Afghanistan

US ambassador, former general/commander in Afghanistan, Karl Eikenberry , has “deep reservations ” about sending more troops to Afghanistan. His major objection is corruption in a country’s whose #1 economic product is opium. LINK & LINK

Finally a major columnist has drawn a comparison between spending money on heath care vs. spending money in Afghanistan . NTY’s Nicholas Kristof argues -  are we “better off spending that money blowing up things in Helmand Province or building up things in America.” LINK Lack of health car kills about 45,000 Americans a year and the Taliban in Afghanistan have not exported their violence to the USA.

Sherwehe points out in comments section of the blog LINK 2,200 0f those are veterans who lacked health care according to a Harvard study. If the current figures hold up “This year more veterans will die from suicide than will die on the battle field.” and “800,000 vets live on the street. “

As pointed out before the major problem is Pakistan – 5/6 time the population of Afghanistan and a nuclear power. According to polls and DAWN (leading English speaking Pakistan paper LINK ) views of Americans are deteriorating rapidly.

Bottom Line – We simply can no longer afford to keep nation build around the world. Investors should note this is just another reason to invest in countries that are focused on building their middle classes instead of nation building opium rich country’s like Afghanistan.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

Dollar rose an anemic +0.07% , & US equities actually managed a minor rally in anemic volume.

The BDI is on fire. (see below) This is very positive for world trade, commodities, and an indicator China is buying.  In the OVERVIEW section of the blog PEAK OIL is mentioned as one mega trend impacting economics and stocks. You might consider peak oil as subset of commodities . As world population and middle classes in emerging markets grow the finite amount of commodities become more expensive.

Patten developing – On Thursday market’s fall in expectation of weekly jobless number and stocks rise on Monday – because of some merger.

The longer the dollar holds above its support level the stronger support becomes.

——–

Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI is @ 13% off its high (early June) Before that it gained almost over + 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 )

The BDI rose a VERY significant +133 points yesterday and closed at 3748. Up 11 days in a row. A higher high price on its chart pattern has been confirmed The BDI has rallied about 1600 points since late September. =  Bullish for stocks & world trade right now. Especially good for our positions in FXI & EWZ

——-

The Dollar is currently the #1 forecasting tool .

$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.

Mantra – Dollar up = US stocks down & Dollar down = US stocks up

US dollar was basically flat +0.07% yesterday. The dollar closed at $75.10 .  This is directly above its, line in the sand, support level. As predicted yesterday – “ Usually a major support level at least temporarily halts any fall.”

The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at $76.32 this AM . The support level is  a t @$75.00 Both are important lines in the sand. A breakout on either side will move US equities in the other direction and the world will follow.

——-

$NYMO The NY Stock Exchange McCellan (EOD) Index measures how much the NYSE is oversold or overbought .

The index closed at +16.70, – Not yet oversold, but moving in this direction,

Key to chart – 0 is roughly  neutral and when you get to @ +60 you are overbought and approaching -60 you are oversold. Buy at oversold and sell at overbought. Nothing is absolute in this chart. In fact using the moving averages as a central point is better than using zero. Nothing is absolute about the minus or plus 60 number either.

Oversold conditions = buy

Overbought positions = sell

Positions

The  Positions Section (top of blog) to see all the latest buys and sells

Sorry have not had a chance to update Positions section in over a week

Investors

FXI – China – (now 25% of portfolio) At new high – up over 50+% this year

EWZ- Brazil – (now 20% of portfolio) At new high – up over 100+% this yea r

GLD (now 11% of portfolio) At new high – up over 20+% this year

Comments – NOT the time to buy or add to these positions.  Enjoy the rally.

Going to add Indonesia & Vietnam ETF’s – but waiting for dips. Also going to add DGP (this ETF does about 2x what the GLD does) – More explanation later. As a trade like GS. Again, waiting for dips

Traders (short term plays) These are not ETFs, but individual stocks

Extra Note of Caution here – Even though I always warn you AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! please note I’m far less confident in individual stock picks

NVS – (5% of portfolio)  We’ve already sold 1/2 of this for +12% gain  Now up 16+% since bought

CSCO – (5% of portfolio) Flat since we bought position a few weeks ago . – Going nowhere while markets have moved higher.  Selling soon for @ -1% loss – Hopefully into a rally. Sold 1/2 yesterday for -1% loss

AMZN – (now 5% of portfolio  ) Bought last Wednesday – Sold 1/2  for 11% gain . Like NVS letting the rest ride .

