The list of photos above on financial reform was from Dylan Ratigan’s MSNBC show. Obviously you can add to list.

Financial Reform DOA

Simon Johnson and the folks at the Baseline Senerio have thrown in the towel on financial reform. Virtually every Republican caved into the shadow banks lobbyist, but the real disappointment - so did Obama, Geithner and Summers and many Democrats. It’s disheartening to read that the Obama administration helped kill Kaufmann/Brown legislation and other substantive reforms.

There may be a few crumbs that the shadow financials have lost, but opaque casino capitalism where your FDIC dollar in banks insures their trading of highly leveraged derivatives will thrive – Privatizing gains and  socalizing losses continues. Shadow financials, obviously would rather trade derivatives than make less lucrative transparent loans to homeowners and buisnesses.

The shadows of over leveraged, opaque, Casino capitalism will thrive in the coutry that is/was the leader of the free world. For the future, let’s borrow a line from Shakespeare’s Macbeth- Something wicked this way comes

Tea Party Patriots and Deficits

Deficits are bad. No question. Building a future on growing debt if you own 50% of the worlds weapons leads to one of 2 things – You bankrupt the future, or you kill your debtors. I suppose you could find a third way where you hold a gun to the head of a debtor, but after a while somebody’s going to kill somebody. – Again – Something wicked this way comes

However,  Before you worry about your debt you have to worry about the soundness of your financial system and keep it from collapsing.

• Fixing financial problems and giving us a fundamental transparent capitalism would enable real transparent, democratic, economic, growth.(see above)
• Increasing debt to keep our financial system (even though it was/is a shadow system) from collapsing and creating a second great worldwide depression was more critical

This is what TPP’s can’t understand. We’ve prevented a worldwide economic meltdown, but we haven’t fixed the system. These two priorities are the foundation of economic growth and therefore supersede deficits.

You want to cut military spending, put a means test on social security/medicare, raise taxes to what they were under Reagan – great. It will cut deficits.

However cutting the National Endowment for the Arts, cutting funding for some pork project, screaming drill baby drill is NOT going to decrease the $13 trillion deficit in any substantive way.

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	-0.08%	down
NASDQ	-0.90%	down
S&P 500	-0.39%	down
Russell 2000	-1.03%	-

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

Technicals, Fundamentals & Analysis

The news that China was devaluing its currency announced over the weekend got sharply tempered. As uncertainty over the China move grew, so did the dollar and the algorithms used by the “black boxes” that control 80% of stock trading kicked in and sold stocks. A triple digit Dow gain faded into a loss = Bearish

This is hardly the first time the Chinese and economists have sharply tempered a government statement about devaluing currency. Let’s take that feather (for now) from Obama’s/Geithners cap and wait to see what happens as the G 20 nations meet.  This also toasts the Fearless Forecast for this weeks trading.

The reversal in the dollar (See below) could mean an overall change in market outlook, especially if the dollar moves higher again today. Today would be confirmation day of the dollars move higher yesterday.. Right now the major institutions  that run the markets have set their stock market algorithms to currency fluctuations.

FXE – The ETF that tracks the Euro sure looks like its starting to turn and head lower.

Bottom Line – The one way to put the odds in YOUR favor that has a reasonable chance at success in stocstoks/ETF’s is to use the MO. The higher it goes the more you sell, the lower it goes the more you buy. Obviously NOT a hard an fast rule, but a good general guide. Currently, as explained above, currency fluctuations are dominating trading.

Significant Indexes

• McClellan Oscillator (MO)fell to +35.08 [+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. Clearly more overbought than oversold, but has pulled back from overbought levels.
• US Dollar –  The dollar rose yesterday +0.43% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar up = stocks down and visa versa. Yesterday – “The dollar seems destine to fall to its 50 day moving average which is $1.06 lower and rising.” The dollar fell to within 0.39 of its 50DMA to $85.01 then rallied a significant +0.94%..  This was the largest gain in the dollar in 11 trading session. For stocks = Bearish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped is in free fall from @4200 to @ 2600 yesterday. This is a huge -38% drop in  Often a leading indicator for stocks. Now at/ just above a support level. Clearly long term  = Bearish

Positions

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

Have not yet had a chance to Update over last weekend.

ETF to watch today is the China ETF - FXI – up +3.48% yesterday. The stock from Your Sock List is China’s BIDU

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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The Magic McClellan

In answer to Doggie’s Mom, Monitor, D & The Critic comments on the MO. First the McClellan Oscillator (MO) used to forecast buying & selling is obviously not magic. We did score big when the MO dipped and we bought in Feb.. We sold when the MO got too high, and we have had some quick outstanding gains this week.

