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Inflation

It’s no secret, almost every country out there is seeking some advantage to manipulate their way out of the economic “Great Recession” or keep their economy growing at a rapid rate (emerging market countries)

Part of what our Fed does with its quantitative easing puts pressure on China and other emerging market countries that results in inflation abroad. There are inflation fears in USA, but it is emerging markets are really feeling the brunt of INFLATION as they have recovered far faster than either the USA or Europe.

Three major articles on this today. It is a problem for all emerging market countries.

Emerging Markets have fallen for about a week on inflation fears. This has also impacted commodities.

Bottom line for Investors – Not only are we overbought (Long term up 7 weeks in a row) but there is a new fundamental – fear of inflation that could take a bite out of emerging markets and commodity prices. Our Fed is walking a tight rope. So far skillfully. But the wind is picking up.

Our turn will come, but the clear and present danger in the USA remains Jobs, Jobs, Jobs.

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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 -0.02% up
NASDQ -0.77% up
S&P 500 -0.13% up
Russell 2000 -1.12% -

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Technicals, Fundamentals & Analysis

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

  • We had what many stock pros call a “confirmation day” The day after 3 of the 4 major indexes took a hit, they DECLINED further = confirmation. More often than not this spells trouble, especially after reaching a top.
  • One of the primer analyst who technically called the the S&P top in 2007 (It plunged 57% starting in Oct. 2007) Tom DeMark, has made  another bearish call that market will plunge about 11% stating in a week or two.
  • In opposition to all this is the FED’s POMO. Notice that directly after the Fed purchased bonds from its 21 big banks at 10:15AM EST to 11.00 AM the US markets started to rally from inter day lows and moved higher.  Strong correlation between this liquidity coming into markets and stocks moving higher since it began in 2009.
  • This is an Options expiration day – third Friday of the month. This sometimes makes for unusual activity and increased volume. However since we have had a short term reversal of trend some of the calls will not get made and volume will suffer. Translation expiration day will probably not have big impact. Other forces might.
  • Key factor of day – Inflation fears

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Significant Shorter Term Forecasting Indexes

  • The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] Dollar rose a small +0.24%. Dollar had a pretty wild day (both up and down). Lot of uncertainty.  Outlook for stocks = Bullish/Neutral
  • McClellan Index – (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.]  MO fell to -33.82. Bullish pattern brokenbears rule in short term, but we are approaching -60 and a buy signal. Outlook overall for stocks = Neutral

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Reading The Tea Leaves

Too many fundamental worries out there. Therefore, going to wait for better conditions or a lower MO to buy.

Will inflation fears trump the Fed’s money dumping and hurt US equities? It has this week. Most say we are long overdo for a correction and DeMark’s call (see above) is significant. Many US companies  that sell to emerging markets could and have been a monentum play to the upside could end up the same way cloud computing did, (See FFIV yesterday)

It’s an escalator going up, but a elevator going down & right now for US equities we have the Fed manipulating to ease the pain.

What to watch today

Dow Index – Almost all sectors that may be negatively impacted from Emerging market inflation – high growth stocks, commodities, China, gold – have faltered this week. The big holdout is this minor meltdown are the giant Dow companies.

AAPL – breaking below its 50 Day Moving Average would be trouble. It fell 1.82% yesterday & rising 50DMA is about 3% lower

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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. (oldest held positions listed first)(see comments section where all trades are first announced)

  • UWM - (2x small cap stocks) A 1/2 position. Setting 2% trailing stop today. Considering selling into a rally.
  • REMX - (rare earth metals) Sold 1/2 at 23.23 for a 1+% loss. Setting 2% trailing stop loss today

Look for short term a rebound today.

Under consideration – Not touching anything new

UCO -(2x oil prices) All commodities, including gold are under pressure from inflation worries in emerging markets.

REMX (Rare Earth ETF) –  Rare commodity used in everything from some TV’s to hybrid cars.

UYG (ETF that does 2x Dow financials) XLF is the financial ETF. - Shadow banks have numerous advantages. – Opaque, special help from Fed and your still on the bottom line to bailout too big to fail institutions.  This sector is being manipulated higher by Fed. Those that can overcome ethic problems with shadow banks could consider buying. Yes, this is another bubble building.

DGP – (ETF is 2X gold)

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How to look up comments from the last two weeks.

Click on SUBSCRIBE TO RSS (top right of blog) You will see a list with title and short summary of the last two weeks of blogs. Click on title and up will come that day’s blog and the comments associated with it. Scroll down to comments

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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 for lists of potential stocks & ETF’s including “YOUR Stock List.” (YSL#3)

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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