Quantum Economic Shift

Both Jim J & JAB sent in a Simon Johnson & Peter Boone article on how bad the European/American situation-

Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialized countries are at risk, but it’s the eurozone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.

Investors, still have what happened in 2008 fresh in their minds. Now the European debt crisis is upon us. It doesn’t take a behavioral economist to predict what will happen. Fear is twice as powerful as greed according to behavioral economics.

Casino capitalism advocates (Tea Party followers & others) are going to blame European socialism. They are in part right. Patronage, corruption and socialism that went too far exacerbated their debt problem. (see yesterday’s Investor’s411 and Fridays for additional warnings about what’s happening)

Bottom Line – Wolves have wormed their way into the henhouse of capitalism, the US congress, and the Obama administration. Debtor nations, with over leveraged, non transparent shadow financials are privatizing gains and socializing risk. The worst is yet to come.

Why trust these two? Because they have been right again and again. Here’s Johnson and Boone on May 8th questioning the stock market at its hight. Unfortunately as Johnson and Boone warn its not the wolves (shadow institutions and free market capitalists) who are going to pay – it you, me and now Europeans.

Our ship is sinking and the captain that steered it into an iceberg in broad daylight is getting rescued and given another ship.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary


Index Percentage Volume
Dow -1.24% down
NASDQ -0.69% down
S&P 500 -1.29% down
Russell 2000 -1.24% -

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

Technicals, Fundamentals & Analysis

US markets fell into the close as dollar soared. =  Bearish

Significantly Lighter Volume indicates things have settled down for a while.= Bullish

Markets still way oversold (see McClellan Oscillator) = Bullish

Dollar’s massive rise = Bearish

Fear over Europe and North Korea (war drums) has futures way way down.

Analysis – Investors411 has been too slow in exiting positions despite making repeated warnings and changing long term outlook to CAUTIOUSLY BEARISH

Mistake not to invest more in SDS as mentioned yesterday

The only silver lining to the up coming storm, is McClellan is oversold and when we get down below -135 we could have another oversold bounce. A 2 to 3% Dow fall in big volume could put us in -120 to -135 territory.

Significant Indexes

  • McClellan Oscillator rose slightly to -89.94 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is OVERSOLD territory. = BullishRepeat -Hate to say this, but once the trend broke this index has become less effective.
  • US Dollar – Friday the dollar rose again to $86.36 Up a massive +1.16% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important .  = Bearish..


The  Positions Section = latest buys and sells  - These are positions I actually own

The whole positions section has been refurbished. Many thanks to one of you who helped and wants to be anonymous.

One of the cardinal rules of investing is don’t loose large amounts of $

Yesterday Sold

  • 1/4 IMAX at 17.88
  • 1/2 IMAX at 17.52
  • 1/2 FAS at 24.45
  • 1/2 of FAS at stop loss of 23.75
  • 1/3 of ESRX at 101.25
  • 2% position bought in SDS at 35.25

Remaining long positions 1% IMAX 2% VCI & 2% ESRX. 2% position in SDS is short.  While all these are out preforming major indexes – They haven’t fallen past their 200 DMA – I’ll be looking to cut back more long positions in any in rally today. Still very interested in owning these companies, but overall bearish trend is established.

New Stock/ETF List

Tomorrow our old “YOUR Stock List will return

Bottom Line - Now is NOT the time to think about going long but  to start to think about using SDS and similar ETF’s that short the market (2X short S&P 500) in a rally.

All the following will go up when stocks go down (TLT is exception but a flight to safe investments and generally moves opposite US stocks)  If we fall to a major correction (Dow now down 10% and falls to 20% – these ETF will make YOU $)

  • EUO – Ultra short’s the Euro (ultra = 2x)
  • EPV – Ultra short the big companies of Europe (new – very thinly traded)
  • SDS – Ultra Short S&P 500
  • QID - Ultra short QQQQ(tech stocks)
  • TZA - 3X short small cap stocks
  • TLT20 year treasury Bond fund

Investors411 will open a position EUO on first dip and add to ultra shorts on rally.



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