There are well over a dozen other recognized methods  analyst use to measure just about the same thing. Each technical indicator has to be used with a little common sense, reasoning, and a bit of luck.

What happened is the MO got so low (the only time it was a little bit  lower was in the 2008 panic meltdown) or stocks got so oversold that we ran out of sellers.  The odds of a bounce back increased. Reasoning – the crisis was not as immediately bad as it was in 2008. (In the long term things could get worse) This is Warren Buffett type of investing - buy when there is panic in the streets and sell when bulls are stampeding out of control.

For more see  Technically Why Markets Moved Higher & McClellan Oscillator below.

Caution – Nothing is close to 100%. Also, when something starts working well all analysts use it and it stops working. There is a lot of interpretation beyond and in the +/-60 overbought & oversold levels.

Teabaggers

John Sovjani, Who is in no way a Tea Party, Sarah Palin (their darling) or FOX News (their promoters) advocate, has a point. Deficits and Big government (you can go overboard and perpetuate poverty in social welfare) can be very harmful in the long run – A mantra of the Tea Party. These problems need addressing in a systemic fashion but not in a fear mongering, white only, anti Obama fashion as JAB, Popeye and Paul R have pointed out.

The biggest deficit creator of the last few years happened because of the 2008 shadow bank meltdown. Paulson, Bernanke, Bush & later Obama & Summers had two paths

• Another Great Worldwide Depression.
• Bailouts, Print money,Stimulate the economy and tax cuts.

The second choice is far less harmful, but obviously created a deficit problem. Letting the insurance and banking system collapse worldwide would have been catastrophic. The folks who created the over leveraged banking problems were the shadow banks themselves and their supporters. The tea baggers were virtually silent when it came to reform of the banking system. Therefore, I understand their power, but see hem as hypocrites.

There is a need for Big or strong government to regulate Shadow banking. Who else will?  The 3 Republicans and 30 Democrats who voted for Kafman/Brown legislation limiting the too big to fail banks are the Teddy Roosevelt’s/Heros of our time. It’s hypocritical to only speak out against Obama and to protect the Shadow and the opaque system that forced a growing deficit on us all.

Defending Capitalism

Answer to Popeye tomorrow

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+1.38%	down
NASDQ	+2.09%	down
S&P 500	+1.37%	down
Russell 2000	+2.97%	-

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

Technicals, Fundamentals & Analysis

Stocks moved higher in decreased volume. Volume, was NOT a confirmation factor. However after a climax sell off volume usually decreases, and the pattern before markets dipped was rallies in weak volume. Patterns tend to repeat themselves = Bullish

All week long the 50DMA of the benchmark S&P 500 has been mentioned as a key resistance level = RED light for markets. Yesterday the SPX (S&P 500) stopped right on at the RED light. If we can close above this level before the weekend its bullish for stocks.

Technically – Why we rallied - We had a climax selling spree in HUGE volume.  All the weak holders panicked and sold. Everyone left is a more committed to holding investor. Lot of major institutions bought “puts”(bet the market was going to go lower) and were forced to “buy to cover.”  So right now there are not many sellers out there and stocks are moving up. Ultimately we will find some equilibrium or point where a consolidation period begins. (See above on SPX as a possible consolidation point)

There are a small amount of buyers/traders, but no long term sellers right now.

Repeat Great source for what’s happening live in markets around the world & in the US before 9:30 EST Wall Street opening at CNBC Slight upside bias for US right now,Europe, Asia basically up, but this could change in an instant

Significant Indexes

• McClellan Oscillator fell dramatically to -13.40 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is NEUTRAL territory.
• US Dollar – rose +0.32% yesterday. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important  Dollar is close to breaking out to new yearly high. = Bearish
• The BID – Kept climbing. It has broken out to a new 5 month high. The Baltic Dry Index measures the cost or flow of goods/trade between countries. This is positive for export countries like Brazil and China and commodities. Goods costing more means trade is increasing =Bullish

Positions

The  Positions Section = latest buys and sells – (Revised positions yesterday) - These are positions I actually own

I again revised all positions held by Investors411 yesterday because so many stocks/ETF’s were bought in the last 4 trading sessions. POSITIONS is also located at top of blog. (Click on the word at the top of the blog and scroll down to 2010)

McClellan Oscillator has reached NEUTRAL territory – Time to STOP any buying – and because of momentum start thinking about taking profits. If you are a trader and can find an individual stock that is not over extended, you can squeeze in a buy.

I really wish things were different (buy and hold forever), but if we see another major rally today Investors411 will take a little money off the table = sell. If/when the McClellan starts to turn into overbought territory its time to think more about selling.

It’s important to look at how far above the 50 DMA a stock gets (compare on chart to other times your stock got too far above its 50 day moving average)- too far = sell

Our Investors411 Positions are up dramatically.  Some well over +10%. (See Tuesday’s charts)

• UWM
• TYH
• IMAX
• VCI
• SNDK
• FXI (weakest & this is troubling – see yesterday’s post)
• ESRX (expect this to be less volatile and slower, but steadier)

I apologize if this is seems complicated. I’m really trying to keep it simple. There are more than dozens of different ways to technically measure stocks/ETF’s.  But Investors tries to Keep it Simple by using only a few and staying with what works.

Paul R has some excellent resources he occasionally posts on the comments section. I’ve also, in the past, recommended the Chart School of StockCharts.com

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

R. KY Senator Mitch McConnell

Blocking Financial Reform

Republicans are considering blocking even debate on financial reform. Ewanapat thinks I’d like his comment/information/link. He’s wrong I Love it. The 3rd Fed Governor publicly has come out against the “shadow” banks that are too big to fail.

There are a few sensible Republicans (Simon Johnson and his Baseline Senerio best source on this) who are bucking Republican Minority Leader Mitch McConnell (see yesterday’s Investors411) do nothing approach.

Taxes

Mama Jama has sent in a link to a site that reales 80% of major corporations evade taxes by having offshore accounts etc. How much does this cost you? $637 in MA and small business has to pay their full share.

Tea Party Flops

Only a 1500+ showed up for the supposed “huge” final day of tea party tour on April 15th (Tax Day) in DC yesterday. A few thousand more showed up in Boston the day before but NOT the newly elected  Republican Senator or the Republican running for governor. They called the Obama administration a “gagsta government.”

Remember we many demonstrations of 10,000 20,000 and even larger protesting the Iraq war and other left of center issues all over the country and there was almost no coverage. Yet even on the financial channel CNBC they are headlining the Tea Party protest this AM.  This is

The issue of deficits is real, but the media distortion of the Tea Party is real too.  We live in a world created by media and the thousands of past protest that get over 1500 people in DC never got the kind of coverage that the Tea Party gets. This is media bias or media manipulation.

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.19%	down
NASDQ	+0.43%	down
S&P 500	+0.08%	up
Russell 2000	+0.25%	-

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

Technicals, Fundamentals & Analysis

See Positions for changes made each weekend

US markets improved a bit on Wednesday’s significant gains in above average volume = Bullish.

Google had  earnings report = an almost 4.71% fall in post market trading = Bearish

BAC (Bank of America) seems to have had blowout earnings numbers this AM up @1.5% = Bullish

Something called a Fibonacci retracement is important in worked of technical analysis. The benchmark S&P 500 is sitting just below a critical 62% retracement from its 2008 high according to analyst on CNBC. This is a strong resistance level. = Bearish

Significant Indexes

• McClellan Oscillator fell to +8.67 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is still in NEUTRAL territory – technically neither overbought or oversold.
• US Dollar – rose +0.36% yesterday. [Anything over +/- @0.50 is significant.] Mantra – right now The Dollar Rules Remember, dollar down almost always = stocks up. The dollar broke though its 50 Day Moving Average support level and next significant support and yesterday rose to just below resistance (Remember the 50 day MA is called its support on the way down and resistance on the way up).

Positions

The  Positions Section = latest buys and sells – (Revised positions last weekend) - These are positions I actually own

I realize the TYH explanation will make some of your eyes glaze over because it is too technical. The best time to buy is when the McClellan is oversold and any trades now (McClellan Oscillator is neutral) is riskier.

TYH – (10%) (3X technology) Up well over 3% since bought. File under - If its not broken don’t fix it Mistake? – In the past Investors 411 sold 1/2 when TYH rose 3% and let the rest ride. Then I put a stop/sell order at what it was bought for or 3% below what it was bought for.  Bottom line here – selling 1/2 into any minor rally.

UWM – (5%) (does 2X small cap stocks) Bought yesterday at 37.57. Stop/loss set at 7% below what it was bought for

EWZ – (10%) (Brazil) Holding on

Monday’s are usually good days and some major tech companies report next week. So expect stocks to drift higher into the close.

