Investors 411 Blog

Health Care

Robert Reich – fromer Sec. of Labor

Frankly Abby Gold (see comments on right) says it all on health care .  This country used to care. There was a bond between neighbors. Now the rich get socialism whenever they are in trouble and the poor and working class average Americans get ground into the ground. This is a mega trend in the USA that’s spiraling in the wrong direction.

Economist Robert Reich has an editorial on – What happened to the public option. LINK

Mexico & Afghanistan

(to be continued over weekend)

KISS & STOCKS

Keep It Simple Stupid

For those of you whose eyes gloss over in the stock section I’ve tried to KISS it today, but I left a little in for those who want the deeper analysis

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.90%	up
NASDQ	-1.66%	up
S&P500	-1.34%	up
Russell2000	-2.41%	-

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

Volume – Volume  rising (see above chart) is important, but it saw still below average. So there is no real big forecasting signal.

Something called Options expiring (3rd Friday of each month – today) is probably what’s behind all this volume. The more sophisticated short term traders are forced to cover some of their bets at the last minute before they have to buy or sell a stock they have an option on.

If you get lost with a term or want to know more use Investopedia.com dictionary and other help programs or Stockcharts.com tutorial programs.

Why Stocks Move Lower – Yesterday we did Higher and probably the #1 reason is the government shoveling so much money into the economy at almost zero interest rate forces people into stocks. The alternative is a measly couple points in a bank savings account or add another point for a bond. So here’s the downside -

• Job, Job, Jobs – Companies fired workers and now first will  first hire overseas where it cost less and the growth is greater.
• American’s middle class went overboard into debt and is now saving more. Our consumers are saving more, therefore, not buying. Good to save more, but bad for economic growth
• Trust – The rich (shadow financials & others) get risk socialized by the government and the middle class gets capitalism. Folks know their getting screwed – they/we are angry.
• Foreclosures – still happening at a far too big a rate despite stimulus.

The best case scenario for economy – All those who made huge money in the stock market or trading credit derivatives this year buy and eventually this will “trickle down” to the middle class.

Important to remember – Stocks can move in one direction and the economy in another.  Perversely, in the short term, if job loss stays high interest rates will stay low to act as a counter balance.  Stocks historically always rise in low interest rate environments.

Now going to get a bit more technical

If you don’t understand a term look in up at Investopedia.com dictionary LINK

——–

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 has broken out to new yearly high

The BDI rose a n insignificant  +18 points yesterday and closed at 4661. Up 16 days in a row . Technically it broke out through its major resistance level 4291 (this year’s high)  The BDI has rallied about 2400 + points since late September.

The BDI is starting to go PARABOLIC – starting to move up too far too fast-inevitable result is a crash and burn.  We seem to be at the top of the parabola. DANGER for Bulls

——-

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 rose  +0.31% yesterday. The dollar closed at $75. 29 . This is back above the major $75.00 support level. 

CAUTION – The first breakout (up or down) is often false. This happened two days ago . Dollar back in trading range. The top of that range is the falling 50 day moving ave. now at $76.02

——-

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

The index closed at-22.67 This indicates stocks are slightly oversold and momentum for bears is growing

Even though the Dollar Rules consider overbought levels (60+) on this index a point to lighten up on stocks)

Key to chart – Zero  is roughly  neutral and roughly when you approach 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 well over a week – see past updates.

Long Term Outlook - We are on the cusp of change between CAUTIOUSLY BULLISH and NEUTRAL for stocks.

Bottom Line – As Investors411 warned US equities are turning negative.  The point to add to positions will NOT come till we reach oversold positions on the McClellan Oscillator

Long Term Outlook = NEUTRAL

GDP = + 3.5%

This better than expected number is obviously a positive . Its due to the Obama & Bernanke stimulus – Cash for clunkers, tax cuts, first time home buyers credit, low interest rates etc.

It’s the first positive growth in over a year . Since only 40% of the Obama stimulus has been allocated and interest rates should remain low -  the next few quarters should also be positive.

The question becomes when you take the stimulus away what will happen?

