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Bulls Stampede

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Why 2012 will start with a stampede

(see stocks below)

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A New Years Resolution

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The Single Best Thing You Can Do for Your Health

A Video

23 /12 hrs by Dr Mike Evans

Thanks to HG for heads up on this

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Best Chart of the Year

How The Deficit Got Big

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Link to full article by Teresa Tritch in NYT

What’s also important, but not evident, on this chart is that Obama’s major expenses were temporary — the stimulus is over now — while Bush’s were, effectively, recurring.

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STOCKS

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Wall Street Bull with OWS Symbol

• European Markets were open yesterday and Germany – The DAX – rose +3% This AM it gapped 1% higher at open

• For shorter Term Traders here’s the  two indexes to watch. Listed in order of importance. (unless the Italian 10 year explodes over 7%)

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“Hopeless,

But Not Serious”

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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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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.

• 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 Down – No 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

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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.”

Increasing Taxes on Wealthy

A Poll by CBS News and Vanity Fair show what the American people would do when presented with the 4 major ways of correcting our debt problem.  These are by far the  3 most significant parts of the budget (the next largest is the debt itself) and it includes increasing taxes on the wealthy as a solution.

1067 adults were used in the survey. Here’s the LINK. “To Reduce the Deficit Tax the Rich More.”

Thanks to S Herwehe for the heads up on this.

So why is the media pounding day after day on everything else, and ignoring what the American people want?

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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

• Another heavy volume day.
• “schizophrenic.” reaction by major market players over last few days
• Leaders like overbought commodities and small caps take it on the chin.
• It looks like the BAC settlement is the single biggest factor behind Monday’s rally and that factor seem to have been temporarily built into stock prices.
• NB – $BDI numbers came back on line and its at 1993. 7 points below major support = BEARISH Will put this back under Significant Forecasting Tools tomorrow. Really wish we had had these numbers the last few days. Would have sold more yesterday.

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Reading The Tea Leaves

Total chaos for major market players. The major firms use puts and calls. They have gone  “schizophrenic.” In one day the ratio of puts to calls went from one extreme to the other. See 3 month chart from SentemenTrader and their comments below.

• “Never before has this indictor swung from a three-month high to a three-month low on back-to-back days, but it has now.  Traders went from heavily trading puts on Friday to calls on Monday.
• Historically, that kind of surge in call buying has been quite bearish for stocks going forward, but it failed completely during December.”

A correction would be healthy for stocks. Commodities, especially have been overbought.

Sentiment Trader says that “bears failed completely in December.” However now volume is over two times what it was in December.

When market behavior becomes erratic and volume INCREASES it is almost always a good time to be on sidelines

So I’ll be cutting back on another position or two early today or on first rally. (see below)Then wait for a correction to run its course. It may NOT be a long correction.  There are also potential buys listed if we dip far enough.

Additionally the Baltic Dry Sea Index has broken support. = BEARISH

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Positions

• #1 UWM - (2x small cap stocks ETF) – 1/2 position -Sold last 1/2 of UWM at 44.25 for +11% gain. Total gain on trade +10%
• #2 UWM Will placed 2% trailing stop on 1/2 this position
• SLV – (Silver ETF) Will place 2% trailing stop on 1/2 this position. May sell more.
• DGP -(2x gold ETF) Sold 1/2 near open at 41.26 for -1% loss Sold the rest near close at 40.50 for -4% loss Total loss on trade -3%
• REMX -(ETF for Rare Earth Metals) Sold 1/2 at 26.12 for +6% gain

Under consideration

UCO -(2x oil prices) Very erratic, waiting till correction it settles.

REMX (Rare Earth ETF) – Will consider more on a dip. Limited supply. China which dominates market is limiting exports. All this makes for a massive supply/demand problem forcing prices higher.  Rare earth goes in everything from hybrid cars to TV’s. Very excited about this sector for the long term. Would consider adding to position if price falls to about 24.

EWZ (Brazil) & LBJ ( 3x Latin America – majority Brazil) Obviously the later is more risky because its leveraged 3X. EWZ has had 6 straight major rally days and is sitting directly below a major resistance level/new high for year. LBJ just failed to break out and dropped yesterday. A dip for a few days would be an decent entry point.

