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Apple

Once again AAPL has hit a grand slam for is earning report. Apple is the 800 lbs. gorilla in the room and probably now beats out Exxon as the world’s #1 company. It is also the company most responsible for keeping the worlds economy afloat.

Their major new growth is, of course, in emerging markets. So Apple to meet the demand has to hire new workers? Guess where 100,000 new jobs were recently added? CHINA

Intel co founder Andy Grove has correctly identified the problem and calls it “scaling.”  Apple is simply opening outlets where the new growth is fastest and the labor by far is cheapest. Any US start up when it comes time for major production is going to do the same. It the mega trend of globalization at work.

John S writes in the comments section – “Perhaps as a country we’ve missed the boat.” He may be right. It is almost impossible to reverse this mega trend of globalization. But we can at least try to make a difference and lives better for our fellow Americans.

The progression goes like this.

• Globalization makes moneyed class in America rich.
• Jobs go abroad.
• USA – middle class suffers.
• Corporations gain power in USA and average Americans loose power (democracy)
• Chinese, one party state (oligarchy/dictatorship) gains power over both American companies (think Google) and its people the more it grows economically.
• US becomes more dependent on China economically.

Flying above the 800 lbs gorilla is the 1,400,000,000 people Chinese Dragon. We should be teaching Chinese in all our schools to get ready for the future.

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	+0.74%	flat
NASDQ	+1.10%	up
S&P 500	+1.14%	up
Russell 2000	+1.82%	-

Technicals, Fundamentals & Analysis

The High Frequency/Black Box traders turned an almost -1.5% loss into a gain  of +0.75% yesterday. Volume was again , below average.

Fundamentals were bad – GS, IBM & TXN had disappointing earning, & economic news was not good. Yet the markets rallied on the bad news all day & into the close = Bullish

AAPL hit another  earnings grand slam after the market closed yesterday. Up +2.57% yesterday and was up over 4% in post market trading last night. = Bullish

Bottom Line –  High Frequency/Black Box trades that make up the majority of trades on US stock markets have shattered many former rules of traditional technical analysis. What used to happen is a week now takes place in a few hours in significantly lighter volume. Some conclusions

• The MO has basically worked as a predictive tool. +/-60 is not the exact overbought/oversold level market turn, but a useful rough guideline for when to be long or short.
• The Black Boxes, because of their size, stick to trading ETF’s and major liquid stocks. AAPL is their darling.
• At different time the algorithms Black Boxes use change.  Example – The religiously followed the dollar for weeks then switched away.

Significant Indexes-

• McClellan Oscillator (MO) rose to +49.90 [+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. = NEUTRAL
• US Dollar –  The dollar  rose +0.28% [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. Earning have trumped this indicator for now & we have consolidated for last two days. = NEUTRAL
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China.) BDI is in free fall from a high of @4200 to 1761 . This is a huge -59% drop in 8weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI rose for the first time in 8 weeks the BDI rose Friday.  Last two days also saw small rallies. At long last the BDI seems to be finding a bottom - a bullish sign, but still too early to tell. Fundamentally the -59% drop is very BEARISH

Reading Tea Leaves-

The MO is again approaching oversold territory. It is the currently the most significant of the indicators considered.

Positions

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

Updated over weekends Investors411 holds ONE position at this time

From Monday – “SH – The ETF that shorts the S&P 500 was bought at 51.45… 1/2 of SH was sold for 53.02 for +3% profit.  Letting the rest ride and will sell when conditions on MO near oversold.” The stop/loss on SH was removed and replaced at @3% below what it was bought for 49.95.

As the MO approaches oversold territory will again consider ETF’s that short the market.

Strategy - The same as before – as US major indexes become more overbought the more ETF’s that sort the market will be purchased. Starting out with SH. Then the higher above 60 the MO goes, the more SDS (200% short the S&P 500) and other even 300% short ETF’s will be used the higher the MO goes.  See POSITIONS section at top of blog for more.

Al Frankin’s Rape Legislation

30 old white Republican men voted NO on Senator Al Frankin’s legislation “that would have required defense contractors to allow their employees access to US courts in cases of rape or sexual assault” The case of Jamie Lee Jones who was gang raped by fellow Halliburton/KBR employees in Iraq and then held prisoner in a trailer sparked this legislation.

