The human brain isn't so great at making decisions based on facts.

Not Fit for Democracy

It seems that our brains are hardwired against democracy. “It’s one of the great assumptions underlying modern democracy that an informed citizenry is preferable to an uninformed one” A truly fascinating article in the Boston Globe about how the mind works by Joe Keohane concludes-

When misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs

This is why appeals to emotionalism, hatred and fear  in politics and with media sources that the moneyed class own works so well. Rush Limbaugh, Glenn Beck, Fox news, the Tea Party Patriots, Sarah Palin etc. all embrace this emotional bias and hatred. They keep pounding on it day after day. 20 years ago news casts used to report and analyze facts. Times have certainly changed. (See Popeye in comment section of blog)

Now It Gets Interesting

It seems that shadow bank lobbyist were able to to gut or seriously water down the Volker Rule, The Lincoln Derivative amendment and almost all of meaningful bank reform, but they forgot or overlooked the Kanjorski Amendment. I never heard of this amendment before either, but Simon Johnson has“In essence, Kanjorski proposed that a group of 10 federal regulators be given the explicit power to break up big financial firms when they pose systemic risk.”

Now the fun begins –  two Republicans have said they would vote for the bill two democrats against – Senator Feingold (D) does not think it does enough.  The bill does contain a consumer protection agency. Imagine that – something to protect you and me the consumer. More

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 +0.19% flat
NASDQ +0.18% up
S&P 500 +0.07% flat
Russell 2000 -1.24% -

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

Technicals, Fundamentals & Analysis

Mantra for week Earnings Season begins this week. – How markets react to news Will be key. If a stock shrugs and goes nowhere on good earnings news you know theirs trouble ahead. Remember Black Box algorithms  dominate even more as volume declines.

Pathetic volume  & flat market. = Neutral

Alcoa (AA) reported last night and slightly beat expectations – How the market reacts to this news is VERY important. Are slightly better than expected earnings built into stock prices? Will find out today with AA. Futures trding up = Bullish

A downgrade of Portugal’s debt did not hurt stocks yesterday – Bad news not hurting stocks shows that it is already built into market prices or expected by investors. = Bullish

The MO (see below) fell 20+ points yesterday. This gives bulls between 30 and 50 points to move higher on the MO before encountering resistance at +60 to +80. Translation another 2 to 4% move higher in the benchmark S&P 500 s possible before resistance is encountered.

Significant Indexes-

  • McClellan Oscillator (MO) fell to +32.57[+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. This index is just a wee bit overbought  = Neutral
  • US Dollar –  The dollar rose +0.31% Friday [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. The big move was breaking the support level two Friday’s ago which set up the rally for stocks. The swings in prices are smaller, but growing and therefore right now = Less Relevant
  • BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  1840 Monday. This is a huge -56% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a decreased -3.26% yesterday. Rate of decline increased yesterday. = BEARISH

The dip in the MO & the good reaction to bad news (Portugal) means that the bulls are back for another run higher.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds NO position at this time. (see below)

Unfortunately, for us, the MO fell 20+ points. Bringing it down from almost overbought territory. The more overbought the better time to invest in one of the short ETF’s. Right now our best opportunity is to go short in an overbought market – However conditions are not yet appropriate

We missed a chance to go long when the MO went below -50 and  I hope we did NOT miss a chance to go short when the MO was above +50.  The area around +/- 60 has been our go long/go short point. Obviously this line is NOT written in stone. – Only time will tell – But be patient - There will be lots of opportunities to go long and short this year

Here’s a list of some Proshare and Direxion ETF’s that short sectors/indexes. You can find a much more complete list clicking here and scrolling down until you find each funds name and LINKS.

  • SDS - @200% short the S&P 500
  • QID – @ 200% short the NASDQ (basically tech stocks)
  • SH – Short S &P 500
  • FAZ – @300% short financials
  • TYP – @300% short  technology
  • EPV – @200% short Europe

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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