Occupy Wall Street

Thanks to frequent blogger Popeye for the above cartoon sent from “Occupy Boston” part of the Occupy Wall Street movement. You can read his remarks daily in the comments section of blog.

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Jobs Jobs Jobs

It again started in the Comments Section of the blog between frequent bloggers JS and Jim J yesterday [LINK - then scroll down] and hopefully will continue today

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Pink Bikes and a Stripper

This short work for your reward add from France is creative, funny, sexy and very very clever. Thanks to MW for sending it in. The French woman’s secret -LINK

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Stocks

Bears should take control of US stock markets in the short term as a 1200 point Dow rally from this years low hits some key technical resistance levels.

• We are directly below key resistance levels on all major US indexes (see chart of S&P 500)
• We hit some of those resistance levels yesterday and fell back.
• Our #1 forecasting tool, the McCellan Oscillator is near OMG overbought levels at 75.31 = Bearish
• Our #2 forecasting tool, the Put Call Ratio, is in overbought levels at 1.31 = Bearish

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Make Friends With A Bear

Its going to be very hard or bulls to push stocks higher in the short term (days to week(s)). The High Frequency Traders, whose algorithms are programed to pounce on news out of Europe are going to need something spectacular to advance stocks. Therefore-

• Risk On Trade in Effect. There is an above average chance we will see at least a 5% fall before we see a 5% rally.
• For those that can handle the risk - short stocks (Puts or leveraged ETF’s that short stocks) or sell long positions. Preferable – into any rally today
• Mea Culpa – Due to my error this risk on trade should have happened yesterday when the Dow was up over 200 points. Link to Tuesday’s blog using calender above.

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Paul’s Corner

YSL 5 Review

Today a brief look at the charts, Stocks listed by best performance top down for the day as sorted by HGSI.  Comments are for education only.

Group performance from the start on Aug 18 to yesterdays close YSL 5 +4.85% vs S&P 500 +5.84%.  Looks like we are a wee bit behind this week.

Chart for your review. LINK

HANS – Hitting resistance, and is extended. All indicators green.

AAPL – Hitting resistance, extended, all indicators green.

CMG – sitting on the 17, buyable, most indicators green

HLF – sitting just above the 50, most indicators green

LULU – parked on the 50, most indicators green

ABV -  Hammer candlestick (usually a reverse coming) sitting at resistance

RES – well below the 50, needs time to decide which way it’s gonna go

TSU – don’t waste your grand kids money on this dog

CROX – Stalled at the 50

ZAGG – just below the 50, most indicators green

AKRX – just crossed the 50 and the 17, most indicators green

CPHD – Pulled back to the 17, usually a good place to buy, I bought a few shares yesterday

NLY – Most indicators red

GMCR – below the 50 and the 17, pull back Wednesday on heavy volume

Disclaimer, Disclaimer, Disclaimer, Disclaimer,

[Editor's Note - Paul is an excellent technical analyst whose insight can be found in the comments section of blog. Right now because of overall short term  bearish market conditions I'd be cautious about going long stocks - If he disagrees you'll here about it in the comments section]

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Long Term Outlook

3 to 6+ months

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

Stimulus Works

Richard Koo, Japan expert and Economist points out the similarities between the USA and Japan’s “Lost Decade” in Money magazine (pg. 61) His conclusion is that deficit reduction right now in the USA will do the same thing as it did in Japan. Perhaps worse. Here’s his major points. (sorry Money magazine is not on line.)

• The USA was ultimately pulled out of the Great Depression by a massive government stimulus/spending program – World War Two

• Japan’s economy started to go south in 1991. Whenever government spending was raised GDP grew.

• In early 1997 Japan cut spending and GDP shrank from @3.5% (per quarter) to almost -3% in less than a year. The gov’t then raised spending and GDP rose to 2.5%.

• When Obama launched his $787 billion stimulus program the the GDP was close to -5%. It improved to +3% in a little over a year. Now that the stimulus is running out we are again falling in GDP growth.

