Investors 411 Blog

by Barr Jozwicki
June 8, 2011

Playing With Fire.

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

The Game of Chicken

Douglas Holtz-Eakin is about as powerful a conservative economist  as there is.

Here are his money quotes on the Republicans holding the debt ceiling hostage to the demands of their right wing/Tea Party ideologues.

  • Default Would Be An Economic Disaster…Little defaults, big defaults; default’s a bad idea period and there should be no one who believes otherwise.”
  • “We need to grow at this point more than anything else.”
  • “The idea that somehow it’s a pro-growth strategy to raise interest rates on a permanent basis in the United States is just crazy,”

Its one thing for Investors411 to beat the drum for these economic ideas again and again, but when arguably the chief Republican economist (Top economic advisor for Bush & McCain, and runs his own right wing think tank ) says the same thing- you have to realize just how “crazy” and ideologically based  the Republican’s in congress have become.

Those big Republican Wall Street investors should be on the phone right now screaming at the Tea Party they created about realities out here in on Main Street America. Because to manufacture this crisis over the debt now is going to sink not only Main Street, but Wall Street even further. Our focus today must be Jobs and growth.

As Republicans push for “brief” default China warns Republicans -

“They are playing with Fire.”

How blissfully ignorant Americn sheep are, as they are mesmorized by their media’s depictions of the tawdry affairs of a musle bound governor and congressman, to the fiscal realities that threaten to explode.

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KISS & Stocks

(Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index Percentage Volume
Dow -0.16% Down
NASDQ -0.04% Flat
S&P 500 -0.10% Up
Russell 2000 +0.28% -

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Technicals, Fundamentals & Analysis

  • RepeatIf the Fed waits weeks/months to offer more liquidity then CAUTIOUSLY BEARISH should be the outlook. (NB I added word weeks)
  • A significant gain evaporated yesterday after Fed Chair Ben Bernanke’s speech was revealed. Bottom Line no QE #3 (additional liquidity) = No rally in stocks.
  • THE MOTHER OF ALL FUNDAMENTAL FACTORS - It trumps everything – No more Fed liquidity = No stock rebound.
  • The McClellan Oscillator (MO) chart rose to -44.65.  US Stocks are moderately oversold. Oversold stocks are the single major technical factor preventing a major meltdown.
  • Markets from the introduction of Fed QE 2 moved higher on weak volume, now they are moving lower on weak volume.

  • Reading The Tea Leaves – Wall Street’s message to world – We are going down until the Fed introduces more liquidity. Technical aspects may be give hints at market directions but fundamentals rule. Investors411 has hammered and hammered on how important Fed liquidity is for many many months. Yesterday’s speech was the cherry on top of proof that Fed liquidity is the 800 lbs. bear in the room.
  • Reading The Tea Leaves – You put an  800 pound bear in a room and introduce fire (see above editorial on debt ceiling) Now guess what happens?

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Positions

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

SLV/AGQ (very roughly 2x silver) Sold 1/2 for +3% profit. Have a sell order in on balance for 3% loss. (see Friday’s comments section of blog.)

REMX(Rare Earth metals) Investors has a 1/2 position in this ETF

NLYAnnaly Capital Mgt. Ultra high dividend stock.

Yesterday – Bought 1/2 position in TZA at 38.65 Bought IMAX at 36.35

The US stock markets have stapled a message in the head of Fed Chair Ben Bernanke. We are not going to buy until you give us more liquidity/stimulus.

The question becomes how low can you go?

Therefore Strategy is clear -

  • Short any rally – Investors411 will use TZA (3X short small cap stocks) and SDS (2x short S&P 500 more conservative) Will add to TZA today.
  • Sell into any rally - Investors will sell both REMX and newly acquired IMAX – Longer term holders of IMAX still have possibility of making out till after premiere of blockbuster Transformer’s movie in July. SLV & NLY seem to be unaffected for now.

REMX & IMAX are NOT Inferior positions and if you have enough insurance/short positions to cover any losses then I’d hold them.