Long Term Outlook – The dollar looks like it may break down through major support and the benchmark S&P 500 is on the verge of a yearly high – Outlook will change to CAUTIOUSLY BULLISH if/when this happens. Instituted change, but subject to change

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

More Troops – Bad Bet

Nicholas Kristoff’ s editorial in today’s NYT on why more troops in Afghanistan is a bad bet. Investors411 praised the fact that we tripled aid to Pakistan.  Here’s Kristoff’s money quote.  “American policy makers were completely blindsided in recent weeks by outrage in Pakistan at the terms of our latest aid package — and if we can’t even hand out billions of dollars without triggering nationalistic resentment, don’t expect a benign reaction to tens of thousands of additional American troops. ”

Jobs Jobs Jobs

Investors411 has painted a bleak picture of long term job prospects for Americans over the last few month. When you add to this shadow banks are still in the shadows and foreclosure problem is at best stabilized you have a bleak picture for Main Street USA.  Perhaps those that have seen gains in their stock portfolio’s since the spring will spend and juice the economy. However, especially for older workers, as Abby Gold in the comments section points out, on Main Street its not a rosy picture.

Solutions – One specific help would be to extend something like the $8,000 homeowner credit for first time home buyers. 350,000 buyers took advantage of this program – it worked especially for lower priced homes. The ripple effect is those new home buyers have to furnish those homes. Two respected individuals have offered their solutions

• Mort Zuckerman (right of center – editor of US News & World mag.) in an editorial titled “The free market is not up to the job of creating work” suggests a “massive program(s)to restore stable jobs growth.” He suggests a National Jobs bank and allocating $65 billion toward it. LINK
• Tom Friedman (left of ccenter/pro business – NYT columnist) looks at the failures of America’s education system to keep up with the increasingly  globalized world.  Here’s the money quote – “While the subprime mortgage mess involved a huge ethical breakdown on Wall Street, it coincided with an education breakdown on Main Street — precisely when technology and open borders were enabling so many more people to compete with Americans for middle-class jobs. ” LINK

Pay Cuts on Bailed Out Companies

Obama administration is forcing pay cuts on top executives of 7 bailout firms. Good first step, but what about all those other shadow financial institutions who used the Fed or collected big time from AIG’s  bailout? Goldman Sachs & many others gets away without any claw backs in this. Huffington Post LINK or NYT LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

This is a US stock market dominated by professionals and traders.  Some sort of programed trade kicked in the last hours and the pro’s left the building.  The volume way well above average and the fall from what was a rally was over 1%. Volume increased significantly in the last hour’s price collapse = Bears asserting dominance

The dollar fell significantly which almost always means US equities rally. This again = Bears asserting dominance

The dollar fell so overbought oil prices rose significantly LINK to chart +2.25 to $81.37 . Obviously oil prices above $80 is going to hurt ma and pa consumer in any recovery.  Sure looks like some entity or group is manipulating oil prices. Up 9 of last  10 days and going parabolic (up too far too fast)= Bears asserting dominance

The BDI rose (probably did not have time to react to swift fall in equities)

Reading the Tea Leaves – There is no specific fundamental(s) that you can point to that says yea that’s the reason stocks tanked in big time volume at in the last hour of trading.  Obviously “the Pro’s” know something us common investors do not. Earnings season has been much better than expected with companies beating on both TOP and bottom line. The dollar fell. The BDI is rising.  Stocks should be rising.

Stocks falling on good earnings news, a rising BDI and a falling dollar is a disconnect from what has been a historically a positive trend .  Think of this as a sign in the road saying WARNING SPEED BUMP AHEAD.

——–

Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI is @ 30% off its high (early June) Before that it gained almost over + 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 )

The BDI rose a significant +85 points Friday and closed at 2917. A higher high price on its chart pattern has been confirmed and it sure looks like a bullish run could be starting. =  Bullish for stocks & world trade right now

——-

The Dollar is currently the #1 forecasting tool .

$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.

Mantra – Dollar up = US stocks down & Dollar down = US stocks up

US dollar fell a significant -0.55 % The dollar closed at $75.12 . We have developed a support now resistance (it’s called support on the way down and resistance on the way up) level just below $76 . The dollar closed below its support level. = Bullish for stocks

NB -

• Earnings will probably trump the dollar as the #1 influencing factor for the nest two weeks. But the falling dollar is the main driver of stocks right now and we have a long way to go till we hit last year’s $71 low.
• A slow decline in the dollar = good a rapid decline = bad .
  