The stimulus program, which Republicans have labeled as a failure, helped increase USA GDP from -5% to +3%. That’s a massive success. Now its running out and we are again slipping in GDP. All everyone talks about is shrinking spending. Dr. Koo has a great point and history will repeat itself  if we let it happen.

For more on Koo LINK here

Stimulus from Bernanke and the Fed’s QE1 & 2 helped us recover.

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Investors411 Technical Forecasting Tools.

The McClellan Oscillator

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Reading The Tea Leaves

Short Term Outlook

days, week+

• The excessive amount of “Put” positions has switched to Neutral. The MO is at Somewhat oversold.  This means that bad news will probably now have a negative impact on stocks. We have had some negative news out of Europe this AM (see above.)

• Technically, Still more  Neutral than Bearish, but Bears are starting to growl. Bearish bias into Fed meeting Wednesday.

• Fed/Bernanke needs to “surprise” traders/investors for rally to continue.

• We do have a technical series of higher highs and higher lows build on major indexes.

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Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

Friday, Investors411 waited for more favorable conditions to go short or buy gold. Unfortunately we had only a minor rally and not a big one which would have given us a solid  technical advantage.

Mea culpa – I often wait for a good trading situation to get even better, before I enter the trade. Right now it looks like the minor rally was good enough to make a move. Gold has rocketed in Europe this AM and stocks fallen.

Positions

NLY - Annaly Capital Mgt. Ultra high dividend stock –a @14% dividend NLY was bought in mid May at 17.14 Now at 17.93

GLD – (Long Gold ETF) Bought at 167.05 - Sold 1/2 for 8% gain. GLD closed at 176.03. Gold is contrarian to stocks and More willing to buy tan sell right now into a stock rally.

Disclaimer - I buy everything in the hypothetical Investors411 portfolio. If stock is mentioned and I own it you will know.

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Long Term Outlook

(for US stocks only – not our economy)

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

Outlook for 2nd Quarter

Case for the Bears

• Japan problem is underestimated and damage to the country’s GDP and the world’s supply change is worse than expected
• The latest housing and consumer confidence numbers are worse than expected and a second housing recession is expected.
• It’s only a matter of time before one of the PIIGS countries in Europe defaults and it will spread.
• Libya is a stalemate and challenges/chaos toward oil dictators will grow.
• State budgets are breaking down because of the lack of revenue and this means greater unemployment.
• More people in the USA are on food stamps than ever before.
• Opaque corrupt Shadow banks  are facing a mortgage crisis (thanks to Robert H for the heads up on the 60 Minutes Show)
• Quantitative easing will end and everything will fall apart because there is no entity big enough to buy as many treasuries as the Fed.
• Inflation and the over supply of unsold housing is going to explode in China, sinking the rest of the world.
• Inflation is coming and this will squash equities
• Earnings disappoint

The Case for the Bulls

• The Fed is going to keep pumping liquidity into the economy. QE #2 continues to June 30th.
• Even after 6/30 there will be a whole lot of liquidity sloshing around and QE 3# is likely if we start falling.
• The recovery from -700k jobs per month to +200k jobs per month shows an economic rebound in the USA.
• Emerging markets are growing again.
• The lack of wage growth and the huge numbers on food stamps in the USA will keep inflation lower than expected.

Bottom Line for Most Stocks – Once a trend is in place, you go with the trend until it breaks.

The Fed Rules (see past updates starting in November or Strategy Section of blog) This trend has crushed major black swan events (Japan & revolutions &  anticipated impending doom listed above) and until it breaks its strong.

This trend has a new force behind it – the better employment numbers. As unfortunate and cruel as the lack of wage growth and record number of people on food stamps  is, it serves to mitigate inflation. Obviously it also show an wealthy oligarchy further crushing lower class Americans.

Dramatically higher oil prices and/or a dramatic fall in the dollar could break the bulls. Of course some unforeseen catastrophe could too. Also,  if earnings season is a disaster, instead of mildly disappointing we could end up down.

Short term we are oversold and ripe for a small correction, but the Long Term outlook remains CAUTIOUSLY BULLISH

and – yes its all a bubble – How can you build a growing economy on a corrupt financial structure and a  growing imbalance of wealth in the #1 economy of the world?