UYG (ETF that does 2x Dow financials) XLF is the financial ETF. - The major shadow banks have the backing of the US government & the Fed. The recent BAC /Treasury/Fannie Freddie decision was the latest in a long line of NOT holding banks accountable and their accounting is non transparent. Remember these are the Shadows that are behind 8 million more Americans being unemployed, the dramatic fall of housing prices and a worldwide “great recession.” Broke out two days ago and pulled back yesterday. Both overbought at this time

NB - I did sell DGP yesterday, although a firmly believe that yesterday was nothing more than a bunch of traders trying to panic the gold market and drive the price down, so they can buy.  The TERMINATORS WORDS – “I’ll be back.” in gold.

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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 for lists of potential stocks & ETF’s including “YOUR Stock List.” (YSL#3)

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.”

From yesterday – “Not making any specific move until dollar breaks out of its range. I would look at a breakout higher for the dollar, and a corresponding fall in stocks and the MO to oversold as a buying opportunity for long term investors.”

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.”

Home Sweet Home – Crisis

Systemic Crisis in Foreclosures/Mortgages?

A major crisis may be emerging from the opaque shadows of the unregulated American financial system.

Can the Obama administration, Bernanke, Shadow Banks and Wall Street push this problem back in the shadows before it dawns on an ignorant public of just how bad their getting ripped off?

Focus is on mortgage and foreclosures systems from the 2008 shadow bank/housing meltdown.

Remember, because of our over leveraged under regulated financial system your mortgage was turned into a note/bond, chopped up and sold many times (credit default swaps etc) and finally even insurance companies like AIG ended up with a big piece of the action.  Well, who exactly owns your mortgage and there were a lot of crooks (fly by night operators – many are no longer in existence) along the road to chopping up your mortgage and owning part of the action.

Throughout the legal systems people were being foreclosed on by entities that did NOT hold the legal right to do so because the mortgages had been chopped up so many times. This problem reached critical mass in the legal system and now AG’s from 50 states are investigating. (see Thursday & Friday’s Investors411)

Major shadow banks were using unqualified “robo signers” to sweep this problem away ASAP to maximize profits. But now its exploded onto a slow moving US legal system because those who were foreclosed on were being unfairly ripped off by ghost entities who claimed ownership to their house. Major question is who holds the foreclosed mortgage???? Who really holds YOUR mortgage????

Bottom Line – Shadow Banks have used inaccurate (illegal) documents to foreclose on homes. Trust issues abound in an under regulated opaque financial system. Investors could loose confidence.

Sources – In descending order of preference on this, because its really beyond my pay scale to understand – here, here, & here

Major Deficit Creator of Our Time

Obviously the 2008 meltdown. It now supersedes, on a yearly basis, the debt created by the go to war, voting for pork and cutting taxes to create a deficit that started in 2000. This made things horrible and is still in effect.

When unregulated casino capitalism exploded in 2008, we were faced with a choice of another depression or an opaque TARP, Stimulus, and most importantly an opaque Fed Reserve Bank printing who knows how many trillions of dollars.

MIT’s Simon Johnson “There Are No Fiscal Conservatives Out There” – money quote

“If you want to fix the US budget – keeping the deficit under control and bringing down the size of our government’s debt – you have to address the risk-seeking behavior of big banks.  No fiscal strategy can be credible without addressing the major problem that brought us to this point.”

The latest foreclosure crisis is another 2 by 4 over the head reminder of 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

US Stock Markets -

Volume is returning to US markets for the last few trading days and spiked somewhat yesterday. Much of this was due to the foreclosure problem in Shadow mortgage banks, (See below and above) The Dow spiked significantly higher probably due to huge volume in Shadow Banks BAC & JPM.

Apple reports today, and as The Critic points out in the comments section it is very overbought into earnings. It would probably  take a knock your socks off spectacular earnings report to move Apple tomorrow.

Shadow Banks – There are 6 major mortgage shadow banks and they all took another big hair cut again yesterday. Two big volume down days in a row for major banks (BAC down @ 5% each day) is an enormous plunge.

The earnings report and week ahead for US markets

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar rose +o.52% yesterday. The inverse correlation is not always perfect. However Friday’s rally bearish for stocks.  Overall trend of falling dollar trend for US stocks is = Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China, emerging markets, exporting countries] Fell a minor -0.25% Friday An 8 week bull run, then a two week fall. A very slight stutter and now moving up. Trend  = Bullish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] Fell to -1.86. Lot of room to move both higher and lower. Momentum is with the stock bulls but location= NEUTRAL

Reading Tea Leaves.

Helter Skelter – Major forecasting tools and market coherence moved dramatically in different directions.