Last year’s low was around $71,(March 08 ) so there is a long way to go before the major and very crucial support level is reached .

The dollar does have a support level around $74.00( a high from about a year ago – see long term chart)

Positions

The  Positions Section (top of blog) to see all the latest buys and sells

Trades made this week are updated at the end of the week. -  Sold 50% of position in EWZ and all of EWY. Have no position in XLE. Also for TRADERS (not investors) strongly considering buying some companies listed yesterday that had outstanding earnings, but have fallen over last few days.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

Perhaps the World’s Best Known Economist

Joe Stiglitz – Photo John Thys/AFP/Getty Images

Joe Stiglitz “is cited by more economists than any one else in the world” Stiglitz is an “economic prophet” and Nobel laureate who predicted the current economic meltdown. Investors411 has for years been quoting Stiglitz starting with the true trillion dollar cost of the Iraq war.

So why is the Obama administration ignoring this Nobel Prize winner? This is one of the major stories in this week’s Newsweek and can be found here .

Paul Krugman , another  Economic Nobel Prize winner goes even further here

Instead of surrounding himself with some progressive economists who warned of upcoming economic meltdowns, Obama has surrounded himself with a Goldman Sach’s crew featuring Larry Summers who participated in building the economic mess.Remember,  Goldman Sach’s, who was a prime mover in creating the economic mess and  took both bailout & Fed money, had a huge positive earnings surprise this quarter.

Health Care

Photo – WaPo

Jim DeMint the Republican Senator from S. Carolina who considers the Obama government “national socialist” (a nazi – like Hitler’s Germany ) says the right wing will use the health care debate to “Break Obama.” Story here

He’s right about the break Obama part.  If health care reform does not get off the ground this summer (some form passes both House and Senate) it will die because unemployment will rise before it falls. This will put Obama in a far weaker position.

It’s time for Obama to stop worrying about consensus building in congress and to start playing hardball.  WaPo on Obama’s next move Hardball?

Your Comments

Popeye adds some more information about the secret  fundamentalist group behind US politicians (see Thursday’s post & comments to the left) – The Family . You can find out a whole lot more here As you might have already guessed this group has strong links to Sarah Palin .

But it not the obviously hypocritical ties to the three adulterous  Republican politicians that is most ominous. It is the past ties and philosophy of this secret group and their allies that is even more significant. (more later)

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

Technicals and Fundamentals

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

We did have the best week in many moons for stocks . We did take out a resistance level on the benchmark S&P 500. We did have one day of strong volume confirming the price move.

However, after big gains like last week, technically, overbought markets need some rest. That plus the SPX is at 940 and this year’s high/major support level is 956.  We may appraoch this level, but the bulls need a rest. Hard to see other companies come in with the earnings results of Shadow Banks like Goldman Sachs and Morgan Stanley Bearish momentum.

The NASDQ did close at a new high for the year and this certainly creates a Bullish pattern. Biggest fundamental of the week is Microsoft’ s earnings report and Apple also could give overbought index some bullish momentum.

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) The big gains at the beginning of the weakened Thursday and more on Friday. It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern. Remember, this index usually moths a lot smoother and turns more slowly than other indexes. It hasn’t turned yet but Bears seem to be gaining momentum

In a nut shell the BDI is

• short term - Bullish
  
• mid term -  Bearish pattern
• long term - Bullish pattern
  

$USD - The Dollar is on the verge of falling down through in its in its 5+ week long consolidation pattern between $79+ and 81+. It did briefly break its support level but rallied Friday. Dollar closed up 0.32 at $79.51.-

Fearless Forecast For the Week

Last Week’s Fearless Forecast – So expect a rise with some financial stocks reporting early in the week and that rally to get tempered later in the week This happened, but Investors411 failed to predict the magnitude of the rally till after Intel’s earnings.

This Weeks Fearless Forecast – Technically overbought markets need a rest . 30 to 40% of Dow & S&P report this week and it would be surprising to see as many positive earnings reports as last week.  Therefore, most likely a down week. But because the NASDQ broke out and created a higher high, we could see another shot at moving higher later this summer. It looks like bearish pattern developing on BDI. If so, this is trouble.

Positions

The whole Positions sections has been revised (Click on “Positions” at top of blog). Check it out

QLD – which was bought independently of “the Hedge” at 38.2 last week will get sold today . QLD closed at 40.47 Friday – why be greedy. We added a lot of positions last week. (QLD, IFN, EWZ, EWS ) Time to take profits on one.  Will buy back in on another dip.