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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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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 liquidity stock bubble. See Investors411 STRATEGY section for more. Remember Fed liquidity (POMO, QE 2 or quantitative easing) announced ending is June 30th.

• Yawn - Another low volume rally. In fact, the lowest , non holiday,  volume day since 2008.
• Repeat - Bulls have two strong fundamentals – Jobs are recovering and Fed’s liquidity injections.-
• Because of the corruption, and lack of transparency housing still a major problem
• Wages still have not increased for most American workers.
• The above two factors should mitigate rising inflation in commodities.
• China has raised  interest rates – 4th time since October – They are worried about growing too fast and a housing problem. This will hurt stocks in the near term
• Emerging  Markets are leading this leg of bull market and the above should give them a whack.

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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]   The dollar saw a huge rally collapse and ended  a wee bit higher +0.10. Chart pattern showing volatility/erratic so short term hard to call, but longer term bearish  For stocks = Bullish/Neutral
• McClellan Index - (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] MO fell to +46.12. Over past three months The MO has had problems getting over +30. This is, therefore, the highest the MO has been since early September 2010. We haven’t hit +60, but for stocks = Bearish

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Reading The Tea Leaves

Little change from yesterday, except that the leading emerging markets are even more overbought and overdue for a correction.

Bottom Line - No Black Swan events have been able to seriously impact the Fed liquidity driven equity market.

What to watch today - Market movers - UUP (the dollar) still has most influential, unless others make some huge move.

• USO - ETF for oil - Oil up = stocks down - Now back above $100. - Headlines from Libya not good.
• UUP - (Tracking ETF for dollar) Remember - The dollar is a contrarian indicator. Bad dollar = good stocks
• AAPL – Tech giant and market mover – Trading below its 50 DMA. Since mid February this char shows a series of lower highs and lower lows = Bearish
• Japan Rector Developments – This keeps getting worse.
• EEM – Emerging market ETF – On a breakout run, but getting  way over extended.

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Positions

UCO -(2x oil prices) Why not, its also a hedge against higher gas prices. Historically driving season in summer drives prices up in the late spring. Supply problems exist because of revolutions/instability in oil producing countries. If these problems are resolved then UCO should NOT be held.

REMX (Rare Earth ETF) - Really believe this a good long term holding.  Simply put because of limited supply of rare earth metals and big demand is going to outperform almost all other sectors. Only some sort of major economic collapse will hurt this sector. A buy.

DGP – (ETF is 2X gold) and/or SLV (silver). AGQ (2x silver) Both inflation worries and a falling dollar positively impact this sector. Silver actually has a manufacturing component.

RJA (Agriculture commodities Index) For a more complete list of commodity ETF’s see POSITIONS

UWM (2x small cap stocks) or TNA (3X small cap stocks) The later for more aggressive traders. Closest correlation to MO and falling dollar. Small cap stocks are outperforming.

EEM (emerging markets) and/or ILF (Latin America) EDC (3X emerging markets) The later for most aggressive traders. Emerging markets are leading the world and after underperforming for years they are back.

EWV (ultra short Japan) The horrific and tragic situation there has been minimized. This holding acts in part as a hedge especially for US small cap stocks and emerging markets.

TMV (3x 20+ year Treasury yields)

A winning hedge has been UWM & EWV combination (some of you may have problems emotionally shorting Japan)

ROM (2x techs) & TYH (3x techs) The later for most aggressive traders.–  Technology has been toasted and if the S&P is higher on June 30th, this sector should catchup.

I’ll keep this on the blog’s home page for a week or two then place it ion the Positions page.

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Your Stock List created 3/7 has underperformed the other 3, because it is overweight tech stocks. A major tech stock, Texas Instruments, bought another company and this should help the whole tech sector today. Paul R often comments on these and other stocks/sectors in the comments section of the blog.

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.“

375 Days – START

Its now been 375 days since American inspectors have been allowed to inspect Russian nuclear weapons facilities. 5 months since the original treaty was signed. In that time 900  questions asked by Senators have received written answers on the next START Treaty. The treaty has been endorsed by everyone from the Joint Chiefs of Staff to Condi Rice to our NATO allies.