Caution – Holding individual stocks into earnings is obviously dangerous – Even giants like INTC (+5%) or GOOG (-5%) can make huge moves. Smaller stocks even greater.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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Congressional Budget Office

The non partisan CBO came out with its report on Health Care. Both Republicans & Democrats endorse the CBO reports when it favors their side in whatever debate. Here are some of the major points on the proposed plan

• Increase costs by $940 billion and cut costs by greater $1,078 billion over first 10 years = net federal deficit saving of $138 billion
• Cut deficit 1.2 trillion next 10 years
• Adds coverage for 32 million Americans
• Closes “doughnut hole.” – no longer a gap in senior coverage

Basically it covers 95% of Americans and cuts deficit by over $1.3 trillion over next 20 years – WAPO’s Ezra Klien. Many analysts feel that this would increase medicare solvency by 9 years

Is Support for Health Care Reform Changing?

Nate Silver, the best poll analyst out there says yes. The center and the left are moving toward Obama on this. Last look at betting site Intrade showed a 78% possibility of bill passing.

The Devil is in the Details

There is a big give away to Louisiana, because they have a Dem. Senator up for reelection and more will come out.   Hopefully they can be changed later. The obvious downside is that this increases the monopoly the insurance & drug companies have. Therefore the exorbitant  17% of our  GDP that goes to Health Care will NOT significantly change

Catholic’s Supporting Health Care

Several major Catholic groups (Catholic Health Organization most notable) are now supporting health care. It’s dawned on them that we are the abortion capital of the world and covering more people will REDUCE abortions as it has in other counties. Thanks to JAB bringing this up in comment section of blog. See JAB’s and other comments  on the right side 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!

Index	Percentage	Volume
Dow	+0.42%	down
NASDQ	+0.09%	down
S&P 500	-0.03%	down
Russell 2000	-0.35%	-

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

Technicals, Fundamentals & Analysis

See Positions , Strategy , and Overview for changes made over weekend. (No changes this weekend)

US markets went all over the place yesterday and on the whole ended up flat in decreased, weak volume. This is probably due to options expiring today (the 3rd Friday of the month).

There was some bad news out of Greece

Significant Indexes

• McClellan Oscillator fell significantly to +30.01 yesterday. 0 is Neutral and +60 or Overbought territory. The recent high three weeks ago was 75.33 StockCharts has a better version of the McClellan chart ($NYMO) LINK. – Once again the NYMO has fallen back down to its support level at 30. While it is much safer to make investments when conditions are oversold (-60) if we are in for a long term rally those willing to take bigger risks could nibble the dip here.

Positions

The  Positions Section = latest buys and sells – (Revised positions last weekend) - These are positions I actually own

Repeat from Yesterday – “Going to build up to a 20% position in stocks involved with 3D technology

. “IMAX, DWA, RGC & CNK In one sense Investors411 will be building its own market basket of stocks (like an ETF) on the potential of 3D technology.

Many of the Stocks on YOUR stock list are great, perhaps even better than the 3 D plays. The difference is fundamentally 3 D has shown it has pricing power. People around the world will line up to pay an extra 20 to 40% to see a 3D film. Think people will go to movies even if we have another leg down economically. I simply have not had the time to go over the fundamentals of the other stocks. Remember AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 ETF positions are currently under performing the benchmark S&P 500 FXI (China) MOO (Agriculture stocks) & EWZ (Brazil – just a bit under) In one sense technically after many years of out performing this was bound to happen. Investors411 has also cut way back on major foreign investments from highs @ 25% each to 5%.

Three significant reasons US markets are outperforming other foreign  markets

• Obama’s health care reform does nothing to break the monopoly of the insurance and drug companies. If anything it makes them more $ by covering more people.
• Financial reform of greed based capitalism proposed by Senator Dodd (D. CT) is very weak and does little to increase transparency.
• Core inflation is well under control From today’s Seeking Alpha – “Thursday’s BLS report on CPI showed core inflation at 6-year lows, up just 1.3% over the recent 12-month period. The main reason for this: The price of ‘shelter’ remains depressed, up only 0.3% YoY.”

Bottom Line – No real reform means another bubble is inevitably building in our greed based (as opposed to rules based) capitalist system. Home prices remaining depressed means the US Fed will keep shoveling money into the system builds both the economic bubble and stock prices.

Investments – There are going to be more short term (when we are closer to overbought) and longer term (when we are oversold) trades involving ETF’s like TYH that do 2 & 3x what an index does.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

A Frog in Hot Water

The old adage goes – Throw a frog in hot water and he’ll jump right out, but you can slowly bring the water to a boil and that frog will stay put.

A little known Republican State Senator, Scott Brown , won a stunning upset victory in the MA Senate race last night. Like Mitt Romney in 2002, he beat  Dem. Shannon O’Brien, Brown toasted another woman who ran a weak campaign – Martha Coakly.  For perhaps the best analysis of what this means see Nate Silver’s – Let’s Play The Blame Game

Health Care – Obviously in deep trouble. The only way Health Care would pass is if the House passes the Senate Bill. Since Democrats in the House have already voted for a far more progressive health care plan and will get hit for that in the next election Obama is going to argue why not vote for the Senate version.