The Hedge – The SDS part is down -3.44% and the QLD part up +5.51% The net gain is +2.07% We are hoping that the QLD outpreforms the SDS.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Iraq Fireworks

US troops are leaving Iraq cities today. Last night there was a different kind of fireworks in the skies in Iraq. (Huffington Post photo)

Here’s one big problem – The fascist government in Iran is a major backer of their fellow Shia in Iraq. This includes Sadr who fought US occupation and immediately recognized Ahmadinejad as President. Reasonable to predict the "Supreme Leader" in Iran will try to have the same fascist and militant influence in Iraq as they do over terrorist groups Hamas and Hezbollah .

Iran (week 3 )

Nico Pitney’s blog at the Huffington Post has broke and provided more info than any other US news outlet . here

Elections were certified by Supreme Leader’s government. More, but smaller (in thousands not 10′s of thousands+) demonstrations and increasing arrests. Iranian protesters are shouting Allah Acbar on their rooftops every night in defiance.

Climate Change/Environmental Legislation

Willing to bet that 75% of America’s population has no idea that this legislation is working its way through Congress. Yesterday Investors411 went over one reason why this legislation is important – to combat global warming . Let’s go over one more.

#2 Pollution

Close the garage door, turn on the car engine, open the car windows, go to sleep and you don’t wake up. Pollution kills

We are a carbon based economy and this has had a huge positive economic impact. But the cumulative effect of growing population and increasing pollutants has turned many Chinese cities days into nights where cars have to drive around with headlights on and use windshield wipers to view the road (massive pollution mostly from coal). Simply put, pollution kills by everything from cancer to emphysema.  Trillions in health care costs could be saved and life expectancy would grow with less pollution.

Realism is needed here . Carbon based energy is very efficient and transitioning to alternatives is going to take many decades.

Chevron has "human energy" ads that proclaims we are going to need to work on ways of creating new sources of energy – wind, solar, geothermal, natural gas and oil. They’re right. You simply can’t just shut down oil exploration without devastating the world’s economic structure. But we can take some concrete steps to more environmentally friendly solutions.

(to be continued)

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

-

Your Market Questions (part 1)

Thanks for all the public and private comments on how well Investors411 did in the first 1/2 of the year .

See Positions section & last Thursday’s update . (click on calendar) The major question is will we do as well in the first 1/2 of the year in the 2nd 1/2. Also, a general worry over the long term viability of stocks and the economy .

These questions are  outlined and addressed  in the Strategy and Overview sections of blog. Most of those sections were first introduced at the beginning of the year, then added to a few months ago. Little has changed.

The long term economic problem is the huge hole that was dug by removing the regulations on capitalism and letting greed run wild.  When it takes decades (especially the last one) to dig an economic hole, you don’t climb out of it overnight.

What’s happened is most savvy investors realizes that we almost had a complete world wide financial collapse last September and it now looks like we will survive. The major problems is getting banks to make loans, keeping loans affordable, and fixing growing unemployment.  Fixing these now could have long term negative impact.

China, India, Brazil simply have better balance sheets than the USA and in the case of Brazil more natural resources. They also did not did deep holes.

If we don’t develop alternative energy we will be stuck in a downward energy spiral forever. Cheap oil (the kind that bubbles out of the ground) is a finite commodity. Any recovery is going to be accompanied by rising oil prices.

Will the second half be as good as the first? I doubt it. Our core holdings should outperform, and if stocks do go higher in the USA our ETF’s should do even better . Investors411 biggest mistake is not being disciplined enough in buying dips.

(More later)

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown. Added the VIX back as a prediction tool .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . If trade is diminishing through out the world then a worldwide recovery is in big trouble. BDI started back up yesterday Long term Bullish although consolidating right now.

$USD - The Dollar fell-0.72% Friday and -0 0.04% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons. Neutral – we are in a consolidating pattern.

Long term momentum for dollar is bearish. Short term  mo is neutral, but we are closer to a bottom side breakdown than an upside breakout. Any breakout or breakdown would be significant.

VIX – Measures Volatility in S&P 500. Notice this chart is in almost a straight line down.  The less volatility means the better investors are feeling. Yesterday the VIX fell to the same level it was when Lehman Brothers collapsed and markets exploded to the downside.  Stocks still have not reached the level they were when Lehman collapsed. Long term Bullish for stocks

NB – The above are secondary indicators. Our mantra has always been Volume is the #1 forecasting tool – Right now volume is not giving any clear long term signal.