Globally the canary in the coal mine is Israel, Norway and Australia. We are a globalized world and these 3 countries have already started to raise interest rates. If their economies continue to grow with raised rates others will follow.

The US does have a specific unemployment problem that will anchor it down longer than other countries. (see below). However, we’re getting some real growth abroad, especially emerging markets. Hopefully, this growth will be strong enough to drag the US along with it.

Jobs, Jobs, Jobs

So far the recovery act has saved or created enough jobs to “shave @2% ” off the unemployment figures. You can get a breakdown state by state at Recovery.com LINK

You can debate their figures, but a jobs recovery is going to be harder than most predict because

• The financial shadow bank crisis created a much bigger hole than most people realize
• Globalization will send most new jobs abroad.
  
• Education of American workers/students has not kept pace with technology.
  
• Our huge deficit will limit stimulus needed to create jobs.
• Our manufacturing base has been seriously diminished.
  

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+2.05%	down
NASDQ	+1.84%	down
S&P500	+2.25%	down
Russell2000	+2.45%	-

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

The Lon Term Long Term Outlook is back to CAUTIOUSLY BULLISH As mentioned yesterday – When the Long Term Outlook is changed we often go back and forth for a while as stocks move above or below key support levels

The discouraging part of yesterday’s rally is THE LACK OF VOLUME . Once again upside moves have little volume and downside moves greater volume. Volume has historically been the #1 confirmation factor of market direction. So this is a very bearish sign

However – The Dollar Rules. Yesterday the dollar moved above the previous days high and closed lower than its low (See chart below). Technical analysts get very excited about a reversal that “engulfs” the previous days move. It fell  over 0.50% which is a significant drop. Investors411  predicted this because it was approaching its  strong resistance level – its 50 day moving average.  As long as the dollar remains below this resistance level - Bearish for the Dollar & Bullish for stocks.

Monitors Question/statement (see comments section of blog)  Sorry I’m not being clear. Yes, I did recommend adding (nibbling) to Brazil and China yesterday (I did) & yes I did lower long term outlook. These ETF’s (FXI & EWZ) had dipped more than 5% & were “buy the dip opportunities.”

NEUTRAL -  Even though it is a downgrade it is still an overall environment that some ETF’s should do well. When  CAUTIOUSLY BEARISH becomes the Outlook – t hat its time to sell. Secondly, as mentioned we are on the cusp of change. Lastly, This market is very difficult to call because the old rules about volume have been cast aside and the dollar now rules.

The Dow is outperforming other major US indexes – This is probably due to the fact that these 30 giant stocks benefit most from the falling dollar (relative to other US companies most of more of their profits come from abroad)

Bottom Line – There are no universal rules in market analysis. Right now the Dollar is trumping volume and all other factors in predicting the direction of stocks and this is quite unusual.

——–

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 modest +27 points yesterday and closed at 3013. Exactly what it lost yesterday. A higher high price on its chart pattern has been confirmed The BDI has rallied almost 900 points since late September. =  Bullish for stocks & world trade right now

——-

The Dollar is currently the #1 forecasting tool . It would be a wild guess to predict he daily moves of the dollar, but longer term fundamentals are clearly negative – the trend of a falling dollar should continue.

$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 -0.67% yesterday. The dollar closed at $75.96 .  This is almost exactly on its support/resistance level of $76.00 . 

From yesterday – The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at 76.78 this AM. It’s the line in the sand – Best read of the tea leaves is that it will hold. In fact, Investors411 will add to some positions  as we get close to this resistance level.

Past statements -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

Outside the USA in Emerging Markets (especially China, & Brazil) are much better in the long run - Our problem is one of timing. We can’t get a 5 to 10% dip to invest. Looks like we will get at least our 5 to 10% dip now.  Investors 411 should have much larger positions in emerging markets .

