Investors411 in on summer break until July 18th

[Stock Market Outlook Below - In Reading The Tea Leaves]

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Reading The Tea Leaves – 7/6/11

Technicals

  • Last week we had a major 5 day bull market run in below average volume. Light volume is no surprise because our stock market is dominated by High Frequency Traders, Hedee Funds, Investment Banks, Central Banks (The Fed & others) and Soverign Weath funds (uber wealthy traders)
  • Overbought conditions stalled gains yesterday, as markets went sideways. MO dropped from an almost +90  or OMG overbought to +74. or overbought. (See previous posts by clicking on calendar at top right or using STRATEGY section of blog)
  • Because of the huge gains last week, the odds are the rally will continue once overbought conditions subside. We most likely will reach 2011 highs and may go beyond.

Fundamentals

  • To understand fundametals you have to first understand who is doing the majority investing. Today – High Frequency Traders, Hedge Funds, Investment Banks, Sovereign Wealth Finds and their clients –  An elite uber wealthy oligarchy of insiders move markets though leverage NOT your average investor.
  • In the long term profits obviously matter. So earnings season’s results and forecasts (this 1/4′s results start reporting @7/11) are important.
  • Three foreseeable problems exist – China’s inflation, European Debit, (can was kicked down road on this for a couple months) and the upcoming potential default of American debt.

Bottom Line- If the Fed and other central banks continue to support economies with liquidity stocks should do well. If the US debt default starts to hurt stocks, politicians will fix the problem rapidly because their campaigns are all funded by an elite oligarchy of insiders.

The key is to watch for is when Wall Street prices start to react negatively to the debt crisis. Currently there is NO negtaive reaction.

We dug a huge hole of over leveraged debt and for now the May 20 long term forecast still holds at NEUTRAL.

However, there’s a lot of bullish momentum behind the move higher last week and those who missed may benefit by buying  the dip.

DisclosureI own NLY and a group of  dividend stocks. I’ve used Puts as a protection while I’m away in case there is a major meltdown.

If I were here I would probably be going long on some High Growth Stocks and ETF’s when MO dipped closer to neutral.

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Longer Term Outlook

NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE


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