Reading the Tea Leaves .

This weeks fearless forecast – A rally, but one that does not get to new highs. Yesterday we had a mild to moderate rally in 3 of the 4 major indexes. Small caps(Russell2000) lost ground, but this is probably due to the annual rebalancing where some stocks are added and others kicked out of the index.

Short term – Volume dropped and markets rallied – you like stocks to go up, but when volume drops in a rally a reversal is usually around the corner.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Iran Week Three

Two points of view

More Optimistic – Andrew Sullivan here (above photo from his blog)

More Pessimistic – Jaun Cole here

Unfortunately, think Cole has better insight.

Photo to left – Your editor in the fabulous Summer of 1951

Why the USA Is in Such Trouble

-

One of my left wing friends lamented that the Mark Sanford debacle didn’t get enough media attention this week. Sanford is a Republican family values governor who hypocritically had a torrid long term affair with an Argentina "firecracker," then likened himself to the biblical King David.

Farrah Fawcett (an actress who fought a courageous battle against cancer) and Michael Jackson (music icon with some strange behaviors) died and they sucked up all the news coverage. He wanted the Republican toasting to be the story of the week. All these events were secondary.

There was one big headline last week and these three events will have far less impact on your life and especially those of your children. - The US House of Representatives for the first time passed a major climate and environmental bill. As a society we just don’t get what’s important. That’s why this country is in such trouble.

There are 4 reasons why climate/environment legislation is so important, but today let’s deal with reason #1

Global Warming and The World Is Flat Society

In every society there are the flat worlders who for some reason (mostly self interest or emotionalism) want the opposite to be true. Example: Smoking doesn’t cause cancer or the CIA orchestrated the 911 attacks. Usually you will find a mix of these two groups in Flat Worlders – one that makes a profit and the other, close minded followers.

If you search through any relatively unbiased media source like Wikipedia you’ll find that "the Scientific community has reached consenus that global warming is man made" and "Since 2007 no scientific body of national or international standing has maintained a dissenting opinion." Link

Unfortunately, American culture is locked in the here and now of the Stanford of Jackson stories. Just like  smoking causing  cancer,  global warming will not kill me now and Stanford and Jackson sell.

Nobel prize winner Paul Krugman puts it bluntly -  those who think global warming is a hoax are committing "Treason against the planet" Unfortunately there are Republican members of the Flat World Society who voted against this legislation because hey believe global warming is a "hoax."

Research, the latest from MIT , (an evil scientific institution that the World is Flat Society hates and ignores) are seeing an even more rapid deterioration than expected. There are imperfections in the climate change legislation, but to vote against it because you think science is a "hoax" puts you in The World is Flat Society.

Reasons 2,3 & 4 tomorrow & apologies to Tom Friedman who has a totally different meaning in his book The World is Flat.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

-

Technicals & Fundamentals

Big spike higher in NASDQ volume. Other major indexes up, but below average. NASDQ spiked probably due to rebalancing of the Russell 2000. So, no real help from volume in making a prediction.

Big events of the week

• Madoff Monday – The financier gets sentenced
• Consumer Confidence Numbers on Tuesday.
• Gov’t employment numbers come out Friday (Market closed on Friday)

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown. Added the VIX back as a prediction tool.

BDI - The Baltic Dry Index measures the flow of goods (world trade). You have to get out of the box and stop thinking just of the USA. This is a worldwide integrated economic planet and this Index is perhaps the best forecasting tool. If trade is diminishing through out the world then a worldwide recovery is in big trouble.

Look at the chart. (Click on the blue BDI above) You can adjust it from 5 years to one day.  You’ll see what looks like a recovery. Friday the BDI was flat and its started to trade in a range. This is better than the bearish fall over the previous four days. Right now the long term momentum is bullish and short term neutral

$USD - The Dollar fell-0.72% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons.

Long term momentum for dollar is bearish. Short term  mo is neutral, but we are closer to a bottom side breakdown than an upside breakout. Any breakout or breakdown would be significant.

VIX – Measures Volatility in S&P 500. Notice this chart is in almost a straight line down.  The less volatility means the better investors are feeling.  This is clearly a long term bullish indicator .

Reading the Tea Leaves

Last weeks  fearless forecast – Another down to flat week. All indexes except the NASDQ were slightly down. NASDQ rose 0.6% .

This weeks fearless forecast – A rally, but one that does not get to new highs. Volume, the #1 forecasting tool, is not cooperating.   Its hard to have confidence in the prediction because volume is not confirming the price move. Secondary indicators are more positive than negative.