Current positions

EWZ (Brazil) – Bought at 69.5 (4% of portfolio)  Now = 20% of portfolio

FXI (China) – Bought at 42.75 (4% of portfolio) Now = 24% of portfolio

GDL = 11% of portfolio

SPX = 20% of portfolio

For traders also have positions in NVS & CSCO

• Going to sell some SPX -reasons – Free cash for other investments & take profits
• Need more diversity in emerging markets than just China and Brazil
  

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Pakistan

Many of you have raised public and private comments about America’s desire to have a colonial empire. (see comments section of blog) I certainly wish these countries had a functioning democratic system, but it can’t be forced on them and that force has proven counter productive and enormously costly for the USA. (see yesterday’s enlightening Tom Friedman’s editorial) LINK

One of you told me a deeply disturbing story of a Pakistani couple (two doctors) who have their green cards and just returned from visiting relatives in Pakistan. They said the situation there was rapidly deteriorating.  LINK

Pakistan should be our focus not Afghanistan .  As brought up before the fact that we spend 30 times the $ in Afghanistan we do in Pakistan is deeply troubling. If Obama goes ahead with the 3rd surge in Afghanistan that figure could grow to 40 or 50 to 1. We should be giving Pakistan’s fragile democracy more economic aid and listening to the views of their moderates instead of focusing on troop surges in Afghanistan.

Instead America is consumed by war propaganda. Glenn Greenwald writing for Salon makes an excellent point about the Universality of War Propaganda LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	- 1.21%	up
NASDQ	-2.67%	up
S&P500	-2.40%	up
Russell2000	-3.51%	-

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

Please Note – Long Term Outlook has changed from CAUTIOUSLY BULLISH to NEUTRAL

This is the first change to Long Term Outlook(downgrade) in many moons . This was done primarily on a technical basis. Both the NASDQ and the S&P 500 crashed through their major support levels (the 50 day moving average = blue line on charts at side of blog) We had an another major meltdown in above average increased volume again. This is the 3rd of 4th time within 5 weeks that volume has on a daily basis confirmed (rose significantly and was above average) a major downside price move (greater than 1%)

Longer term – volume has decreased as stocks have risen throughout the summer and fall. This is another technical sign of impending meltdown.

Markets are also not reacting positively to good news AAPL, GOOG,  AMZN , GS & others who beat expectations on TOP and Bottom line have rolled over and are trading down.  Hot stocks loosing ground on good news is the second canary in the coal mine dying.

Markets run on psychology more than anything else – especially in the short term.  Fundamentally , the situation is positive. The US lags most emerging markets, but even here more than a handful of companies now have top line growth.

The Dollar is the catalyst for this turn. Obviously it rose yesterday and this time the impact on stocks greater than the usual (@1% or less) that is approximately what stocks would have fallen with a+0.36% rise in the dollar. (see dollar analysis below)

When the Long Term Outlook is changed we often go back and forth for a while as stocks move above or below key support levels . Expect a rebound this AM.

Best Read of the Tea Leaves – I don’t expect a major roll over -20+%. If/when the dollar starts moving back down stocks should go higher.  However, some sort of correction (a 5 to 10% fall – we are already at 5%) is good for markets.  Anything that goes up too far too fast creates a bubble that bursts.

Also see dollar analysis below.

——–

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 lost a modest -27 points yesterday and closed at 2986. 2nd day of modest losses. A higher high price on its chart pattern has been confirmed The BDI has rallied almost 900 points since late September. =  Bullish for stocks & world trade right now

——-

The Dollar is currently the #1 forecasting tool . It would be a wild guess to predict he daily moves of the dollar, but longer term fundamentals are clearly negative – the trend of a falling dollar should continue.

$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 rose for for the 4th straight day +0.36% The dollar closed at $76.48 .  This is above the former support – now resistance level of $76.00 . Technically - Bullish for dollar & Bearish for stocks.

The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at 76.83 this AM. It’s the line in the sand – Best read of the tea leaves is that it will hold. In fact, Investors411 will add to some positions  as we get close to this resistance level.

We 0.40 away from this resistance level. Mighty close.

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

Outside the USA in Emerging Markets (especially China, & Brazil) are much better in the long run - Our problem is one of timing. We can’t get a 5 to 10% dip to invest. Looks like we will get at least our 5 to 10% dip now.  Investors 411 should have much larger positions in emerging markets .

Look to add to EWZ (Brazil) and FXI (China) positions because of dip. If prices continue to fall  will nibble some more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!