The globe realizes that terrorism is the #1 enemy.

• Russia has a far bigger internal terrorist problem than the USA
• Their country is one of the most corrupt in the world.

Doesn’t it make sense to better secure these weapons to protect not only our troops, but our own lives. “Trust but Verify” was the credo when this started and it should be today.  So why are so many right wingers doing everything possible to destroy this treaty and give terrorist  a potential bigger less transparent supply of nukes  to choose from?

• Tom Friedman quote in an earlier Investors411 mentioned they don’t want Obama to have success. Imagine putting politics in front of the safety of Americans.
• There are many on the right ,like their #1 spokesperson, Rush Limbaugh who believe Pelosi & Reid are the terrorists and the administration is like Al Capone’s
• There are those who want endless war with the rest of the world.
• There are those who realize that the military industrial complex desperately needs to kill this treaty because it will cost $10 or perhaps $100s of billion of dollars  in revenue. Just imagine the  fear mongered money  to be made if the world started to rearm with nukes. Big campaign donations at stake here.

There is a very powerful oligarchy who make a lot of $$$$$ from fear. They know how to manipulate the frightened sheep, even in obvious cases like this.

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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

Technicals, Fundamentals & Analysis

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

The Obama Tax compromised passed last night. It will have no short term impact on stocks, but an obvious long term impact because it raises GDP & deficits, and creates jobs. Reuters has an interesting  “all candy and no spinach” analysis “but at least it shows that President Barack Obama and Republicans can cooperate on fiscal issues.”

Investors are by the boatloads are getting out of Treasury bonds. This is really a massive move. The Tea Leaves here are saying these investors see an IMPROVING economy and that should mean inflation. Dave Moenning is a very credible analyst on why the “herd of investors” are getting out of bonds

“now that even amateur economists can see that the economy is improving and everyone and their grandmother is saying that it is time to “sell bonds and buy stocks,” no one wants to be caught with an oversized amount of government bonds on their books going into 2011.”

Reading The Tea Leaves -

The bears strongest case is the falling BDI – Lower trading prices show a slow down in in imports/exports. This translates into a right now very small drop in GDP for emerging markets. If it continues we have problems. Obviously housing, European debt & employment problems exist.

The bulls case – Fed Ex was the latest sign that American companies are improving (the herd believes this) + QE 2 juice + Obama compromise juice+ India & China growing at 8 to 10% GDP (a 1% slip not that bad)+ everyone panicking to get out of bonds (where does the $$ go – stocks)  = Strong set up for January earnings reports.

Relativity – The US dollar rises almost 1.00% two days ago and stocks loose some ground. The dollar falls 1/10th that amount and stocks rally more than the fell the previous day

Positions

• EEM - (Emerging Markets ETF) -1/2 positions sold
• #1 UWM - (2x small cap stocks ETF) – Sold last 1/2 bought at 38.75 sold at 40.34 Gain almost  +7%. First 1/2 of trade made +9% so total trade = +8%
• #2 UWM-
• #3 UWM

Mistake, at least in short term, to sell 1/2 UWM position early in day because the ETF was up 2% for the day. Still looking to buy dip/add to positions with leveraged ETF’s

New considerations

• EUO - an ETF that double shorts the EURO – Europe far more than the USA is taking fiscal medicine to solve debt crisis. More importantly they are becoming fiscally transparent while we remain opaque. So in short term Euro is going to suffer.
• PST - an ETF that double shorts 7 to 10 year treasuries. This would be a short term trade. The herd is stampeding to get out of Treasuries before years end.

The first would be, hopefully, more long term the second a trade.

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 stocks & ETF’s including ”YOUR Stock List.” -

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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

Technicals, Fundamentals & Analysis

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

Major news yesterday and today is Spanish debt. Spain is a major country in the EU and if Spain goes down all of the EU get shaken to its roots.  This is making the Euro weak and therefore the dollar strong. This is important. Europe got hit by the 2008 financial meltdown and because of how their monatary system is structured its far harder to smooth over the bumps as our FED does.