Our Positions

Let’s take the 5% loss on SDS and sell it. SDS was bought as protection against a big downside move. For Mid Year Results see last Thursday’s Post.

Our Hedge (SDS & QLD ) is starting to work.

Our other new position IFN (India) is also off to a good start.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Many Thanks to posts from d , E Wanapat, & JB on how to follow the coup/revolution in Iran. Great stuff! “Neither Free or Real” from the NYT – Intent & Twitter break news while networks/cable sleep  Day #3 of Coup in Iran – Important Summers/Geithner editorial – Outlook for stocks and more

Dorm Room Door in Iran’s Ishfan Technical University

“Neither Free or Real”

The NYT headline editorial entitled “Neither Free or Real” about the elections in Iran.

It is essential that Obama recognize the plight of the young revolutionaries in Iran. This view is held by most from the far right Weekly Standard to all the liberal blogs following the “green revolution.“

Huge kudos and Thanks to those of you who listed sites that readers could go to to witness the videos of the violence, brutality and oppression  by the dictators in Iran . You can follow what’s happening live by going to those sites or on suggested Twitter sites. The videos are in many cases horrific and brutal. See posts on left hand side of blog.

Brutalized Iranian protestor – Both photos from Andrew Sullivan’s blog

Some Significant Points

• There is a huge reform movement among the Iraq people who genuinely desire freedom. This is a majority of the Iranians. Unfortunately the dictators have all the guns.
• This coup by holocaust denying dictator Ahmadinejad (fronting for militant Iranian Mullahs) was well planed down to the details of the Interior ministry surround the place the count the votes before elections were closed.
• News coverage by networks and cable TV is slow and out of focus compared to the internet. While watching the brutality happen CNN’s Larry King was asking Ahmadinejad questions about his kids.
• Most likely, in the short term, Iran is going to move in the direction of N. Korea. Editorial analysis here
• Lots of decent coverage on internet that you all sent in. Perhaps the best is Andrew Sullivan’s blog The Daily Dish He writes for the Atlantic magazine. Their weekend wrap up of what happened can be found here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

-

Technicals & Fundamentals

Breakout is not an accurate description of what’s happened to the market.  We have “INCHED FORWARD”  There is no real conviction in the volume behind the move higher. Yes markets have remained above “breakout levels” for about a week, but it seems like a very hesitant bunch of investors waiting for a massive counter attack.

The situation in Iran is not going to help markets. Asia & Europe down 2% as I write

Obama is going to lay out his concepts of regulations on financial markets and that also is  probably not going to be bullish for the stocks. This happens on Wednesday. Obviously some kind of regulation is needed to keep the greed of unregulated free markets from self destruction.

Larry Summers & Tim Geithner have a  must read for investors in the Washington Post entitled “A New Financial Foundation” Geithner and Summers have often been treated negatively in this blog, but the outline in decent. It makes the Fed the systemic risk regulator & all derivatives are “subject to” ( not – will be) regulations.   The devil is in the details.

This is all going to be a huge mess in front of congress. Lots more as this gets worked out this summer.

Reading the Tea Leaves

Expect a tired low volume market to retreat this week.

The battle over regulations on a unsupervised shadow banks will probably halt any short term rally.  The medicine is going to taste bad, but unless confidence in the financial system is restored we have no real long term stabile economic future. Right now we (the taxpayers) are socializing the risk while they rap the gains.

Technically – The BDI is bullish, and is a good long term indicator of the trend. How the dollar moves is now the most critical factor behind current     stock movement. Dollar rising = stocks & oil prices dropping.  Another reason to expect a down week.

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa. Dollar is up in pre market rally and up a significant +0.97% Friday

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. + 0,64% in weak volume Friday

WTIC – Oil prices down -0.99% Friday

BDI - The Baltic Dry Index measures the flow of goods (world trade). Stated before -  This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) 24 up days in a row, 6 down day in a row, & now 2 day rally. Bullish sign.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

What’s Up? – David Patraeus on torture and Gitmo – The Supremes sing in Spanish – Californification, Is the Golden State falling into the sea? Will the US join them – Women’s historic win in the Islamic state of Kuwait – Fearless market forecast.

