What’s Up? North Korea, data, editorials, and raising the alert levels. How we act here impacts Iran – New daily Positions section for recommended stocks – Reading the Tea Leaves, a broader longer term market outlook.

North Korea Info Page from BBC
Map and links from BBC

 

The British Broadcasting Company is a more independent source for information than most American media.

North Korea’s nuclear test is obviously a very significant problem. US and South Korea have just raised their alert level.

Solutions here are going to have to involve China/world taking a more aggressive role against North Korea.  NYT editorial here. Iran is watching what happens here. Giving into North Korean demands obviously encourages every nation/dictator to become a nuclear power.

 

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index Percentage % Volume
Dow -2.05% down
NASDQ -1.11% up
S&P500 -1.90% flat
Russell2000 -2.09% -

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Technicals & Fundamentals 

The NASDQ held onto most of Tuesday’s gains, but the Dow and S&P lost most of those gains. Small cap stocks (Russell 2000) were somewhere in the middle. Volume was again below average. We are stuck in a trading range.

From yesterday – “One interesting pattern is developing – The first trading day of each week recently shown a  a significant move higher and the rest of the week has given up those gains…. Very suspicious over lack of volume.”

XLF - The ETF that tracks financials (mostly shadow banks ) fell -2.99%. Financials has been the leading sector and as financials go so go the markets.

WTIC - Oil prices again closed over their $60 support level +1.60% at $63.45. Energy related stocks kept the rest of the US markets from loosing more ground. As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

Fundamentally – Almost every analyst out there says we have a glut of oil and prices should be falling. 

BDIThe Baltic Dry Index measures the flow of goods (world trade).  The momentum here is bullish (see chart). This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism)

Reading The Tea Leaves - Longer term pattern is clearly consolidation (last month prices have been stabile) and this is good. The bullish trend that started on March 9th is firmly in place.  

If we break out of this consolidation pattern to the upside the Long Term Outlook will change to Cautiously Bullish. Right now, this senerio looks more likely than a downside breakout.  

  • The BDI rising 
  • Technical consolidation in prices 
  • consumer confidence rising  
  • rising commodity prices 

All this shows an improving economic situation worldwide. One downside to all this stimulus is inflation, but for now the mojo is still with the bulls  Questions - 

  • Could it be that we are unwinding the economic debt of shadow banks in the right way?
  • Are we in the last innings of the housing meltdown?  
  • What happens when we impose rules on the shadow banks?  

 As stated before we have dug a huge economic hole. We can go from  -6% GDP growth to zero and this will be positive for stocks. But what happens after that?

Positions - (See positions section of blog for more)

  •  EWZ - From yesterday “sure looks like it was a mistake to take our substantial profits (+26) in Brazil (EWZ) Brazil reached a new closing high yesterday… looking for a dip (-5 to 10%) to get back in.”
  • Inflation - GLD (gold) is one of the hedges against inflation. Down -0.33% yesterday
  • There are ETF’s that also will move higher if/when inflation occurs. Considering TBT  (explanation later this week), but is has way too high a price right now. This ETF has gone elliptical and will wait for a pull back.
  • FXI - our major position here only rose +0.68% yesterday.
  • GEX – alternative energy – +1.91 yesterday 

Long Term Outlook = NEUTRAL

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

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