Gang of 21

Snidely Whiplash – Shadow Banker

Imagine if you will, a gang of 21 Snidely Whiplashes [AKA Shadow Bankers.] The problem is you don’t have to imagine – THEY EXIST

Here’s the List of the Fed’s 21 Primary Dealers. Just what powers do they have besides borrowing money for nothing and what are they now up to?

  • You can sell bonds to them and get freshly minted greenbacks in return.
  • Our government has blessed them with opaque accounting rules so who knows what they do with the money.
  • The bulk of their money certainly is NOT going into mortgages or helping small business grow -
  • Lots of Dudley Doright’s (Snidely is Dudley’s arch enemy) suspect that that money is going into Black Box/High Frequency Trades that keep pushing stocks higher. They invest on algorithms and market distortions NOT valuation.
  • Lots of Dorights suspect the money is going into more complex massive derivative market – A still totally UNREGULATED Market
  • Who believes shadow banking culture has changed?
  • Did the Sindlely’s buy off enough in congress to crush banking reform? Will they further weaken reforms in place?

Life is pretty good if your name is Snidely “Big Taxpayer Bonus” Whiplash right now.

Dudley Doright (below)

CiscoWhy their earning Matter to YOU

Teach giant CSCO earnings report shattered the stock yesterday (-16.21%) Its report showed slower than expected growth in Europe, US and especially government spending.

In the US the Obama stimulus/tax cuts, and other world wide stimulus programs have run their course. The US stimulus along with the The Fed’s “print and dump” of $$$$ has been primarily what’s holding up GDP in the USA and improving the jobless picture.

The training wheels have come off the economic trike and yesterday and Cisco is saying things don’t look good. Add to this

  • Palin and other Tea Kettlers (Tom Friedman term) have come out against Bernanke and the print and dump of Fed cash.
  • Lots more Republican governors after election who are going to further cut state spending.
  • No new stimulus seems likely in Congress with Republican takeover of the House.
  • Many European governments are cutting government spending also.

Emerging markets are doing well, but the US & Europe are running along an economic cliff with blindfolds on. Long term we do need to make some serious decisions about our economic future. See NYT editorial – Some Fiscal Reality – that Popeye suggest in comments section of blog.

Fiscal reality while running along an economic cliff.  Yikes.

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

Index Percentage Volume
Dow -0.65% up
NASDQ -0.90% up
S&P -0.42% up
Russell 2000 -0.45% -

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

US Stock Markets -

Big volume behind yesterday’s selling with CSCO leading the way down -16.21%. Lots of that volume was the massive 500+ million CSCO shares traded.

Stocks keep absorbing body blows of bad news. See below. We reached a critical resistance level for the dollar. If the dollar breaks out of its range to the upside it should be one uppercut to the chin that could send stocks tumbling to the mat.

Under what used to be a normal market where Investors & a stocks value ruled bears would already be in charge. Mantra - Black Box/High Frequency traders dominate 50 to 80% of this market and they are buying the dips.

Significant Indexes

  • The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] For the 4th day in a row the dollar rose a significant amount. +0.75% yesterday. Dollar broke its support level last week, but yesterday it broke back up through that resistance level. The trend for stocks = BEARISH/Neutral
  • The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China, emerging markets,&  exporting countries]Fell  a massive -3.59% yesterday. BDI now consolidating after bull run that began in June. The BDI has been overshadowed by the dollar moves. Sitting directly above major support. Big breakdown though its support level = Bearish
  • McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] Fell  to -20.02 yesterday.  = NEUTRAL

Reading Tea Leaves.

Three major Bearish sign emerged yesterday.

  • The BDI broke down through its support in a BIG way -3.59% Probable cause – No real unity apparent at G20 hurts world trade.
  • The USD has had a massive 5 day rally. Sure looks like its resistance level will crumble today. (see chart). Stocks have held up remarkably well through the dollars assent, but breaking through resistance is BIG. . If two resistance lines fall – watch out.
  • CSCO massive 16% decline held up though out the day. This is a huge drop for a major major tech stock on earnings. The rest of tech did remarkably well,

When you add CSCO to the dollar’s rise & the BDI’s fall its three strikes. Perhaps a silver lining here is the falling 50 day moving average for the dollar (another significant resistance level) is just $0.56 higher. The dollar is rising like a rocket, but taking out two signicant resistance levels may be hard.


Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions)

  • EWS (Singapore)
  • EEM (emerging Markets) Have stop on position at what it was bought for.
  • DGP (2x gold)
  • TYH (3x tech stocks) Bought at 40.63 yesterday. Sold 1/2 near close at at 42.06 for minor @ 3/4+% gain. Stop on the rest at 39.25 – If this gets stopped out today then there will be no gain

Short term traders – TYH was bought because the BB/HFT traders keep supporting stocks. The dollar’s gains were significantly for the 5th day in a row so I sold 1/2.  Probably should have sold it all – but greed won.

Not entering any positions on dip today, but watching UUP (tracking ETF for dollar closely).

Traders & Investors with tolerance for high risk.-  Any significant drop in equities should bring the MO down to -25 (see above) support level and an opportunity to buy. Today is very significant, if we end up with the Dow down 100+ points it will mean the MO has broken support and is probably on its way to -60 or beyond. That would be a point we could start to nibble again.

Investors - I know its been a long wait for the MO to agin get close to -60/oversold/ safer to buy area. Be patient and also remember when we cross -60 everyone going to be saying the sky is falling. MO at -20.02 and today some major bearish signals came into play. So we should reach oversold soon. Today is very significant, if we close with the Dow down 100+ points it will mean the MO has broken support and is probably on its way to -60 or beyond. That would be a point we could start to nibble again.

Remember we are revising YOUR Stock List so send in your choices to me or post them in the comments section of blog. YOUR Stock List works because YOU send in stock ideas. Here the guidelines for entries.

  • The 50 day moving average must be moving up. That’s the blue line if you are using Stockcharts
  • No thinly traded stocks. Absolute minimum $2.5 million dollars worth of this stocks traded each day.  (example over 500,000 shares traded and worth $5) Over $5 million is preferable. Smaller stocks are too easy manipulated by major players.
  • Maximum 2 entries.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocksETF’s including “YOUR Stock List.”

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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