The significant problems we face today cannot be solved at the same level of thinking we were at when we created them.

Albert Einstein

Albert Einstein, 1921

Albert Einstein, 1921

 

Barack Obama addressed (video & Transcript) the Muslim world yesterday in Cairo Egypt. He earned a standing ovation from the crowd of 2500 many with “tears in their eyes” (al Jazeera report) and no one threw shoes.

Obama

If you think in one dimensional fundamentalist terms like Osama Bin Laden and others you hated the speech. True fundamentalists everywhere believe your “either with us or against us.” In fact, Obama did not even once dignify the radical extremists  by  mention the word “terrorist” in his address. Instead he mentioned the word “peace 29 times.

I have come here,to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect; and one based upon the truth that America and Islam are not exclusive, and need not be in competition. Instead, they overlap, and share common principles — principles of justice and progress; tolerance and the dignity of all human beings.”

Yesterday the USA started building a bridge or, for those old enough to remember, you might call it introducing”detente.”  Extremists need growing hate to swell their numbers. Obama took that away.  al Jazeera, the #1 media outlet in the Arab world, editorialized Obama’s speech “was more than just soaring oratory and soothing words.”   This was just one small speech of a man, but perhaps one giant step for mankind.

For more see David Levy’s 10 Comments, or David Corn’s Obama’s Tough Tour de Force

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index Percentage % Volume
Dow +0.86% flat
NASDQ +1.32% up
S&P500 +1.15% up
Russell2000 +1.72% -

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Technicals & Fundamentals 

The NASDQ was the only index that had confirming (the price move) above average volume. Volume is still not confirming the price move for both the Dow and the S&P 500.

8:30 AM EST Unemployment Numbers for May -345,000 Much less than expected and a 154,000 drop from previous month. Last two months revised down @80,000 and unemployment rate at 9.4% Wow! Blow out numbers for stocks.

$USD - The Dollars fall significantly impacts the rise in oil prices (oil , for the most part is traded in dollars) The fall of the dollar influences a  lot more (stuff for future posts)

XLF - The ETF that tracks financials (mostly shadow banks ) rose +3.58%

WTIC - Oil prices rose +4.07% to $68.81 – A new high for the year. As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade).  After what seems like almost a month of consecutive up days in a row the BDI fell yesterday.  A one day drop from 4,291 to 4080 in itself is not significant, but a 5 day trend to the downside would be. 


Reading The Tea Leaves -  

The longer we stay above breakout levels, the better it is for the bulls. Lack of volume is a concern and we have to watch the BDI to see if the reversal grows. Until we fall back into the consolidation pattern the new CAUTIOUSLY BULLISH outlook holds.

The Hedge

This is both a new concept and a new position for Investors 411. It’s really not that complicated and does not involve you buying puts and calls. It’s simple and if it works you could money no matter if the market goes up or down.

Basically your investment is that the NASDQ 100 will outperform the S&P 500.  If markets rise the NASDQ will go up faster (it did today by +0.17% – see above chart) If the markets fall, hopefully the NASDQ will fall less.

Reasoning – A large part of the top 100 NSDQ are well capitalized tech companies and tech usually outperforms the S&P in up markets. The S&P 500 contains a lot of insurance and financials that already have had a massive run. In the future there will be a battle over how to regulate these companies. This should negatively impact these stocks. 

Technically this hedge has been working over the last two months.

Here’s the trade – Buy equal dollar amounts of the following two issues.

QLD -Does @2x long what the NASDQ 100 does (ProShares Ultra ETF of QQQ)

SDS – Does @2x short what the S&P 500 does (ProShares Ultra Short S&P 500)

Because the NASDQ outperformed the S &P by 0.17% this hedge probably made @0.34% yesterday. Caution there is rarely a 100% correlation to the the two major indexes do. Basically it aproximates.

Either QLD or SDS is going to make money over time the other will loose. You probably will not make as much $ as you will in going all long or all short. But my read of the tea leaves is this stands a good chance of being a winner,  I’m personally committing @15+% of portfolio to this hedge.

Long Term Outlook CAUTIOUSLY BULLISH

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

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