Petraeus – Huffington Post photo

Torture

• Obama says – torture bad – closing Gitmo good – Right wing says NO
• McCain says the same thing – Right wing says NO
• Powell says same thing – Right wing says NO
• Admiral Mullin (chair joint of staff & a Bush appointment) says the same - Right wing says NO
• Sec. of Defense Gates says the same (another Bush appointee) says the same - Right wing says NO
• Now the hero of the right wing General Petraeus says Obama is right – what will Cheney, Limbaugh and the rest of the right wing now say  about torture and closing Guantanamo Bay?

Californification

California is up to its neck in quicksand. Its one of the leading states in foreclosures and unemployment. Will the US follow California? Previous posts over the years have brought up California’s two major problems

• Proposition 13 - This state taxes property at what you payed for it. So for example if you payed $50,000 for a property 30 years ago and it is now worth $1,000,000, you pay only a tax on$50,000. Someone who buys property now pays today pays a whole lot more – This has lead to a serious short fall in revenues.
• You need a 2/3 vote in the legislature to make any serious changes in tax structure.

In the USA we too have self interested people who want to pay almost no taxes & have to overcome a 60% filibuster in the Senate to make any serious tax changes.  Not as bad as California, but still a problem.

Want to learn more – See Nobel Prize winner Paul Krugman’s editorial California - A State of Paralysis. 

Sotomayor – AP Photo

Supremes

Front page of every newspaper – An “inspired” (obviously others might disagree) choice for the Supreme Court – Sonia Sotomayor. – - Impressive legal background, compelling life story, first Hispanic ever nominated to Supreme court. For more see NYT editorial

Aseel al-Awadhi photo – Boston Globe

Women in Kuwait

4 of the recently elected 50 members of parliament in Kuwait are now women. This begins to breaks the mold of how women are treated in Muslim countries and a first for the Gulf States. This is truly a historic move

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

Forecasting what markets will do is all about how potential investors feel about the  fundamental aspects of stocks and the economy. Technicals (looking at chart patterns) gives us some idea of where the traffic signals are. It all about predicting attitude.

Yesterday the US stock markets exploded higher as volume rose. However volume was below average and below the down days of both Wed. & Thur. of  last week. While the price move is encouraging and explosive, what natural for a sustained rally is increasing above average volume. This show buyers or potential investors are not moving back into stocks.

Yesterday is certainly not a bad day and it may be the start of another leg higher. However for right now it is a move from near the bottom of the consolidation pattern we’ve been in for the last three + weeks to near the top. Therefore, no big green light till volume confirms a breakout.

One interesting pattern is developing – The first trading day of each week recently shown a  a significant move higher and the rest of the week has given up those gains.

Good consumer confidence numbers were said to be the fundamental behind the market move. Never seen consumer confidence boost the markets this much. Very suspicious over lack of volume.

News this AM – GM bondholders say no and it looks like GM will go into bankruptcy.

XLF - The ETF that tracks financials (mostly shadow banks ) rose +3.26% . This index closed at 12.04. As stated in past updates for the last 3 weeks financials have been trading between @ 13+ and @11+ (more specifically support at 11.33 and resistance at 13.08) Any close above or below these support of resistance levels would turn confirm a longer term trend for bull or bears.

WTIC - Oil prices again closed over their $60 support level +1.26% at $62.45. Energy related stocks kept the rest of the US markets from loosing more ground. As stated before – Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.

Reading The Tea Leaves - Yesterday we moved up within the consolidation range. (see above or chart of SPX) There has yet to be any breakout in any US or world indexes.(except Brazil) The formerly leading Financials (shadow banks) are now a bit behind the major US indexes. The NASDQ (techs) seems in the lead.

Positions - (See positions section of blog for more)

•  EWZ - sure looks like it was a mistake to take our substantial profits (+26) in Brazil (EWZ) Brazil reached a new closing high yesterday. As stated Thursday looking for a dip (-5 to 10%) to get back in.
• Inflation – GLD (gold) is one of the hedges against inflation. As recommended last week I was able to add to this position as about $93. We sold some gold at $95 earlier this year. 
• There are ETF’s that also will move higher if/when inflation occurs. Considering TBT  (explanation later this week), but is has way too high a price right now.
• FXI – our major position here only rose +1.24% yesterday due to the proximity of China to the nuclear test in North Korea. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

WHAT’S UP? – Three influential  personalities are shaping future trends - Jesse “the body” Ventura; Jim “mad money” Cramer ; Arianna “she’s everywhere” Huffington.  Their views on the future of capitalism and American morality will impact your money and your lives; Investors411 just took +23%, +16% and +26% profits in 3 different areas – Was it a mistake?

Jesse Ventura

Jesse’s been a Navy Seal, a World Wrestling Federation Champ and the Governor of Minnisota. Last week he came up with the following quote on why we should prosecute Dick Cheney for torture-

“You give me a waterboard, Dick Cheney and one hour, and I’ll have him confess to the Sharon Tate murders.”

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

From yesterday – Let’s stick with the same prediction, for this week as last. More consolidation with a downside bias. After 9 up weeks in a row a consolidation is good for bulls. Going too far too fast creates bubbles. 

Major US and world markets couldn’t wait for a consolidation and instead on the India news (See yesterday’s Investors411) IFN India  ETF was up +21.5%) exploded higher. A relatively positive earnings forecast from Lowe’s (home building/remodeling supplies) helped. Competitor Home Depot had basically the same report this AM.

There is one ingredient missing - VOLUME - The #1 confirmation factor of any rally did not show up yesterday. Below average declining volume indicates that the huge amount of money on the sidelines stayed there. 

XLF - The ETF that tracks financials (mostly shadow banks ) exploded higher yesterday  +6.59% in below average declining volume. Volume is NOT confirming the price move. Of course, they again outperformed.

Market’s Major Mantra - Again – “If Shadow Banks go up – so will stocks. If Shadow banks go down so will stocks” 

WTIC - Oil prices fell from the $60+ high last week and have established a range between $54 and $60. Up Monday +4.54% to $59.59. This is directly below the the major $60 resistance level.  Hard to tell if stocks are pulling oil prices or visa versa. Both seems to be signaling a rebound in the economy. 

BDI - The Baltic Dry Index that measures world trade  broke through resistance last week and is at a new 6 month high. The BDI broke through a major resistance early last week and rose another +2.4% yesterday.  World trade is critical, because if protectionism/nationalism between countries grows over trade the recovery is doomed. Very Bullish indicator for world economics and stocks

Reading this weeks tea leaves - From yesterday - Lets hope and predict a consolidation with a downside bias this week in weak volume. BDI and India are both long term  positives. If 877 support holds on (Mon, Tues. & Wed.) the S&P 500, we could see  the nine week stampede of bulls continue later this week. 877 is the number to watch.

Looks like I was wrong – or I let hope of a consolidation cloud my judgement. The stampeding bulls did NOT wait till the end of the week to get the stampede started.  When bulls stampede they just blindly move. Today they’ll look around and wonder why their fellow bulls did not show up.

We’ve had 3 days in a row of declining volume as markets went south. Then a major reversal in still less volume.

Certainly looks like only short term traders are putting their money down. Benchmark S&P 500 closed at @ 910 and last week its high was @930. We could reach or even surpass that 930 resistance level. But without volume after another short term push higher expect a fall.

Reasons to rally-

• Markets are moving higher on good news
• BDI has broken out and moving higher
• Rising Oil prices reflect an economic rebound
• Financial analysts keep mentioning “green shoots” sprouting up all over.
• Obama is one good salesman.
• Shadow banks have government support

Why are the giant institutions and massive amounts of cash staying on the sidelines? Not having VOLUME confirm the rally is maddening and therefore definitive longer term calls are suspect. However, the mojo is back with the bulls.

Was it a mistake to get out of certain positions too early? +23%, +16% & +26% (See Positions section of blog) Perhaps, and will buy back into EWZ (Brazil) on dip.  Would buy back into XLF (financials) as longer term investment on dip -A smaller position than before. Also looking for a dip to buy some more GLD

However still short term trading FAS and UYG (ultra financials)on dips.

NO major long term  moves now – Be patient - But a tradable market.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

Sorry limited time this AM - 20 criminal probes into possible corruption of the $750 billion dollar government bailout have been opened;  Bank of America down 24% after earnings and Financial sector down  11.6% ;  Bears back in control of markets    

Ken Lewis – Head of BOA

Major Fraud Suspected in Bailout

 20 cases of fraud into the $750 billion bailout program are being opened and this may just be the tip of the iceberg. Story from LA Times. CNN Money. Washington Post/Reuters

Neil Barofsky - chief watchdog of bailout program released a 247 page report yesterday. Basic conclusion –  “TARP is ‘inherently vulnerable to fraud, waste and abuse.”

The report recommends the government abandon its partnership with private sector in buying toxic assets.

Bottom Line - Not good for confidence in stocks, the economy, the government & especially banks. As each case becomes apparent the call for banker’s heads will grow.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Big 3 to 4+% losses across the board on fears of bank nationalization and poor profits. Big volume. Short term momentum definitely turning negative.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!