Additionally the 10 year T bill yield is still rocketing ahead

Too early to tell if this is a much needed and healthy correction in stocks or something deeper. I suspect the first.

There is also plenty of reasons to be fundamentally bullish.

Reading The Tea Leaves -

Spain is Europe’s 4th largest economy and its 10 year T bill is trading at 5.53% (relative to ours at 3.52%). The posablitity in investors/traders mind of run away inflation in Europe and the USA is growing. Stocks have historically handled a beginning of inflation well, but if it gets too large everything suffers. The good news in all of this is deflation (a much more significant problem) seems off the table. Could go on for thousands of words but here’s the

Bottom Line – Quantitative easing over the past 18 months has kept stocks surging and stabilized our economy. Europe is having a major negative impact on us and it looks like right wingers and others are going to challenge or put road blocks in front of our FED.(I’m all for more transparency, but these guys want to destroy the FED – lead by Ron Paul.)

Right now quantitativ easing is NOT having some of its intended effect of keeping the dollar lower and the T bills/bonds yield low.

This is going to make for a bumpy ride and perhaps  changes investment strategy.

• EUO – an ETF that double shorts the EURO
• PST – an ETF that double shorts 7 to 10 year treasuries.

Of course, this would be a buy the dip situation.

Positions

• EEM - (Emerging Markets ETF) -1/2 positions sold
• UWM – (2x small cap stocks ETF) – 1/2 position sold
• UWM-
• UWM

Putting stop on 1/2 of  last UWM position at what it was bought for. 40.94 or sell 1/2 for minor 1% gain near open. 2% trailing stop on the rest.

Very Interested in UCO – double oil ETF, but still waiting for dip.

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 stocks & ETF’s including “YOUR Stock List.” -

Russian and Stock Bears

START

Strategic Arms Reduction Treaty (Part 1)

Background

If we survive as a species, President Ronald Reagan, will be remembered as a true hero for placing in motion the first START Nuclear Arms reduction treaty between the USA and Russia (the symbol for Russia is a bear) that was eventually signed in 1991. Key to this treaty were Reagan’s words “Trust but Verify.“

Today – Russia’s Economic status is more improved than the vast majority of countries since 1991. Russia has vast natural resources and oil/gas exports account for much of that growth and a trade surplus of $10.4 billion in Sept. Russia fell further in the world wide recession and last quarter under performed other emerging markets when its GDP growth fell from 5.0 to 2.7%. Great source for economic data is Tradingeconomics.com

Two significant problems in Russia

1. Corruption – On the list of the 178 most corrupt countries rated by Transparency International in the world Russia comes in #154. For all Investors411 chides the USA for its growing corruption (we have, for the first time fallen out of the top 20) we still come in a respectable - #22.
2. Terrorism - Russia has had 4 separate major terrorist incidents in 2010 resulting in at least 67 deaths and over 300 serious injuries.

Background and problems in USA

1. The USA has 5113 nuclear warheads Virtually all them dwarf the 2 atomic bombs that destroyed Hiroshima and Nagasaki in Japan and ended WW2. The smallest weapons today are at least 7 times more powerful than the first rudimentary bomb that leveled Hiroshima Although the # of Russian weapons vary according to source, they are thought to have slightly more. Video of  57,000,000 ton Russian Tsar bomb – compare to 15,000 ton Hiroshima bomb. Tsar Bomb about 4000 times more power.
2. We are, by far, the most militant country on the planet. Only country in 3 declared wars – Iraq, Afghanistan, Terrorism. Who knows how many attacks in other sovereign countries from Pakistan to Yemen.No country even comes close to our 1000 military bases/installations around the world. Multiple sources indicate if you include homeland security, and other appropriations like nuclear weapons that fall outside of listed “defense spending” we create over 50% of the worlds military budget.

tomorrow (part 2)

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

Technicals, Fundamentals & Analysis

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

World Stocks -

USA – Volume up & Stocks down. Benchmark S&P 500 fall to 1181. Just above major support at 1173. Falling through 1173 will probably intensify selling. Lots of economic data released today, but the big report is Friday’s monthly jobs number.