This is very much the same condition as the Silver trade in April, where there was a high probability that the trade you made would work. (both long and short) Shorting rallies is that trade. What will kill the trade is the belief that the Fed will take action and introduce more liquidity. Remember – There’s risk in everything

Disclosure - I own SLV, NLY, REMX, & IMAX (the later should have been in  Investors portfolio)

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Longer Term Outlook

NEUTRAL/CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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June 7, 2011

The Nobel Prize

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

The Nobel Prize

Many of you commented directly on this when it was posted yesterday in the comments section. The start of an editorial by Nobel Lauriate  Peter Diamond.

“LAST October, I won the Nobel Prize in economics for my work on unemployment and the labor market. But I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination.”

THIS IS WHY YOU NEVER VOTE REPUBLICAN.

Read the full NYT editorial here - LINK

Popeye

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KISS & Stocks

(Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index Percentage Volume
Dow -0.50% Up
NASDQ -1.11% Down
S&P 500 -1.08% Up
Russell 2000 -1.59% -

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Technicals, Fundamentals & Analysis

  • Repeat – If the Fed waits months to offer more liquidity then CAUTIOUSLY BEARISH should be the outlook.
  • Yesterdays fall was in below average volume. Check out the chart of the S&P on right side of blog. You will notice (the green line) a steady decrease in volume. High Frequency Traders dominate and the light volume is very reminiscent of the light volume melt ups we had all spring. Perhaps light volume meltdown are in store for the summer = Bearish
  • The McClellan Oscillator chart is at -57.79 just 2 points shy of oversold – expect a rebound at least in the AM. However , before this is all over and the Fed caves in to more liquidity expect the MO to reach numbers like -100. The MO chart, just like major US indexes is a series of lower highs and lows.
  • Last night CNBC’s  Jim Cramer went bearish on stocks. One reason he used was US politicians wrangling over debt crisis. (Thanks to Jim J for his comments on this.)

  • Reading The Tea Leaves - Repeat Everything that was said yesterday.  We are in a chart pattern of lower lows and highs (see any major index charts on right side of bog) with liquidity being yanked out from under us on June 30th. The odds continue to increase that bears will rule this summer.

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How To Protect Your Money

In a Bear Market

  • You can be in cash, but that will return almost nothing
  • You can be in bonds – treasuries under 3% for 10 years
  • Your home value are going down so real estate isn’t great
  • You can be in stocks and watch them sink or perhaps grow. But that’s a guess.

Yuck – Not very palatable

A Hedge for Dividend Stocks

Let’s assume we do have a bear market.  Here’s the hedge I am using for dividend stocks. Over the past months I’ve listed a group of dividend stocks that have a second stream of income between 4% & 19%. Let’s say you’ll make an average of 7.5% on these high dividend stocks this year – Not bad if we remain in a bear market.

Here’s what to do in a bear market to preserve you capital when the prices of the dividend stocks decrease. Remember last year after QE #1 ended- we dropped over 15% on the S&P and we could do the same or worse as QE #2 ends. There are two (of many) hedges that Investors411 is recommending to cushion losses in price while you still get the dividend.

  1. TZAThis ETF is 3 times short the small cap index. The plus on TZA  is  it gives you the most volatility for the least price. Its not 1 or 2 times short small cap stocks, but 3 times short the most volatile major index – small cap stocks. The minus is it gives the most volatility for the least price. Example – yesterday the S&P was down 1.08%, but the TZA was up 4.79%
  2. SDS - This ETF is two times short the S&P 500. The plus is it has more stability (less volatility). It is only 2 times short a more stabile S&P 500. The minus is your going to have to spend more dollars to compensate for losses Example yesterday S&P was down 1.08 and and SDS was up 2.15%

One was to calculate a more accurate hedge is to total the price losses of all your dividend stocks yesterday. Then choose some sort of balance ratio between that total and TZA or SDS

Example – Let’s say your total loss of all the shares of dividend producing stocks you own was 0.50% yesterday. Lets say the total  you have invested in dividend stocks was 100 k (I’m using round figures so its easy) Therefore you lost – 100k time o.5% = $ -500.

  • TZA – Is at almost $40 right now and went up almost 5% (4.79%). 100 shares of TZA at $40 gaining @5% = @$+250. 200 shares of TZA or $8,000 = $+500 and that would protected @almostall of your 100 k of dividend stocks yesterday
  • SDS - Is at @ $22 right now and it went up over 2% (2.15%) yesterday. 100 shares at $22 gaining @ 2% = +$44. 1100 shares of SDS or @ $22,000 = @+500 and that would protected almost all of your dividend stocks yesterday.