• The Mother of all tech stocks AAPL clearly overbought in front of earnings report
• MO neither overbought or oversold and parked in neutral
• Two dramatic down days for big mortgage banks and possible mortgage/foreclosure meltdown
• Dollar took unexpected significant move higher Friday
• Major US indexes moving in different direction in big volume
• Emerging markets consolidating.

Again above my pay grade to explain why all this Helter Skelter in a detailed fashion, but I know chaos when I see it.  There’s big money to be made for the traders who guess the right direction of the market. Best read of tea leaves is down.

So many folks have been long and getting more complacent each month. Something we’ve talked about before – the VIX – shows this. So the highest risk for a big move is DOWN.

Bottom Line – There is a possibility of another foreclosure/ mortgage systemic meltdown.

We have NOT fixed the #1 cause of our growing deficits – regulating the over leveraged giant shadow banks – How can any political group can claim to be concerned about deficits and not address hidden, crony, casino capitalism in our wildly over leveraged shadow banking system ?

Positions

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

(I do manage 6 accounts that have other positions)

• EWS (Singapore)
• USO (price of oil/commodity).
• SSO (2x what S&P does) – Tightened stop and may sell/take profit today.
• TYH (3x tech stocks) Sold the rest of TYH at 38.8 for @ +13% gain. Sure looks like a climax run Friday afternoon. TYH is a trade not an investment. Could re enter this trade at different time. Sorry I made a post on this Friday afternoon and it looks like it did not get posted. See comments by “The Critic” entered under Friday’s blog. It may be still up on the right side. I discussed what’s happening with several of you over weekend.

Both US & EWS will be impacted if things go South.

Time for caution for both Investors and Traders. – Time to bring out the old Lost in Space robot, with all his bells and whistles and warn Danger Will Robinson Danger Danger. 95% of this call is based on the current foreclosure crisis and understanding it is beyond my pay scale.

Look for Paul R’s always enlightening comments on stocks and sectors in the comments section.

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

No Repeat Depression

Two highly respected Economist have completed  a major study saying, “A Second Great Depression was averted” for the following reasons. Quote -

• the Wall Street bailout,
• the bank stress tests,
• the emergency lending and asset purchases by the Federal Reserve
• the Obama administration’s fiscal stimulus program

Without this GDP would be 6.5% lower this year and there would be 8,500,00o fewer jobs.

Most economists usual use cautious approaches in quantitative models. They forget – the panic of  banks collapsing, fed by an over hyping media would have cause a far more serious problem.

Investors411 and many of you have been beating the drums on this for 2 years, and its good finally to see a major study come out. Especially one that supports our thesis. Now besides Greenspan, Paulson, Bernanke, Geithner , etc., telling us we would have gone over the cliff, we have some academic support.

Alan Binder Princeton Prof. & former Vice Chair of Fed

Mark Zandi – Chief economist Moody’s Analytic

Smoking Hot Debate

If you’ve missed the comments section of Investors411 you’ve missed the some of the best thing this blog offers – Information and debate on stocks & politics. Right now Jsovjani & Popeye are going toe to toe. Hard to tell if they agree or agree to disagree.

Jsovjani has produced a set of statistics that show the concentration of wealth before Ronald Reagan took office of the richest 1% of Americans was @ 20% and when he left office it was @ 36%. Popeye believes that he has finally found some common ground with Jsovjani our resident “deficit hawk.” The rich getting richer coupled with the fact that President Reagan raised the deficit by over 400% makes “Ronald Reagan, economically one of the worst presidents we ever had.”

What will Jsovjani reply?

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 for week -The Black Box/High Frequency Traders BB/HFT control the vast majority of trades.

Another typical light volume day which saw rotation (a bullish thing) out of high beta stocks into more mundane stocks. Overall things were flat.

There was one big bearish sign out there - crude oil – took a big hit right at its resistance level.

Earning continue.

Significant Indexes-

• McClellan Oscillator (MO) fell  to +75.69 [+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. Yesterday’s close = 75.69 = BEARISH But, the MO fell 21+ points and major indexes were flat. Plus its 50 DMA is crossing its 200DMA, and the chart shows a series of higher lows and higher highs. Best read of tea leaves is we are now looking like the MO will drop more on flat days and get us out of overbought territory. Then rally as stocks go higher.
• US Dollar –  The dollar  rose slightly  +0.12% yesterday [Anything over +/- @0.50 is significant.] The dollar/stocks relationship is strong – Dollar up = stocks down and visa versa. Dollar just broke a major downside support level two days ago = 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 7 day+10% rally and is at 1869 = Bullish

Reading Tea Leaves-

The highly overbought position of US equities eased yesterday. We are just overbought now. See MO above. Another day/two of easing will give the bulls another chance to charge. There is so much bullish momentum behind the move higher, its hard to see it all stop now. At least retail investors should buy the dip. If we continue to fall out of overbought positions with stocks remaining flat – This would be a signal to go long.

