Bear Face Photo

Economics – What’s happening — We have moved away from the edge of the economic cliff and now folks are realizing that the world’s economy is in trouble. Its possible that Brazil, China and India will lead us out of the mess created mostly by the USA. Time magazine’s Justin Fox has an interesting article on what has been the mantra of Investors411  here

The Baltic Dry Sea Index is a critical gauge of the world’s economy (trade) and is has broken support levels. This is NOT good news. (see below) Can’t over emphasize this chart enough!

I’ve mentioned before, the problems with Larry Summers and Obama’s economic plan .  One major problem is that the stimulus plan is back end loaded and we need the help now. We’ve only spent 10% of the stimulus so far. A lot of states would have gone under and employment would have rocketed if there was no stimulus, but the new jobs were NOT shovel ready.

Until we rebuild our financial system its hard to see any long term recovery.  So far all we’ve done is talk about it.

However, the major problem is in underestimating just how huge  the economic mess really is. See Overview & Strategy Section of blog and lots of past daily updates.



Index Percentage % Volume
Dow -1.94% flat
NASDQ -2.31 % up
S&P500 -1.97% flat
Russell2000 -1.98% -

Investors411 record – 4 1/2 years of beating benchmark S&P 500 (see results click  6/25 & scroll down)

Technicals and Fundamentals

Another major meltdown in below average volume. The S&P has now fallen back down through two major support levels – its 50 & 200 day moving average. As stated before the line in the sand is 875 support level (see past updates and look at chart on side of blog) SPX at 881.

As predicted at the beginning of the week we are already challenging the major support level.

Earning season starts as Alcoa (AA) reports at the close of US markets today.

The lack of volume still troubling factor. – One things for sure-money on the sidelines is staying here. Its hard to make a long term forecast with volume as a confirming factor .

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

These are important forecasting tolls, but secondary to volume .

BDI The Baltic Dry Index measures the flow of goods (world trade) . BDI fell sharply again on Monday & Tuesday. Trade has broken through its support level and that decline was confirmed by another drop Tuesday. WARNING The breakdown in trade is very significant to any worldwide recovery. BEARS RULE

$USD - The Dollar rose +0.34 % yesterday The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down. Dollar closed at $80.72 and has been trading for  a month between @$81+yesterday= and $79+. So the dollar nearing the top of its consolidation range. Long term Bearish pattern for Dollar ( bullish for stocks ) that is consolidating pattern now ( neutral but turning bearish )

WTIC Oil dropped another -1.75% yesterday. and 11% over last week. (see chart) The 5 day fall has been significant and has NOT been accompanied by a significant rise in the dollar. (dollar works inversely to oil prices) What oil markets seem to be saying is demand is weak out there and the world’s economic picture is less bright than traders thought. = More Bearish news for stocks


Back to CAUTIOUSLY BEARISH outlook. This is in anticipation of a further breakdown of the BDI and S&P 500 .   Both of these have happened.

Our Positions (For more see Positions section of Investors 411-scroll down)

Monday/Tuesday’s  Recommendation -  take some $ (1/3) off the table in China (FXI ).

The Hedge – So far the QLD has lost -10.39% and the SDS has gained +10.88% Check out Positions section on top of blog = total gain +0.49%

I plan to buy back all recommended foreign ETF’s – just hopefully at a lower level. Perhaps when  S&P dips to support level @875. Perhaps lower

Bottom Line – The BDI has rolled over. This is important.  Investors 411 has closed a lot of long positions over the last month or two. The last being 1/3 of China investment. The short term may not look good, but it should also son be another buy the dip opportunity.  We will use the BDI turning back higher as a reentry point.

More tomorrow


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


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