m not making a big investment in stocks, because the MO is too high, but cautiously nibbling on (especially on a dip)

  • UWM (2x small cap stocks) again as a longer term investments.
  • GLD slower and steadier than SLV. SLV is riskier or for those that love great risk AGQ are options, but I’m going to wait a day or three on SLV. (MO relevant to stocks, but not as relevant to silver, gold, or rare earth metals)
  • REMX – Buying any dip – Will try to add to Rare Earth Metals ETF’s. If you know how to read a candlestick chart you’ll see investors have bought the dip for the last 6 trading sessions – usually a bullish sign.
  • See YOUR Stock List for other options

What to watch today - For shorter term traders – Market movers. UUP is key

  • USO ETF for oil - Oil up = stocks down.
  • UUP(Tracking ETF for dollar) Remember - Usually the dollar is a contrarian indicator for stocks. Any major fall may give temporary help to US stocks, but a major breakdown also signal major structural problems with the USA

CautionBecause of Low volume,  and high frequency trades, its very easy for entities from the Fed to hedge funds to manipulate prices Quantitative Easing is one huge manipulation of stocks (higher).

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Positions

The POSITIONS Section at top of the blog is a link to 4 different portfolios. It’s full of investment idea. The actively managed portfolios #3 &4 - Aggressive ETF Trading & Your Stock List.

Disclosure - I have personal  positions in REMX,  SLV (smaller) RJA and manage a fund that has a 5 year position in GLD

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION“ section of blog (at top of page) 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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