To protect Hallibuton these senators had to side against American rape victims. The 30 old white Republicans (including McCain) “might want to rethink your allegiances.” (Jon Stewart ) LINK to his devastating video and story on this

Trickle Down Economics/Health Care

Trickle Down economics started with Ronald Reagan and it has sure worked in making America’s rich richer and disintegrating the middle class. Two editorials by Robert Reich and Frank Herbert t deal with this. (Herbert fails to lay at least some of the blame on Obama.)

• Safety Nets for the Rich LINK
• Why Obama Has to do What Letterman Did: Refuse to Pay Hush Money LINK

To Big To Fail

NYT award winning financial columnist Andrew Sorkin’s book Too Big to Fail has an interesting excerpt in Vanity Fair LINK entitled Wall Street’s Near Death Experience. Yes these same guys brought us to the brink, but the excerpt is enlightening. Also in NYT is The Race to Save Lehmann LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.67%	up
NASDQ	-0,76%	up
S&P500	-0.81%	down
Russell2000	-1.15%	-

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 and Fundamentals

US Markets broke out to new yearly+ highs in weak volume.  All that money on the sidelines is staying there. Technicals – Volume in no way confirming the price move higher – However, volume, as a #1 confirmation factor, is getting trumped by the ever sinking dollar.

From yesterday – The FED and the US government is not going to stop shoveling cash at the market as long as unemployment is so high. US companies are not hiring and will first hire abroad where labor is cheaper and growth faster.  So the cash shoveling will continue and Wall Street, once over bought situation is corrected, will continue to rise and the dollar fall. Two major points

• The rally is based on the dollar falling
• As long as unemployment grows there is no reason to stop the Fed from stimulating the economy

Therefore high unemployment numbers inversely benefit Wall Street stock prices.  The more we stimulate the economy (0% interest rate loans from to bailouts) the lower the dollar falls. The more we simply print money the  lower the dollar falls and the more profit American base companies make because their goods cost less abroad. (see below for more)

Apple has grand slam earnings report. Flood of earnings this AM. CA T (big equipment maker) also a grand slam.

Both the BD I and the Dollar are bullish for stocks

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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 @ 37% 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 +38 points Friday and closed at 2766. A higher high price on its chart pattern has been confirmed =  Bullish for stocks & world trade right now

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$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 -0.37 % The dollar closed at $75.37 . 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.

Therefore, The dollar can drop much lower and stocks rise much higher till support levels are reached

Positions

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

Review of Positions (Part 2) (more on stocks tomorrow)

SPX or SSO – This is where you park money instead of cash. Only downside here is it takes 3 days to get to use this $ to make a trade. More aggressive traders can use SSO Longer term investors use SPX (This ETF does 2x what the S&P 500 does) Recommendation Buy the Dips till the dollar drops to near $72 .

NVS, AAPL, CSCO, MVIS, GS , & JPM are all stocks that have been recommended for traders to buy on dips. Would add CAT to that list

EWZ – Up way too far too fast.  Trader s should lighten up on this ETF

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Wall Street Journal and Stimulus

The weekend WSJ had a lead editorial (you have to subscribe to get the editorial) that suggested the remainder ($400 billion) of the stimulus should be given to American business in the form of a tax cut .  The WSJ does, of course, have a "supply side/free market" economic bias that is to enrich the companies they write about. What is good for Wall Street in the short term is often quite the opposite for the long term well being of the country and even stocks. Best example is the WSJ support for "free markets" to regulate themselves greatly intensified the worldwide recession. (see past Investors411)

If you cut taxes for business here’s what happens-

• The money could go into a stock buyback
• The money could go into dividends
• The money could go into bonuses for top executives
• The money could go into research
• The money could go into hiring new workers  – First choice to hire is, of course, cheaper labor outside the US that does not have  heath care or has fully paid health insurance by the country.

Stimulus value for the American economy is minimal, but for the individual company its great. The stock market is recovering quite well on its own, why do we need to cut its taxes more?