China – FXI (ETF for China) is down over 10% from its high and trending down. But manufacturing numbers (just out) rose.

BAC – US giant shadow bank dramatically broke through  a major support level (down -3.14)on rumors that it was the next target of WikiLeaks.  BAC has an opaque accounting system, so selling here could intensify on the rumor. = Bearish

Europe – Worst month since May and the 50 Euro STOXX Index break below “upward trading channel”

Reading The Tea Leaves -

Look above – There’s lots of red Bearish signs.

• Combination of BDI and FXI (most important emerging market) along with Europe trending down is trouble in the long term.
• Dollar rally hurts
• BAC breakdown and AAPL one day fall (-1.81%) are two leaders that got smacked yesterday

The Bad news . If/When  the S&P major support level (1173) falls, selling usually intensifies.

The Good News – Trend exhaustion  -49 on the MO shows we are technically reaching a point where there are fewer and fewer sellers out there.

There are other indicators I use to show trend exhaustion and one of the best was created by Tom DeMark. His nine day trend analysis is right more than its wrong and some of the more important forecasting tools used above concur with his theories. If you are trading short term and have NOT reviewed his system or one of his books be assured almost every hedge fund manager has. Investors411 tries to “Keep It Simple” but if you trade as oppose to invest this is one system to know.

Positions

• EEM - (Emerging Markets ETF) -
• UWM – (2x small cap stocks ETF) -

We’re at or approaching “buy the dip” territory. I’d love to see another 20 points cut from the MO before I nibbled.  However, I’m afraid the High Frequency Traders that dominate trading are probably going to see “trend exhaustion” like I do. Right now emerging markets are ripe for an oversold rebound, and the dollar is also close to trend exhaustion. This means at least a short term oversold bounce.

Would love to see a clear buy the dip opportunity arise today or later this week, but afraid we might not get the chance.

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 stocks & ETF’s including “YOUR Stock List.” -

Reading The Tea Leaves -

There are still too many bearish signals out there to to balance the fact that we are approaching the 50 day moving/support level average for the major US stock indexes. The MO is clearly in oversold territory at -86.89 but has fallen beyond -130 ONLY twice in the last three years

There’s a shot because of the low MO and support levels for the major indexes is in front of us that bulls could make a stand. The problem is that just about everyone else who I skim for analysis is full of doom and gloom.  In fact, more are starting to talk about a double dip recession.

Bears are approaching the 50 day moving average with HUGE momentum so the Long Term Outlook was changed to NEUTRAL

The Wild Card is the High Frequency Traders that dominate the stock market (50 to 80% of trades) I get the feeling they are “pumping and dumping” HFT and other entities push or pump panic traders/investors in one direction then when it reaches a fever pitch go/dump in the other.

So being totally out of the markets, I think there a chance to nibble on another big dip. At a -120 MO I’d take a bite.

Additional reasoning -The rising dollar is playing a major role in falling stocks. The USD is trading above its top Bollinger Band. Translation its gone up too far too fast. So if the tracking ETF for the dollar the UUP goes up  and stock dip this AM, I’ll BUY

This trade will evaporate if we go sideways for a few days. But at least a snap back counter trend rally is very possible right now.

Investors411 has No long positions at this time. Even our YOUR Stock List is under construction.

Traders. Potential for a buy the dip trade exists today.(see above) Would use riskier TYH (3X techs) & EDC (3X Emerging Markets) rather than less leveraged ROM (2x techs) & UWM (2X small caps) to start. Reasoning – I’ll take a quick 3 to 5% profit on 1/2 and let the rest ride. The more leverage the quicker you get to the profit/stop loss

Investors. -87 on the MO is mighty tempting. I do think there is more downside to come. If you can take the high risk  EEM or one of the various other specific emerging market countries is what I’d choose. You’d love another  Dow down 100+ points before nibbling.

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 stocks & ETF’s including ”YOUR Stock List.”

