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Regulating the Casino’s

This is the week some sort of financial regulation begins to emerge from congress. Baseline Senerio has the best stuff on this here and here and here

It’s truly unfortunate that Obama is NOT leading the charge to regulate shadow banks or even substantively backing Volker.

Casino Capitalism

It’s critically  important if you are an investor or trader in stocks  to recognize stock prices are being dominated by massive institutions and hedge funds with ultra huge high speed computers.

Mutual funds and your average investors and you day/swing traders etc. make up only @20% of the market. Many average investors have realized that opaque US casino capitalism and stock markets are rigged. They’re staying out of investing.

They trade 24/7 worldwide in currency/bond and stock and are in and out of a company like SNDK often in a matter of minutes.

The best we can do is to follow the footprints (perhaps a better analogy would be is to follow the elephant droppings) of “masters of the stock universe.”

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 +0.38% down
NASDQ +1.12% down
S&P 500 +0.44% down
Russell 2000 +1.44% -

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

Technicals, Fundamentals & Analysis

Another low volume rally occurred in the last 45 minutes of trading.  The key technical that’s showing the most correlation with the US stock market – The Dollar – dropped a bit less than -0.50% (see below) in this 45 minute period and this sent stocks on late day rally.

Some auction of Spanish bonds went well. Spain is the S in PIIGS + H (Hungary) – those countries we know are NOT doing well across the pond. Spain EWP (US ETF) gapped higher at the open for the second day in a row, fell, then consolidated mid – day and rallied into the close. At the end of the day Spain’s ETF shot back led all world markets higher up +3.45%

Spain, because of its size and seriousness of its debt is key factor in Europe’s debt problem. Good news here = Bullish

A double gap higher off a low is certainly bullish (even in long term), but a triple gap higher often means a stock is over extended and will correct. = Bullish

UUP is the ETF that tracks the dollar. EWP (Spain’s ETF) is now the cutting edge to focus on. It goes up, the dollar goes down and stocks rally. France and Germany are more important than Spain (bigger stronger economies). But if Spain tanks its big enough to take a lot of  Europe then the world down with it.

Right now we’re still in the discovery stage,  of which countries in Europe are in what size trouble. This extends from Russian satellite countries on the East to Spain in the West.= Bearish

The most important thing to recognize are stock prices are being dominated by massive institutions and hedge funds with ultra huge high speed computers. Mutual funds and your average investors and you day/swing traders etc. make up only @20% of the market. Many average investors have realized that opaque US casino capitalism and stock markets are rigged.

Fearless Forecast for WeekRally Ho on European Sovereign Bonds & Spain at the end of the week. Should continue this week. Another successful sovereign debt auction in Europe could really move the dollar lower and US equities higher.  I haven’t the knowlege to to understand how deep the European debt problem is. Like the USA it’s hidden in the shadows of unregulated derivatives.

#2 reason for arally is regulatory mandates on shadow banks and casino capitalism seems to be loosing.

The low volume gives the Huge institutions and hedge funds even greater advantage in manipulating markets.

The area on the benchmark S&P 500 around 1105 to 1110 is the next resistance level. SPX at 1091.

Here’s the problem – The MO is starting to reach overbought territory (see below) and this could limit stocks up side (see below) The last time the SPX got up above 60 (high of 75) the SPX was at 1220. We could be at 60/75 well before the SPX reaches 1120 (one hundred points lower)

Nevertheless, those algorithms created by the super computers are spitting out buy signals.

Significant Indexes

  • McClellan Oscillator rose to +43.30 [+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. We moving close to overbought, but still basically = NEUTRAL
  • US Dollar –  The dollar rose Friday +0.33% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. The dollar was @ +0.50% higher and fell into the close.

Reading the Tea Leaves -

Currency markets>Bond Markets>Stock markets. Stock investors are the tail and the tail does not wag the dog. The action is in Europe. If European debt is bought at a reasonable rate, US stocks will improve. Right now EWP (Spain) is the ETF to watch. Of course, there will be more European shoes to drop. But none did over the weekend.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekend.

All the stocks on YOUR stock list as well as ETF’s like FXI (China) EWZ (Brazil) and those that mirror the US indexes (long or better) should do well until ovebough conditions exist.

Expect some sort of dip when the MO gets into the 60/75 range. Perhaps tomorrow.

CAUTION – I don’t have the inside knowledge to predict what will happen in Europe. What I can tell you there is a strong bounce off the bottom in Spain that’s leading the charge. Those huge institutions with their super computers have recognized this and are buying dips in US stocks.  The real question is who is buying European debt?

Best guess – Institutions/govenments that can hide their books and would get hurt by a collapsing Euro.

Change in outlook – This is tentative . Upgrading to NEUTRAL. Technically, this looks justified, but framnkly, fundamentally I sure don’t see the light at the end of the tunnel.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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