digging-a-hole

When people make mistakes and do NOT pay for those mistakes, then keep profiting from those mistakes, they tend to make the same mistakes only bigger and bigger and bigger

The US is digging an ever deeper economic hole.

To compensate for the loss of revenue caused by globalization (Jobs and profits going abroad) greed and an over extended military empire  we created an over leveraged, under regulated, shadow banking system of too big to fail banks.  This resulted in the 2008 meltdown, the start of the Great Recession and the loss of trillions of dollars of revenue.

Virtually nothing has been done to punish any banksters or, even more important, reform our financial industry. Without a competent regulated banking system real long term economic growth is impossible.

The problem keeps getting bigger and bigger and bigger

Wisconsin

Wisconsin vote LINK. The Democrats won 2 of the 6 recall elections of Republicans yesterday. Unfortunately they fell one win shy of winning a majority in the Wisconsin legislature

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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 +3.98% big
NASDQ +5.29% big
S&P 500 +4.74% big
Russell 2000 +6.94% -

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Technicals, Fundamentals & Analysis

Shorter Term Outlook.

day/days/week

  • Repeat from yesterday in the same bold lettersExpect a bounce higher today Every technical measure out there says we are in a climax sell off. Volume exploding as markets sink. – We had our oversold short covering bounce. US equities recovered 3/4 of the previous days losses in the last hour of trading.
  • Again a repeatWhat stocks need is a fundamental catalyst, to give potential investors hope. The Fed is the strongest entity out there to halt the slide. The Fed gave us a promise of ultra low interest rates until mid 2013 (two years) This AM GS sees Fed resuming QE #3 The outline of the 15+% summer meltdown was forecasted on May 20th
  • CAUTION - Even more mom and pop investors have left the markets in the latest meltdown. High Frequency Traders rule even more than before. This is what is creating the massive interday volatility (especially in options). Don’t be fooled into thinking these are normal investors getting back into the markets – its HFT’s taking a an ever bigger and bigger share of US equity trading.
  • The McClellan Oscillator (MO) From yesterday – chart fell to to -142.58 (-30 somewhat oversold, -60 oversold, -90 OMG oversold). This is the lowest the MO has ever been. = Bullish Yesterday the MO rose to -76.99 This is now an oversold market. Technically, we are not at record oversold levels, but more normal oversold levels Not as Bullish, but still = Bullish
  • Reading The Tea LeavesBest read of the Tea Leaves is for some more short covering early. This should send oversold  markets higher. There are a mountain of short positions still in place. Yesterday US equities had an enormous range. I’m sure the HFT’s will again pump and dump equities adding to volatility.

Bottom Line - When we get out of oversold territory (See MO) we will need another solid fundamental factor to move stocks in the short term. The low interest rates till mid 2013 can only go so far.

More often than not lows are retested before a rally.

Longer Term Outlook

weeks, month, months

  • Repeat - 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.
  • Long Term Outlook Listed Below.

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Current Positions

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

NLY - Annaly Capital Mgt. Ultra high dividend stock – It’s been shaky, but so far NLY has held up reasonably well through current stock market slide. Up  an irrational +9% yesterday along with AGNC the other high dividend stock listed in POSITIONS Section of blog. Many of you commented on this yesterday. You nailed the reasons for the advance, but remember HFT added to the gains.

I still have a Put position to protect NLY. (strike price $17.00 for 3rd Friday in Sept) Also puts on other dividend stocks.

GLD – (Long Gold ETF) Obviously a mistake to sell and take profits. Like a millions of other people who see worldwide economic problems ahead – waiting to buy another dip.

DisclaimerPersonally I own  a group of dividend stocks including NLY. I have placed puts on all of dividend stocks I own. I buy everything in the hypothetical Investors411 portfolio. I also own some SDS & TZA (ETF’s that double and triple short the market) as hedges.

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Long Term Outlook (for US Economy)

BEARISH

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Long Term Outlook (for US stocks)

CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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