Frankly, The American Public got it right. If we don’t fix JOBS and the ECONOMY the rest is NOT going to matter. The Tea Patry’s feeding frenzy over the deficit is almost totally irrelevant now.

What will Obama do? History;

• Caved into generals/military industrial complex over endless wars – Iraq, Afghanistan, War on Terror and probable future wars Iran Pakistan etc.
• Caved in to Insurance companies on Health Care. FYI – Repealing Heath Care law would mean Insurance companies would loose cash cow of @30+ more Americans covered. Hard to see a total repeal.
• Caved into shadow banks over stringent reforms that helped cause global recession.

Think its a safe bet here that Obama will cave in or nicer word compromise (then cave in) to some major industrial sector or their media outlets (Fox news etc) decide.    What should Obama, who has spent the last 10 days outside the country, do ?

• Focus on Jobs, Jobs, Jobs.
• Reincarnate Teddy Roosevelt as listen to him
• Learn to communicate your successes.

Tomorrow – What Obama/Democrats has done and failed to communicate.

All this is bearish but tempered by light volume.

Reading The Tea Leaves – 8 Charging Bears

There are about 8 bearish signals flashing in today’s Investors411 vs. 2 Bullish signals – Light volume show not much panic over 8 charging bears and the MO is almost oversold.

If 8 bears were charging me I’d run and hide behind a support level – In this case the 50 Day Moving Averages for the major stock indexes. Who knows what’s in the minds of the High Frequency Traders. Perhaps faith in QE2 is built into a lot of their algorithms. However, they did NOT even attempt to rescue stocks at the end of the day. Bear # 9

Most significant forecasting ETF to watch

• The dollar (UUP the tracking ETF) - Most likely the significant resistance level will hold,
• Overbought commodities - (USO the tracking stock)

Threw in the towel on long positions after markets started to deteriorate (see above) yesterday.

Investors411 has No long positions at this time. Even our YOUR Stock List is under construction.

Traders. There was no big dip (Dow down 100+ points) to buy on yesterday. I’d be more cautious about going long today. (see 8 charging bears above) Personally I’d use positions like ROM (2x techs) & UWM (2X small caps) to start. TYH (3X techs) l& EDC (3X Emerging Markets) seem too risky right now.

Investors – Lets wait for the MO to close below -60 before even considering buying. Right now it looks like bears are going to run right through -60 and @-130 was the May low for the MO.

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• Your First Stock List made @ +24% from 2/11 to 5/20 vs @ +11% for the S&P 500
• Your Second Stock List made @ +26% from 8/4 to 11/5 vs @ +9% for the S&P 500

Paul & I will be going over the list and coming out with YOUR Stock List #3 by next Monday. We have about 30+ stocks to choose from and the eventual list will be from @ 12 to 15 stocks like the last lists.

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 stocks & ETF’s including ”YOUR Stock List.”

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Bulls & Bears

The case for a rising or falling stock (not economics) market

The Bears

• At best unemployment in the USA has stabilized around 9.5%. The stimulus that has caused the reversal will soon run out and employment will grow.
• Housing prices have at best stabilized. 90+% of mortgages are now in some way backed by the US government  (Fannie & Freddie)
• Not only is the middle class in the USA shrinking, most people are saving more than they used to. Money flows are therefore diminishing.
• The European bank stress test was at a best a PR exercise. US banks are not loaning like they used to. They’d rather make more profit in other areas and are still in after shock from the original crisis.
• European Union with the world’s largest GDP, has many shattered economies (PIIGS &  Eastern Europe) and the others are no better off than the USA.
• The US has an exploding military budget $1,003,000,000,000 ($1.03 trillion) last year. If you count all our military expenditures it is over 60% of the world’s military budget.
• Iraq ‘s March elections created a stalemate with no government. The two leading candidates lavishing praising Hezbollah’s founding ayatollah and meeting/praising  Sadr (anti American ayatollah in self imposed exile in Iran) to beg he joins their side in new government.
• Afghanistan – WikiLeaks has just released 90,000 documents showing “devastating portrait of the failing war.”
• China, the leading emerging market has a housing bubble.
• Stocks are overbought according to the MO (see below)

