Magician and Magicians US, UK and the rest of the world

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The Magic McClellan

In answer to Doggie’s Mom, Monitor, D & The Critic comments on the MO. First the McClellan Oscillator (MO) used to forecast buying & selling is obviously not magic. We did score big when the MO dipped and we bought in Feb.. We sold when the MO got too high, and we have had some quick outstanding gains this week.

There are well over a dozen other recognized methods  analyst use to measure just about the same thing. Each technical indicator has to be used with a little common sense, reasoning, and a bit of luck.

What happened is the MO got so low (the only time it was a little bit  lower was in the 2008 panic meltdown) or stocks got so oversold that we ran out of sellers.  The odds of a bounce back increased. Reasoning – the crisis was not as immediately bad as it was in 2008. (In the long term things could get worse) This is Warren Buffett type of investing - buy when there is panic in the streets and sell when bulls are stampeding out of control.

For more see  Technically Why Markets Moved Higher & McClellan Oscillator below.

Caution – Nothing is close to 100%. Also, when something starts working well all analysts use it and it stops working. There is a lot of interpretation beyond and in the +/-60 overbought & oversold levels.

Teabaggers

John Sovjani, Who is in no way a Tea Party, Sarah Palin (their darling) or FOX News (their promoters) advocate, has a point. Deficits and Big government (you can go overboard and perpetuate poverty in social welfare) can be very harmful in the long run – A mantra of the Tea Party. These problems need addressing in a systemic fashion but not in a fear mongering, white only, anti Obama fashion as JAB, Popeye and Paul R have pointed out.

The biggest deficit creator of the last few years happened because of the 2008 shadow bank meltdown. Paulson, Bernanke, Bush & later Obama & Summers had two paths

  • Another Great Worldwide Depression.
  • Bailouts, Print money,Stimulate the economy and tax cuts.

The second choice is far less harmful, but obviously created a deficit problem. Letting the insurance and banking system collapse worldwide would have been catastrophic. The folks who created the over leveraged banking problems were the shadow banks themselves and their supporters. The tea baggers were virtually silent when it came to reform of the banking system. Therefore, I understand their power, but see hem as hypocrites.

There is a need for Big or strong government to regulate Shadow banking. Who else will?  The 3 Republicans and 30 Democrats who voted for Kafman/Brown legislation limiting the too big to fail banks are the Teddy Roosevelt’s/Heros of our time. It’s hypocritical to only speak out against Obama and to protect the Shadow and the opaque system that forced a growing deficit on us all.

Defending Capitalism

Answer to Popeye tomorrow



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!

Index Percentage Volume
Dow +1.38% down
NASDQ +2.09% down
S&P 500 +1.37% down
Russell 2000 +2.97% -

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Stocks moved higher in decreased volume. Volume, was NOT a confirmation factor. However after a climax sell off volume usually decreases, and the pattern before markets dipped was rallies in weak volume. Patterns tend to repeat themselves = Bullish

All week long the 50DMA of the benchmark S&P 500 has been mentioned as a key resistance level = RED light for markets. Yesterday the SPX (S&P 500) stopped right on at the RED light. If we can close above this level before the weekend its bullish for stocks.

TechnicallyWhy we rallied - We had a climax selling spree in HUGE volume.  All the weak holders panicked and sold. Everyone left is a more committed to holding investor. Lot of major institutions bought “puts”(bet the market was going to go lower) and were forced to “buy to cover.”  So right now there are not many sellers out there and stocks are moving up. Ultimately we will find some equilibrium or point where a consolidation period begins. (See above on SPX as a possible consolidation point)

There are a small amount of buyers/traders, but no long term sellers right now.

Repeat Great source for what’s happening live in markets around the world & in the US before 9:30 EST Wall Street opening at CNBC Slight upside bias for US right now,Europe, Asia basically up, but this could change in an instant

Significant Indexes

  • McClellan Oscillator fell dramatically to -13.40 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is NEUTRAL territory.
  • US Dollar – rose +0.32% yesterday. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important  Dollar is close to breaking out to new yearly high. = Bearish
  • The BID – Kept climbing. It has broken out to a new 5 month high. The Baltic Dry Index measures the cost or flow of goods/trade between countries. This is positive for export countries like Brazil and China and commodities. Goods costing more means trade is increasing =Bullish

Positions

The  Positions Section = latest buys and sells – (Revised positions yesterday) - These are positions I actually own

I again revised all positions held by Investors411 yesterday because so many stocks/ETF’s were bought in the last 4 trading sessions. POSITIONS is also located at top of blog. (Click on the word at the top of the blog and scroll down to 2010)

McClellan Oscillator has reached NEUTRAL territory – Time to STOP any buying – and because of momentum start thinking about taking profits. If you are a trader and can find an individual stock that is not over extended, you can squeeze in a buy.

I really wish things were different (buy and hold forever), but if we see another major rally today Investors411 will take a little money off the table = sell. If/when the McClellan starts to turn into overbought territory its time to think more about selling.

It’s important to look at how far above the 50 DMA a stock gets (compare on chart to other times your stock got too far above its 50 day moving average)- too far = sell

Our Investors411 Positions are up dramatically.  Some well over +10%. (See Tuesday’s charts)

  • UWM
  • TYH
  • IMAX
  • VCI
  • SNDK
  • FXI (weakest & this is troubling – see yesterday’s post)
  • ESRX (expect this to be less volatile and slower, but steadier)

I apologize if this is seems complicated. I’m really trying to keep it simple. There are more than dozens of different ways to technically measure stocks/ETF’s.  But Investors tries to Keep it Simple by using only a few and staying with what works.

Paul R has some excellent resources he occasionally posts on the comments section. I’ve also, in the past, recommended the Chart School of StockCharts.com

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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