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The Stock Bubble Bursting

Yesterday we went over the fact that the foundation of this stock bubble lies in our huge debt and the shadow banksters

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Since September Investors411 has been describing the impact of  the tsunami of liquidity our Central Bank has introduced and  the influence of High Frequency trading on the stock market. How this Bubble-icious Stock market is forming is listed below in brown in the Technical and Fundamental Analysis part of the blog.

As JS points out in the comments section of the blog – bubbles can build for quite some time. So what can kill this bubble ?  The events in Egypt barely dented it. The answer is good economic  news in housing and employment. Not phony news but real progress. This will mean that the FED will have to stop its quantitative easing.

The tsunami of liquidity means inflation down the road and  our Fed keeps building it higher every day. This makes future inflation more of a problem each day. Socks hate inflation.

Some food commodity prices have gone parabolically higher in the last few days and that’s an early warning signal. This is, in part, driven by the tsunami of liquidity around the world. Some food prices rising are probably not strong enough to cause a meltdown in stocks.   Rather this is a warning of what’s to come. (inflation)

Bottom LIne for those who hold stocks - You can ride this expanding bubble. Old Wall Street term. “Stocks can remain irrational longer than you can stay solvent.”

Perhaps the Fed is playing/manipulating this all perfectly. However, if history is any indication the pendulum always seems to swing too far in one direction.  We all need to stay awake because when bubbles burst the fall is fast and dramatic.

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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 +0.24% down
NASDQ +0.21% down
S&P 500 +0.31% down
Russell 2000 +0.68% -

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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 stock bubble.

  • Once again stocks rallied in below average volume.
  • Mantra #1till it no longer works - still endorsing the concept that the Fed POMO [scheduleis and will be the key factor in keeping a long term rally going. Another term for this is quantitative easing or QE #2.
  • Mantra #2 - 50% to 70% of the volume on US stock exchange is soaked up by High Frequency Trades chasing imbalances in trades. This means 30% to 50% of volume is made up or real or valuation investors.
  • You can NOT compare, use many technical tools, or historic data to evaluate this market because it is being manipulated higher by our Fed or central bank and the majority of volume is soaked up by HFT’s chancing imbalances.
  • Two significant reasons allow the Fed to keep the liquidity tsunami flowing Housing prices are hurting & Unemployment figures are high.

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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] Dollar fell  yesterday  -0.29%. There has been the start of a  short three week bullish dollar,/bearish stocks pattern.  -However last two days were bearish for the dollar and bullish for stocks. Shorter term trend is therefore bearish, but longer term trend is bullish for dollar  = Neutral
  • McClellan Index(MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] Rose to to +31.84. Over the last three months the new parameters seems to be +/- 30 as an overbought/oversold level. Note: the +30 barrier has become a very strong resistance point.  It fell yesterday.  Stocks outlook = Bearish/Neutral (see below)

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Buy the Dip

Reading The Tea Leaves

The same Old SongA manipulated US stock market is moving higher on stimulus, low interest rates and quantitative easing. Financials and stocks have received unbelievable support from our government and the Fed.

We have reached over + 30 on the MO and technically this should slow down any rally. However, we are building a manipulated stock bubble and that throws most of the technical rules out the window. So, be cautious moving forward. +60 is the usual overbought level that has worked well for a couple years. Link to chart above.

There are some early warning signs, but its not time for panic.

What to watch today

UUP - (Tracking ETF for dollar)

Remember - The dollar is a contrarian indicator. Bad dollar = good stocks

AAPL The tech general broke out to a new high and continues to trade above those levels.

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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).

Current ETF Positions. (oldest held positions listed first)(see comments section where all trades are first announced)

  • UWM (1/2 position, took 5+% profits already) Up about 10%
  • REMX (1/2 position, took 5+% profits already)  Up about 9%
  • DBC Up about 1 %. Sold all for +1% profit yesterday
  • RJA Up about 5%.  Sold 1/2 for +5% profit at 11.92

Commodities are being driven higher by inflation fears in emerging markets. The Fed’s POMO program/QE#2 is a/the major driver of this.

Considering an even higher leveraged ETF for small cap stocks TNA (see below)

Warning - some food commodities are going parabolic in big volume. Time to take profits and/or tighten stops in this sector (especially RJA).

UCO -(2x oil prices)  Wait till it consolidates lower  and returns to pre Egypt crisis levels or below.

REMX (Rare Earth ETF) – Really believe this a good long term holding. Considering buying more on a dip today

DGP – (ETF is 2X gold) .

DBC – (Commodities ETF) For a more complete list of commodity ETF’s see POSITIONS listed at top of blog  DBC is tilted to energy. Perhaps preferable or a good alternative would be *DJP that is more agriculture and metals or RJA (all agriculture)

RJA (Agriculture commodities Index)An  ETN, not an ETF. Up a huge +2.75% in big volume yesterday. See warning above.

UWM (2x small cap stocks) TNA (3X small cap stocks) Would add TNA on big dip

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See ”POSITION“ section of blog (at top of page) for lists of potential stocks & ETF’s including ”YOUR Stock List.” (YSL#4 is under construction.)

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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