CAUTIONThese two choices are going to move in the opposite direction of dividend stocks if we have a major move of another 10% down. But the ratios presented are NOT going to remain as balanced as they are above. They will fluctuate.

Perhaps the best way to go is to protect @ 1/2 your dividend stocks immediately and wait for a rally then protect more. Use both SDS & TZA or even another short ETF. There are many many possibilities.  When to sell tomorrow.

JS & The Critic

If you follow the comments section of the blog both JS & The Critic have used similar methods of having a hedge or buying insurance to protect their dividend stocks in a down market. They use a more conservative SDS (2 times the S&P) Both are simply protect the price of their original investment in what appears to be a bearish market ahead.  I do not know how much of their principle they are protecting- 100% on down. LINK here and scroll down for their comments at bottom

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Paul’s Corner

BOLLINGER BANDS

Today a brief look at the Bollinger Band and how it can be used to monitor your stock and provide entry and exit signals.  For your review, the Bollinger Band Basics PDF:

LINK

After a quick review of Bollinger Band Basics here are Your Stock List members with comments with respect to the Bollinger Band.

  • ADTN basing after down trend
  • ALTR basing
  • ABC basing at bottom of band, 3 green candles looking  to turn up
  • BIDI In downtrend, fell back from middle band, not buyable
  • BEXP downtrend, failed rally, at bottom band, not buyable
  • CPHD basing after uptrend, excellent chart
  • IMAX uptrend, great tight chart
  • JNPR broken stock after downtrend, NOT buyable!
  • KSU in uptrend, loose chart
  • LYB in downtrend after nice uptrend. Peaked the day it was introduced to YSL!
  • POT rotten wide chart, in downtrend, sitting on middle band as support. Maybe a turn here.
  • PCLN starting downtrend after a nice run.
  • RNOW basing after good tight chart run, watch!
  • RVBD nice short uptrend after basing, broke down through middle band Monday, not buyable at the moment.
  • SAP What does this chart look like to you?
  • SKWS Look out below!
  • SPRD in downtrend, dropped below lower Bollinger band Monday, NOT buyable!

Ok a little different way to evaluate Your Stock List, your thoughts to using the Bollinger Bands?

So it’s Tuesday morning what’s the market going to do today? Let’s load up Quote Tracker………here we go folks another day of fun!

All of these observations made from the charts dated Monday June 6, when the market opens this morning at 9:30 EDT all bets are off! Remember, you are responsible for your investment decisions, and I am not.  Please do your diligence, and please take ownership for your actions.

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Positions

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

SLV/AGQ (very roughly 2x silver) Sold 1/2 for +3% profit. Have a sell order in on balance for 3% loss. (see Friday’s comments section of blog.)

REMX - (Rare Earth metals) Investors has a 1/2 position in this ETF

NLY - Annaly Capital Mgt. Ultra high dividend stock.

Plan to buy TZA in rally to protect above long term positions. 1/2 the usual amount. If markets continue to fall will add more high dividend stocks and TZA or SDS.

Disclosure - I own SLV, NLY, REMX, & IMAX (the later should have been in  Investors portfolio – May add it today.)

Thanks for all the praise on calling the market turning South. But its still premature until we hit at least a 10% correction.

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Longer Term Outlook

NEUTRAL/CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING


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May 11, 2011

Take No Prisoners

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , ,

John Boehner

Take No Prisoners

Our political structure has devolved into a take no prisoners style of government.  Compromise has become a dirty word and threats of financial armageddon will soon becoming reality.

Ezra Klein (Bloomberg & Washington Post) has a comprehensive look at John Boehner’s (Republican House leader) demands over the debt ceiling.  This is obviously influenced by the Tea Party’s growing domination of the Republican Party. The Democrat’s too seem only be out to score political points.

Klein’s name is linked to the article and I stronly urge you look at it.

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KISS & Stocks

(Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index Percentage Volume
Dow +0.60% up
NASDQ +1.01% up
S&P 500 +0.81% up
Russell 2000 +1.56% -

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

  • The liquidity provided by the Fed ( quantitative easing) is still the dominant factor. These $ combined with low interest rates force money into stocks.
  • The big news of the week is the weekly jobs number on Thursday. – Whose right? the monthly report = employment increasing or weekly employment decreasing.
  • Watch UUP – tracking stock for the dollar.
  • Not good news for stocks - Partisan Divide on Debt Ceiling Hardens
  • Significant question – Can stocks rally if US political structures growing ideological wars and lack of compromise continues?