However, Black Box/High Frequency Traders rule, and they may think its time to take profits from this rally. If you’re a trader what to look for (probably on the SPX daily chart) is that every time the SPX rises to a certain level it gets sold into by BB/HFT’s

Positions

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

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

Sticking with overall strategy on short ETF’s. However, Probably selling 1/2 of SDS today. Reasons stated above under MO.

EWZ (Brazil – chart on side of blog)) an ETF Investors411 owned for years is again outperforming and is a buy the dip opportunity.

GLD – (Gold) has come down off its high. But a big dip in big/above average volume is a signal to wait.

Going to try to put together YOUR Stock List with Paul R (if he has the time) before I leave for trip.

S&P 500 at 1113. Breakout point to turn Long Term Outlook to CAUTIOUSLY BULLISH is 1131

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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Jesus’ Colt 45

Louisiana Governor Republican Bobby Jindal just signed into law that it was legal to carry guns into church. My how religion has changed in the USA.

Deficits

What to do about the deficit? The Center for Economic Progress and Research using non partisan Congressional Budget Office data has come up with some concepts and their impact on the deficit. Thanks to Sherwehe for the site recommendation and Jsovjani for the below insightful  comments on this data

“Very interesting; fin. spec tax raises the most. My question is impact on jobs. However, things I want, like means testing ss and medicare are not included. Gas tax interesting, but I do not trust gov’t to use it for deficit reduction. History has not proven that they would keep their promises. I think trust in gov’t  is major issue to reform. Till then,  spend less (personally) and maybe buy gold. I am not hopeful in healing US till maybe a real depression and massive public riots. Does sound very negative, doesn’t it. I’m very concerned.”

Check out the site and you can see dozens of different possibilities

Jobs Now…Deficits Soon

Like Andy Grove, Matt Miller in the WaPo has some definitive solutions. Miller has a relatively coherent vision but admittedly it would be very hard to accomplish what he calls for politically. Here’s his main point.

That means cutting payroll and corporate taxes now — and offsetting this with phased-in tax hikes on dirty energy and consumption, to take effect only once jobs and growth are back on track.

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!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - Fundamentals rule. Old fashion fundamental earnings analysis dominates as earnings season kicks off big time next week. ”Double dip recession” has become an investment mantra starting in Europe and now echos worldwide.

Old Wall Street Axiom - The market can remain irrational longer than you can remain solvent

Yesterday stocks staged a mega rally on virtually no news and on well below (only slightly increased) average volume. Irrational, to anyone who believes fundamentals matter. The Black Boxes (giant institutions that speed trade using algorithms & make up to 80% of the trades) made these seemingly irrational trades yesterday.

Yes, the US markets were oversold and due for the predictable rebound (see Tuesday’s Investors TF&A section) But what happens is Black Boxes magnify what should have been a more mellow rally. Almost no investors returned from the sidelines or you would have seen volume spike higher. That left the Black Boxes on their own.

What’s this all means – We have to adapt to what’s happening & adjust how we make both long term investments and short term trades. In discussing Black Box trades on CNBC (the financial channel) they said that 99 stocks yesterday made up 50.1% of all trades. Also Black Box institutions were using Sector and Index ETF’s as one of their primary trades.

• Everything happens at hyper speed
• Everything is more technically based
• Moves are exaggerated both up and down
• Lots of the old rules that governed the markets are not functioning because of the hyper speed.

In the long run fundamentals are going to have their say. The BDI cannot keep falling 4 & 5% each day without consequences. The cost of shipping goods falling 52% worldwide in almost 7 weeks should be sending off at least some alarms. = Bearish

Earnings Season starts next week.

Perhaps the most important leading sector was financial stocks yesterday XLF (ETF for financials) up +4.33%. Mega shadow banks JPM up +5.01% & BAC +4.62% Perhaps a message on how weak financial reform is in the USA.

Significant Indexes -

• McClellan Oscillator (MO) rose a very significantly to -1.45 [+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..= Now squarely in the middle or NEUTRAL
• US Dollar –  The dollar fell -0.32% Friday [Anything over +/- @0.50 is significant.]  Right now is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. For some reason they have changed and the dollar is now = Less Relevant
• 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  2018 yesterday. This is a huge -52% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a massive and increased -5.13% yesterday. Rate of decline increased as it broke through its support level. = BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds one position at this time. (see below)

Short Term Traders – I opened a 2% of portfolio position in SDS near the close yesterday. SDS is an ETF that double shorts the S&P 500. Price 35.40.  The enormous size of the rally made me hesitate.  A better entry would be in a rally today.