If you offer a stimulus plan that gets money flowing and more people buying products – business also grows, but so does the economy because more money flows. I’ve given two examples, but there are others in the stimulus program

• The $8000 first time home buyer stimulus . This works in a myriad of ways Some – Stimulates a much larger purchase ($100,000+ homes), new homes need new appliances, increases property values of surrounding homes, helps fix the declining foreclosure crisis, could result in more construction jobs etc. In short much more money flows and demand grows.
• The Cash for Clunkers progra m – Even if you factor in only the cars built in America (60% – see your emails) This encouraged the purchase of the remaining 2009 inventory, put more efficient cars on the highway, gets more money flowing (purchase of a $20,000 car).

In short DEMAND increasing and MONEY FLOWING among more people makes an  economy grow far faster than simply cutting taxes on business which has almost no impact on demand and gross money flows.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+1.03%	down
NASDQ	+1.79%	down
S&P500	+1.31%	down
Russell2000	+1.42%	-

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 and Fundamentals

Major US indexes rose in light decreased volume on Friday.  The decreased volume show indecision of investors and traders over the jobs data.  The jobs rate fore from 9.4 to 9.7% but the job loss fell from 247,000 to 216,000 jobs. Over 1/2 the job loss was in the manufacturing and construction sectors.

Last Week , FEARLESS FORECAST – "is for a down week ." Major US markets were down as well as most world markets .

This week , FEARLESS FORECAST - is for an up week .

Major news for the week is going to be Obama’s health care speech on Wednesday. Anything less than a clear full & forceful  commitment  to a public plan for heath care will give insurance companies and some major HMO’s a quick boost in price.

Bottom line here is Wall Street will probably come out of this with the feeling that they own or have broken the Obama administration.  This should add to stock prices in the short term.  The long term is a different story (more later).  The BDI has also started to level off and formed a base. (see below)

History – In 1929, right before the great depression, the market reached its high on the Tuesday after Labor day

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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) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . The BDI has leveled off over the last 9 days , +17 yesterday.

Unfortunately, since early summer we have created  lower lows and lower high that confirms both the mid term bearish trend .@ 2298 is a major area of support and the BDI has fallen since early June from 4291 to 2413. This is just 115 points away from a major support level.

The 9 days of relatively flat trading could be a technical base forming just above the BDI’s major support level.  The 17 Friday is a small,but hopeful move in a bullish direction.

The BDI is 41% off its high (early June) Before that it gained almost +170% from early April to June

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

The dollar was fell -0.35 % Friday. Dollar closed at $78.16. Its  major support level is @$77.5 & it has 2 major resistance levels – a falling 50 day moving ave. at @$79.o0 and the August highs of @ $79.5 .  If it breaks down through support stocks should rise, if it breaks up through resistance stocks should fall.

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

For an unbelievable 11 straight days the dollar has reversed direction – One day up and the next day down.  If the dollar goes in the same direction two days in a row you might call it a trend.

Positions

The whole Positions Section has been revised (Click on "Positions" at top of blog). Check it out

Sold 1/3 (or 6% total stock) position in FXI (China) Boy this sure looks like a mistake this AM

My bias – I will be away at an art show this weekend & I tend to get conservative when I’m not near my computer. – Too scared of bad jobless figures on Friday. The decrease

Your Comments

Both privately and in the comment section of the blog you are asking for individual stock recommendations. OK I have a few. NVS (Novartis)-  a swine flu play (46% of US flu vaccine) and Apple computer – AAPL (Apple is moving into China)

I bought both these stocks early last week. Please remember this is a trade rather than an a longer term investment. I have a predetermined 8% loss price that I will get out. What I have is a trailing stop which means if the stock goes up so does the stop.  Will take 1/2 profits with a @8% gain and let the rest ride.

Both stocks have decent technical charts, a fundamental story, & if markets move higher, they should outperform like they did Friday. (Buy the dip)

I do not like recommending individual stocks and much prefer ETF’s. Sectors are easier to understand, more liquid, and less likely to dramatically fall.

GLD – our 5% position in gold is doing quite well

Have to update positions section (away all weekend) Investors411 problem is that we are under invested in equities. The predicted 5 to 10% correction this month almost happened last week (-4+%), but close doesn’t count.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!