The Bulls

• The dollar is falling and close to breaking out of chart pattern to downside. Lower dollar = higher US stocks because US goods will cost less overseas.
• Oil prices near breakout to new 3 month highs. Higher oil shows greater consumption = bullish, but not if you’re a consumer.
• Shipping prices have rebounded and are moving higher. See BDI below.
• According to International Energy Agency China surpassed the USA in energy consumption in 2009.
• Most US companies that reported better than expected profits cited emerging markets (China specifically) as where they were growing the fastest and creating jobs.
• China will spend $738 billion over the next decade on clean energy. = growth. The USA can’t get a weak climate or energy bill passed congress.
• Unless you want to invest in some European bonds (example Greece) there is almost nowhere to go besides stocks to get more than a couple % growth for your $.
• Black Box/High Frequency Traders dominate the market and they are ONLY concerned about short term results. They can go long or short.
• Weak banking reform means shadow banks can again get over leveraged.= more profits=higher stock prices till another crash.

I’m sure I missed some. To see the positions Investor’s411 is taking see Positions below and also click on POSITIONS at top of blog.

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!

Technicals, Fundamentals & Analysis

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

Mantra -The Black Box/High Frequency Traders control the vast majority of trades.

The NASDQ volume was slightly above average, but the other major indexes had a typical light volume rally that has become the norm for the Black Box traders that control the markets.

News on the earnings week ahead

Significant Indexes-

• McClellan Oscillator (MO) rose dramatically to +79.48 [+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. 79.25 = BEARISH
• US Dollar –  The dollar  fell  -0.16% yesterday [Anything over +/- @0.50 is significant.] The dollar/stocks relationship is strong – 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. At bottom of trading range. = Neutral/Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also, good proxy of China.) BDI was in free fall from a high of @4200 to 1700 . This was a huge -60% drop in 8 weeks is very bearish Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI has staged a 6 day +7% rally and is at 1826 = bullish

Reading Tea Leaves-

The McClellan Oscillator at +79.46 shows stocks as being overbought. I’d be just a little more cautious about using short ETF’s too early because of the strong bullsh sentiment right now among Black Box traders. But, its clearly time to think about using those ETF’s that short major indexes. Click on POSITION at top of blog for more info.

The MO has not been above 80 since the big spring rally in April of 2009 – then it reached @ 105. In early Jan. of 2009 it did reach 120.

Positions

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

Updated over weekends Investors411 holds ONE position in SDS at this time

Strategy – From Thursday - The same as before - If/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. Therefore what is happening is a series of trades (Short ETF’s) the more overbought the market becomes.

The same entry/exit strategy applies. Considering dropping exit/entry point to 4 instead of 5%. See Friday’s Investors411 for more. The following trades were made Friday.

• SH (ETF that shorts the S&P 500) was sold for 51.26 – a -2% loss. The other 1/2 of SH was sold earlier for a 3% gain
• SDS (ETF the shorts the S&P 500 at 200%) was bought at 32.50 Nibbled with just a 2% of portfolio position.

Reasoning - The majority of technical analysts seem to be bullish, the BDI has reversed its 8 week fall & the dollar is right at its major support level.Therefore they may be room for 3 week bull rally may continue. We could reach a high above 100 on the MO. However the MO chart has not gone over +80 (where it is now) since April of 2009. Translation – There is some greater risk in this trade than if we had long term bearish outlook. However the more overbought thing get the safer the trade.

Longer term investors may want to wait to see of the MO goes up another 20 points before nibbling. Please recognize that right now this looks like it may only be  a trade  and NOT a long term investment

EWZ (Brazil) an ETF Investors411 owned for years is again outperforming and is a buy the dip opportunity.

GLD – (Gold) has come down off its high and any further dip Investors411 will buy.

The Long Term Outlook has been changed to NEUTRAL from Cautiously Bearish As explained/predicted Friday, the benchmark S&P 500 broke through the first of 4 different resistance levels. Another 3% move higher and the remaining 3 levels will fall.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!