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Shorter Term Forecasting Indexes

There are hundreds of forecasting tools, – These two tools have worked

When they stop working Investors411 will use other Indexes

  • The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] Dollar fell again yesterday -0.17% The dollar has challenged its falling 50 day day moving average/strong resistance level and failed to overcome this barrier for the last three days.  A short term rebound earlier was bullish, but now the bears are regaining some momentum. Long term trend still bearish, but no clear direction exists until the 50 DMA or the old low is broken. (see link to chart) = Neutral
  • McClellan Index(MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] Mo on   rose to +32.00. We are approaching oversold. Last two highs of between 50 and 45 gives us a day or two(depending on gains) left to the rally. = Neutral

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Dividends

Part 2

Dividend Stocks vs. Non-Dividend Payers

The following are the sexy, high octane , high risk dividend plays. The criteria for the selection of all dividend stocks was announced Monday.

Most of the group below are in some was involved in trading derivatives. They may use black box trading techniques and/or be high frequency traders.

Disclaimer - I own the two stocks mentioned below. You might want to own one of their competitors. Do your own research

NLY – Annaly Capital Management. Dividend 13.82% per year last quarter.

What they do – “We are primarily engaged in the business of investing, on a leveraged basis, in mortgage pass-through certificates, CMOs and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans issued or guaranteed by Freddie Mac, Fannie Mae and Ginnie Mae.”

NLY, I believe, is the biggest firm of this group. Market cap = 14.4 billion. Others competitors and similar high yield dividend plays are smaller.  JS points out in the comments section that NLY is a favorite stock of Jim Cramer.  The dividend for the stock 0.60 per share 8 quarters ago and reached a high of .75 six quarters ago and  the latest quarter was .62.

AGNCAmerican Capital Agency. Dividend 18.78% per year last quarter

AGNY is a 3 year old company. Market cap $1.9 billion.  It rose to a hight of $1.50 dollar per share dividend  two years ago and has had what seems like a too good to be true steady 1.40 dollars per share dividend for the last 7 quarters.

Competition – You may find the following companies more desirable after you do the research.  HTS, MFA, IVR, CYS (the last has the highest dividend payout) There are others in this group.

Reasons for holding – The government has weak regulations on the derivative markets and it does not look like any changes are coming in the future.  These are risky plays and NLY is now trading at 18, but did reach a low of @ 11 in 2006 and 2009. (See link to chart) From late June of 2008 to late May of 2009 the dividend of NLY was a relative steady 0.50 to 0.55%. So NLY during the financial meltdown had a steady return.

More on dividend stocks ASAP – Next the anchors – or the dividend stocks you may hold through tick and thin.

Caution – all dividend stocks are vulnerable to run away inflation.

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Positions

Reading The Tea Leaves – MO has been an amazing accurate forecasting tool for the past year.  It saying we are getting near a technical top (See above)

Disclosure - I have personal ETF positions in REMX and manage a fund that has a 5+ year position in GLD. I also own NLY and AGNC mentioned above

  • REMX is going to take a hit today. The #4 stock in its portfolio MCP had a bad earnings report and was down 12% in after hours trading. This will probably drag REMX down below its 50DMA. I will lighten my position here (at a loss) if there is no rebound by the end of the day.

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Check out the advice, recommendations, analysis by bloggers on stocks,politics and trends in the comments section of the blog  Many of the best concepts regarding YOUR Financial Future are discussed their. Watch for Paul’s Corner every Tuesday and Thursday

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Longer Term Outlook

CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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April 13, 2011

The King Kong Deficit Creator

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , ,

So, you going to ignore him?

Tax and Spending

Since Obama and the Republicans answer to the shadow bank, military/industrial and other business cartels in Washington it is important to get get a more unbiased point of view on the budget. Here’s one from today’s NYT. Tax and Spending Myth and Realities A must read since  the cartels dominate the flow of information.