Investors – Keep powder dry and wait for a clear signal from MO. Perhaps we should have gone long when the MO got not quite to -60 (oversold territory), but -54. There are no absolutes in defining oversold. This market is far too wild and Black Box dominated. Better safe than sorry.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

You’re happy to be in cash if you’re an Investor411 reader and waiting to deploy that cash when the opportunity arises. We’re starting to get close, but how bad will the bears bite?

Fat Cat Shadow Banks Kick Ass

You’d think congress would be all for a tax on the biggest shadow banks, but Republican’s (perhaps led by my Senator Scott Brown) objected. The $19 billion dollar tax on shadows and hedge funds got taken out of Fin/Reg bill. Now who pays if one of these giants goes down? YOU

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!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Mantra for week - ” Any analysis of stocks has become an analysis of what the ”Black Boxes” of  huge institutions with their high frequency trades & computer algorithms are doing.” They make up 80% of trading and right now the huge currency markets are dictating their moves.

The last major support level gave way on the benchmark S&P 500 around 3:00 PM EST Only the Russell 2000 (small cap stocks) remains above this years low. = Bearish

Analysis – Double Dip Recession Fear Grows

• EU & GB (Obama was NOT on board with this) want to raise taxes and cut spending – This is exactly what Herbert Hover did to cut the deficit and led to the Great Depression. Combined EU alone has bigger GDP than USA so this is significant.
• BDI falling off a cliff. Now a -42% decline in world trade prices also indicates the worlds engine of growth emerging markets (China & India lead the pack) in decline. This translates into falling GDP’s for emerging markets. Jim Cramer dismissed this index on his TV show last nigh – He’s wrong.
• USA fixation on cutting deficits (tea party patriots) and not fixing transparency and over leveraging problems. We are not out of the recession woods our focus should still be jobs, jobs, jobs.

Paul R in comments section has a list of  some support levels of the benchmark S&P 500.

Significant Indexes

• McClellan Oscillator (MO) fell to -50.77 [+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. In May the MO reached two lows – one at -120 and the other close to -130. Therefore, potential for more downside risk. = Still NEUTRAL, but approaching oversold
• US Dollar –  The dollar fell a marginal yesterday -0.12% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important Dollar up = stocks down and visa versa. Both stocks and dollar going down together = Bearish
• 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@4200 to  24o6 yesterday.(2447 to 2406 yesterday) This is a huge -42% drop in 6 weeks.  Often a leading indicator for stocks. Here’s a week+ old chart of BDI showing broken support levels =Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekends

Have not yet had a chance to Update over last 2 weekend but there are NO positions held at this time.

Hold your “I wanna invest” horses. The MO is not even at - 60 yet. Just because we are all in cash (some of you still have SDS (Double short the S&P 500) lets not jump in head first when we cross the -60 oversold threshold. Reasons

• Technically – the MO reached over -120 in May
• Never make all or nothing investments enter them gradually.
• The BDI did hesitate a bit but is still in free fall -42%
• S&P is now down @-15% from high and when that happens -20% becomes more likely than not.

These red flags exist. But below -60 is a place to start nibbling on those ETF’s/Stocks that have held up better than their peers. The lower the MO goes the better. Today some ETF’s that are doing better that US markets.

• EWZ (Brazil) still about 10% from this years low.
• EWC (Canada) Like Brazil energy rich and above this years low.
• EWA (Australia) Common theme with above – higher beta, energy rich, above this year’s low.
• EWS (Singapore) Trade hub, China play – rallied yesterday despite US decline.
• FXI (China) Old favorite like EWZ has made us $$$ in the past.
• There are sectors within the USA that are holding up better than major indexes like Health Care Products, Paper, Drugs, Airlines etc. But their outperformance level is not as great as some foreign countries right now.
• GLD &  DGP (2X gold) continues to be the #1 buy the dip play – Irrelevant of MO.

Another 100 point drop in the Dow should bring us close to -6o on the MO and the least risk averse could nibble a wee bit. I’ll wait for a bit bigger fall.

Caution – Major US and most world indexes have formed bearish patterns of lower highs and lower lows. Therefore, chances are that when Investors ‘s411 buys we will only hold for a week or two. You can hope for more.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING