Outlook for 2nd Quarter

Case for the Bears

  • Japan problem is underestimated and damage to the country’s GDP and the world’s supply change is worse than expected
  • The latest housing and consumer confidence numbers are worse than expected and a second housing recession is expected.
  • It’s only a matter of time before one of the PIIGS countries in Europe defaults and it will spread.
  • Libya is a stalemate and challenges/chaos toward oil dictators will grow.
  • State budgets are breaking down because of the lack of revenue and this means greater unemployment.
  • More people in the USA are on food stamps than ever before.
  • Opaque corrupt Shadow banks  are facing a mortgage crisis (thanks to Robert H for the heads up on the 60 Minutes Show)
  • Quantitative easing will end and everything will fall apart because there is no entity big enough to buy as many treasuries as the Fed.
  • Inflation and the over supply of unsold housing is going to explode in China, sinking the rest of the world.
  • Inflation is coming and this will squash equities
  • Earnings disappoint

The Case for the Bulls

  • The Fed is going to keep pumping liquidity into the economy. QE #2 continues to June 30th.
  • Even after 6/30 there will be a whole lot of liquidity sloshing around and QE 3# is likely if we start falling.
  • The recovery from -700k jobs per month to +200k jobs per month shows an economic rebound in the USA.
  • Emerging markets are growing again.
  • The lack of wage growth and the huge numbers on food stamps in the USA will keep inflation lower than expected.

Bottom Line for Most StocksOnce a trend is in place, you go with the trend until it breaks.

The Fed Rules (see past updates starting in November or Strategy Section of blog) This trend has crushed major black swan events (Japan & revolutions &  anticipated impending doom listed above) and until it breaks its strong.

This trend has a new force behind it – the better employment numbers. As unfortunate and cruel as the lack of wage growth and record number of people on food stamps  is, it serves to mitigate inflation. Obviously it also show an wealthy oligarchy further crushing lower class Americans.

Dramatically higher oil prices and/or a dramatic fall in the dollar could break the bulls. Of course some unforeseen catastrophe could too. Also,  if earnings season is a disaster, instead of mildly disappointing we could end up down.

Short term we are oversold and ripe for a small correction, but the Long Term outlook remains CAUTIOUSLY BULLISH

and – yes its all a bubble – How can you build a growing economy on a corrupt financial structure and a  growing imbalance of wealth in the #1 economy of the world?

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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!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index Percentage Volume
Dow +0.19% down
NASDQ -0.01% down
S&P 500 +0.03% down
Russell 2000 +0.31% -

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

BUBBLE-ICIOUS - Investors411 term for the stock market – We are all riding on the outside of an ever expanding &  Central Bank manipulated liquidity stock bubble. See Investors411 STRATEGY section for more. Remember Fed liquidity (POMO, QE 2 or quantitative easing) announced ending is June 30th.

  • Yawn - Another low volume rally. In fact, the lowest , non holiday,  volume day since 2008.
  • Repeat - Bulls have two strong fundamentals – Jobs are recovering and Fed’s liquidity injections.-
  • Because of the corruption, and lack of transparency housing still a major problem
  • Wages still have not increased for most American workers.
  • The above two factors should mitigate rising inflation in commodities.
  • China has raised  interest rates4th time since October – They are worried about growing too fast and a housing problem. This will hurt stocks in the near term
  • Emerging  Markets are leading this leg of bull market and the above should give them a whack.


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Shorter Term Forecasting Indexes

  • The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks]   The dollar saw a huge rally collapse and ended  a wee bit higher +0.10. Chart pattern showing volatility/erratic so short term hard to call, but longer term bearish  For stocks = Bullish/Neutral
  • McClellan Index(MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] MO fell to +46.12. Over past three months The MO has had problems getting over +30. This is, therefore, the highest the MO has been since early September 2010. We haven’t hit +60, but for stocks = Bearish

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Reading The Tea Leaves

Little change from yesterday, except that the leading emerging markets are even more overbought and overdue for a correction.

Bottom Line - No Black Swan events have been able to seriously impact the Fed liquidity driven equity market.

What to watch today - Market movers - UUP (the dollar) still has most influential, unless others make some huge move.

  • USO - ETF for oil - Oil up = stocks down - Now back above $100. - Headlines from Libya not good.
  • UUP - (Tracking ETF for dollar) Remember - The dollar is a contrarian indicator. Bad dollar = good stocks
  • AAPL – Tech giant and market mover – Trading below its 50 DMA. Since mid February this char shows a series of lower highs and lower lows = Bearish
  • Japan Rector Developments – This keeps getting worse.
  • EEM – Emerging market ETF – On a breakout run, but getting  way over extended.

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Positions

The POSITIONS Section at top of the blog is a link to 4 different portfolios. It’s full of investment idea. Below is the actively managed portfolio #3 – Aggressive ETF Trading – To follow this and Portfolio #4 Your Stock List keep an eye on the daily blog and the comment section.

(I do manage 6 accounts that have other positions).

Below are the recommended ETF’s/ETN’s for the 2nd Quarter

  • Since many of these choices are not directly related to stocks on the NYSE the MO & the Dollar may influence them differently.
  • Buy the dip is a recommended strategy (Investors411 likes the 17, and 50 DM’s) Especially don’t buy when stock is too far above 17 DMA
  • A 7% to 10% trailing stop loss is recommended
  • World events impact these sectors
  • Investors411 believes these sectors should outperform the S&P 500 now through June 30
  • Investors411 expects, baring a change in world events, a higher S&P 500 on June 30th.  Emerging markets and US small caps stocks are especially vulnerable to any meltdown of the S&P.
  • You can use part or all of list.
  • Note - I own SLV, REMX, UCO, UWM,RJA, EWV and plan to own ILF on a dip.

UCO -(2x oil prices) Why not, its also a hedge against higher gas prices. Historically driving season in summer drives prices up in the late spring. Supply problems exist because of revolutions/instability in oil producing countries. If these problems are resolved then UCO should NOT be held.

REMX (Rare Earth ETF) - Really believe this a good long term holding.  Simply put because of limited supply of rare earth metals and big demand is going to outperform almost all other sectors. Only some sort of major economic collapse will hurt this sector. A buy.

DGP – (ETF is 2X gold) and/or SLV (silver). AGQ (2x silver) Both inflation worries and a falling dollar positively impact this sector. Silver actually has a manufacturing component.

RJA (Agriculture commodities Index) For a more complete list of commodity ETF’s see POSITIONS

UWM (2x small cap stocks) or TNA (3X small cap stocks) The later for more aggressive traders. Closest correlation to MO and falling dollar. Small cap stocks are outperforming.

EEM (emerging markets) and/or ILF (Latin America) EDC (3X emerging markets) The later for most aggressive traders. Emerging markets are leading the world and after underperforming for years they are back.

EWV (ultra short Japan) The horrific and tragic situation there has been minimized. This holding acts in part as a hedge especially for US small cap stocks and emerging markets.

TMV (3x 20+ year Treasury yields)

A winning hedge has been UWM & EWV combination (some of you may have problems emotionally shorting Japan)

ROM (2x techs) & TYH (3x techs) The later for most aggressive traders.–  Technology has been toasted and if the S&P is higher on June 30th, this sector should catchup.

I’ll keep this on the blog’s home page for a week or two then place it ion the Positions page.

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Your Stock List created 3/7 has underperformed the other 3, because it is overweight tech stocks. A major tech stock, Texas Instruments, bought another company and this should help the whole tech sector today. Paul R often comments on these and other stocks/sectors in the comments section of the blog.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. SeePOSITION“ section of blog (at top of page) for lists of potential stocks & ETF’s including “YOUR Stock List.

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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