Military/Industrial Cartel

Just how powerful and dominate is this cartel? Their budget has gone up a staggering 81% in the last ten years.  Nothing comes close to creating debt like the military budget yet they are so powerful a cartel that neither Obama, the Republicans or the media address the problem in a substantive way.

The $700 billion yearly usually used as an approximation of the  defense department’s budget is as phoney as a three dollar bill.

  • Foreign wars (Iraq, Afghanistan) are treated as supplemental budget items and not included
  • Veterans affairs are not counting in this budget, yet this is closing in on 8.5% of total budget.
  • Homeland Security (almost 3%) is not part of this budget and so are other smaller related military expenditures.
  • Since programs like Social Security are paid for with their own tax or fees and are currently in the black they are not part of the growing federal deficit.  If you eliminate these programs as debt contributors, the military budget alone wind up contributing over 50% of the growing national debt. Some put this figure much higher

So if we take the $1,000,000,000,000+ military budget and increase it by 81% growth over the next 10 years you come up with a $4 to $6 trillion dollar increase over the next ten years that almost every politician in the USA ignores.

You’ve seen Republican’s ignore the King Kong of deficit creators in the Room (far bigger than the 800 lbs. gorilla) and today you will see Obama in a speech to the nation virtually ignore it.


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KISS & Stocks

(Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index Percentage Volume
Dow -0.95% up
NASDQ -0.96% down
S&P 500 -0.78% up
Russell 2000 -1.39% -

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

BUBBLE-ICIOUSInvestors411 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.

  • This is different. What has been a 3/4 day market correction has happened in light volume. Used to be we rallied in light volume and sold off in heavy volume.
  • The dollar , oil and MO have fallen significantly and the likelihood of at least a technical rebound is growing (see below)
  • Republicans seem to want to play politics with the Debt Ceiling. This could have a significant negative impact on stocks. More on this in later Investors411. Surprised the Wall Street part of the Republican party seems to be caving into the Tea Party wing on this.
  • The key to US equities remains how accommodative the Fed can be. If it is limited by the debt ceiling or something else – watch out below. Everything will suffer.
  • Fed announces POMO schedule though May 14. $80 billion, plus a second program of $17 billion. Can’t help but wonder if this second program will continue beyond the supposed end June 30th. Analysts very divided on a QE #3(more quantitative easing after June 30th)

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Shorter Term Forecasting Indexes

There are hundreds of forecasting tools, – These two tools have worked

When they stop working Investors411 will use other Indexes

  • The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks]   Dollar fell moderately yesterday -0.23%.  The trend since start of year is bearish with lower highs and lower lows on chart, We are at a lower low.  For stocks = Bullish
  • 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 -51.72. Almost oversold. = Neutral/Bullish

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Reading The Tea Leaves

From yesterday – “Looks like we are in for a correction. The dip last month took the MO down to -85 (see link to chart above)” and in past has gone as low as -135.MO at -51.72 now

Bottom Line  Till it Breaks DownNo Black Swan events have been able to seriously impact the Fed liquidity driven equity market. So we are nearing a buy the dip territory.

The dollar at a low, oil prices plummeting last 2 days, and the MO nearing oversold levels shows we are ready for a rebound. If oil , the dollar & stocks continue to fall I will buy the dip. The further the better. This may only be a short term play (day, days, a week, or more).

Debt ceiling Republican soap opera politics in Washington could really hurt stocks. Question becomes will US default? Investors hate uncertainty and this is yet another bond holder to get out of treasuries.

This could kill the duration of the expected rally higher.

What to watch today – For shorter term traders Market movers.

  • USO - ETF for oil - Oil up = stocks down – Big hit in last two days – for stocks – Bullish
  • UUP - (Tracking ETF for dollar) Remember - The dollar is a contrarian indicator. Bad dollar = good stocks. Now bullish
  • 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. AAPL rebounded yesterday. Perhaps the start of a rebound rally? Still, overall = Bearish
  • Japan Rector Developments - This keeps getting worse.
  • EEM – Emerging market ETF – On a breakout run, but getting  way over extended and now correcting.

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Positions

The POSITIONS Section at top of the blog is a link to 4 different portfolios. It’s full of investment idea. The actively managed portfolios #3 &4 – Aggressive ETF Trading & Your Stock List can be found in the POSITIONS Section of blog

I have positions in REMX, RJA, SLV, EWV,UWM

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

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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