Talking heads said stocks moved higher on some pipe dream that China was going to bail out Italy. YOU know better. The programed trades of the HFT’s saw a moderately oversold market & when institutions started to cover their short positions – they used the news to push stocks higher.

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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 +0.63% down
NASDQ +1.10% down
S&P 500 +0.70% down
Russell 2000 +0.86% -

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Market Analysis

Focus on TechnicalsFundamentalsHFT’s

Shorter Term Outlook.

day/days/week/week+

  • Talking heads said stocks moved higher on some pipe dream that China was going to bail out Italy. YOU know better. The programed trades of the HFT’s saw a moderatly oversold market &  pushed the volume higher
  • HFT (60+% of trades) added considerable volume.
  • The fact that technically European markets were down 2 to 4 % during the day and the US markets held up is a bullish sign.
  • Europe having a bad day on a bad Italy bond sale and no emergency France/Germany meeting
  • Repeat - Technically we have formed a double bottom for most major indexes Now major indexes have formed short term higher highs. (see charts of major indexes on right side of blog). Traditional technical analysis says this is bullish. However, fundamentals control what’s happening in the long run and the HFT are dominating stocks technically. Any breakdown through the double bottom is bearish Benchmark S&P at 1162 and 1135 is one support level +1120 is the major support level.

Investors411 Technical Forecasting Tools.

  • The PCR fell  to 1.25 (Roughly - above 1.25 is getting Bearish and below 0.80 is getting Bullish. 1.00 = same amount of puts and calls)(last two years the highest for PCR is @1.50 and lowest @0.60 - anything approach these levels shows change likely For more information on PCR LINK)   = Neutral

The McClellan Oscillator

  • (MO) Fell to to -29.52 (Rough estimates =-30 somewhat oversold, -60 oversold, -90 OMG oversold)( +30 somewhat overbought, +60 overbought and +90 OMG overbought) We have just started into oversold territory. Somewhat overbought = Bullish/Neutral

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Reading The Tea Leaves

Understand what moves markets is is a constant process, because its ALWAYS changing.

Technology now in the form of HFT’s, that doesn’t give a damn which way the market is moving, dominates.  Mom and pop (retail) investors have left the building or are too apprehensive about investing. Our job, if we are going to make $$$, is to predict what HFT’s will do.

From Financial TimesLiquidnet did the survey.

  • More than two-thirds of traders at asset management firms around the world are worried about the impact of high-frequency trading on the equities market, [I think the other 1/3 use programed trading/HFT's/black boxes/computer algorithms
  • Investors are clearly concerned that their long-term investment styles are at odds with the speculative, nano-second profit taking approach utilised by high frequency traders.

Investors evolving strategy model - Yesterday showed (see PCR and MO above). HFT's could gain 200 Dow points in mildly oversold conditions  on a wishful thinking rumor.

This gets confirmed by how markets react to news -  A major French Bank (Soc. Gen. down 10%) meltdown failed to collapse US markets [ugly bad news] vs. some news about Italy begging China to bail them out (Hint – China will do what’s best for China – NOT bail out Italy, Greece, or Spain or Europe) moves US markets higher [pie in the sky news]

Bottom Line -

  • Some big bad piece of news could come along and spoil a potential short term bull run.
  • Also what acid were you dropping to believe that China is going to bail out Italy could reverse the gains
  • But we did learn that HFT’s could move the market 200 points on pie in the sky hope if conditions were right - Yesterday showed HFT’s could gain 200 Dow points in two hours in mildly oversold conditions (see MO) & a 1.34 PCR on a pie in the sky rumor.
  • HFT’s are going to pull your chain on any event/rumor as long as they exist – Get used to it – HFT’s are here to stay.


Longer Term Outlook

month, months,

  • Repeat Same old mantra - May 20th forecast still stands. The May 20th summer forecast has come to pass and now we wait to see the Fed’s next move. Add to this Europe is a whole lot worse than previously thought back in May. For the Fed to act significantly – inject more liquidity - I’m afraid we need to see stocks do worse for that to happen

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Paul’s Corner

Another market sell off Monday which was “saved” by a rumor of China buying Italy bonds, etc. This is not a market at the moment for the retail investors. It’s volatile and range bond and is driven solely buy the news.

YSL 5 Chart Observations

AKRX – Good chart in a buy the dip position

ABV – Sold off sitting just below the 50, Force Index negative

NLY – Sitting on the 50, candles are very tall indicating volatility

AAPL – Sitting on the 50 Force Index turned negative, Relative Strength indicators negative.

CPHD – Below the 50, needs to settle down and consolidate.

CMG – Below the 50, buyable when the 17 crosses up through the 50

CROX – Series of lower lows and lower highs, HGSI Indicators turning red.

GMCR – Chart ok but volatile.

HANS – Chart Ok sitting on the 17

HLF – All indicators red, chart broken down

LULU – Sitting below the 50, above the 17, volatile buy at your own risk!

RES – Below the 17 and 50, indicators turning red.

TSU – Series of lower lows etc, not buyable

ZAGG – Indicators turned red, not a buy at the moment.

Chart comments are my opinion and are for education only. No actual trades are suggested, understand?

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Current Positions

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

LONGER TERM POSITIONS

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

Traders -  Investors411 is waiting for more favorable conditions – Lower MO and PCR that stays above 1.25 – to go long. But if you can tolerate high high risk, buy  a big dip that seems to be building in pre market trading.

Investors Your dividend stocks, especially ultra high dividend, have outperformed the benchmark S&P 500 this year & in the last few months. In some cases when you add the dividend you actually made a decent profit in a down market. Be happy. Example – In last 6 months –  DOW has gone from @12220 to 11060 and the DVY (ETF for Dow big dividend stocks) has gone from @ 49.5 to 48.83.  An almost 10% loss vs a bit over 1% loss.

As The Critic mentioned (see comments section of blog) puts are getting too expensive to act as protection. It’s not a perfect correlation but you can use ETF’s that short the market. Think of them as a dividend if stocks go down. I’ve used TZA & SDS.

Positions

NLYAnnaly Capital Mgt. Ultra high dividend stock –a 14% dividend

pot of gold

GLD – (Long Gold ETF) Bought at 167.05 last week - Sold 1/2 for 180.4 (see comments section of blog on Friday) Almost +8% profit.

From two days ago - There are simply too many calls out there on GLD. Ripe for a bear raid by HFT’s. Investors411 also likes to take a 5 to 10% profit and let the rest ride. Last reason – Gold should have gone way up as stocks went way down. GLD was down all day and setteled at 176.67

Yesterday Investors411 went over the major political battle going on over gold.  If gold opens higher today in Europe it will be because of Chinese intervention. Still too many call positions on GLD to buy it now. Put stop/sell order for remaining GLD shares at 167.05%

Disclaimer - I buy everything in the hypothetical Investors411 portfolio. I also own  a group of dividend stocks including NLY, SNH, KMP, MO, HTD, ABV & AGNC and a few other smaller positions I have puts on some of the dividend stocks I own. I also use leveraged ETF’s – TZA & SDS to minimize downside risk or make a profit.  I will be purchasing additional YSL #5 stocks when we have a lower MO.

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Long Term Outlook

(for US stocks only – not our economy)

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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