Bottom Line – Health care. – You blew it – RIP

That Frog in this case is the typical American worker who is in the pot of ever increasing temperature .

• Globalization is slowly eliminating working class jobs across America
• Weapons budgets are growing at the rate of 10 to 20% each year
• For the first time in our history we cut taxes and went to war.
• Our federal and trade deficit exploded from 2000 to 2008.
• The era of cheap oil is OVER. The supply has peaked and the demand from billions of people in emerging markets is growing.
• Because of our suburban sprawl and relative lack of public transportation we are far more vulnerable to high oil prices.
• Time tested solutions like stimulating the economy to fix it will not work as well because of our already huge deficit.
• There fewer and fewer laws to govern excess GREED on Wall St. Main Street has socialized the risk for Wall Street
• The rich in the USA are getting richer and what’s left of the American working class (those not newly unemployed) are paying the bill
• As the situation worsens, self preservation kicks in, and Americans care less and less about others.

The American frog is in a pot that’s getting hotter and hotter.

There is an upside to all of this outside the USA. Hundreds of millions (perhaps billions) in emerging markets are increasing their standard of living. They have or are learning to Manage their capitalism and hopefully not repeat mistakes that were made here.  Greed is a powerful factor and one hopes eventually more democracy will grow abroad.  If Time magazine called the last decade The Decade from Hell for the USA – it could get a whole lot worse for the American frog in this decade.

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+1.09%	down
NASDQ	+1.42%	down
S&P500	+1.25%	down
Russell2000-	+1.75%	-

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

Technicals, Fundamentals & Analysis

See Positions , Strategy , and Overview for changes made over weekend.

Stocks staged a major rally (above 1%) in decreased, average volume. Volume, our #1 confirmation factor did NOT confirm the move higher. Even though we achieved some new highs (for a calander year) on 3 of the major indexes we are doing it in reduced volume.

• McClellan Index at +i3.14 = A little bit overbought.  There’s a long way to go till we reach @-60 or oversold or @ +60 or overbought

IBM reported after the bell and beat top and bottom line expectations. This was not a grand slam, but IBM did solidly better, but lost money in after hours trading.   The important news from IBM which does 60% of its business abroad was that their areas of growth were "Brazil, China, & India."

Even though stocks rallied yesterday still believe in down week.

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends)

These are positions I actually own

SELLING & BUYING

YOUR Watch List of Stocks . Unfortunately, I’m not daily checking these stocks out. Ideally, you’d like to McClellan index below zero (the further the better) and these all would be better buys. We developed most of these potential stocks about two weeks ago. Check old Investors411 for more.

Again the problem with buying now is that markets are slightly overbought and you would like stocks oversold position. Click on ticker symbol for chart. Going to limit Watch List to @ 10 stocks.  80% of investments wil be ETF’s 20% stocks.

NB – I feel much more confident with ETF’s because they reflect global trends than individual stock. Too many things can go wrong with individual stocks.

• SEED – In a buy the dip position.
  
• AAPL – big +4.42% rally yesterday. Sitting on breakout point. AAPL moves markets – if this goes higher so does the market.
  
• AMZN – We sold at highs and AMZN has formed lower highs and lows. In bearish mid term pattern. Will drop from list soon
• HMIN - Failed breakout, back at lower end of trading pattern. Will drop from list soon
  
• CAAS – Buy the dip opportunity as CAAS falls to just above 50 day moving average.
  
• PCLN – Buy the dip opportunity
  
• F – Still too over extended to buy
• DRWI – New – Big exporter to China -  Looks great but still too overextended to buy
  
• ENOC – New – Reduces costs for utilities – Great long term chart. formed base for last 5 months moving higher – A buy
• ATHN – New - Software reduces costs for health care - Clear trend higher since June – Buy the dip opportunity
  
• IMAX – Great long term chart – falling back to its 50 day moving average. A buy the dip opportunity

Mistake – I let my emotions over rule logic on IMAX It was too overextended from 50 day moving average to buy at 13.9. So I’ve sold the small position (1% of portfolio I bought at 13.9 for 10% loss) Keeping 1% bought at 12.9 and will add more at lower price.  Perhaps the most important rule of investing learn from mistakes and do not repeat them.

If markets were overbought I’d strongly consider ENOC, CAAS, ATHN, SEED, & PCLN.

See POSITIONS (scroll down) for details on this and what’s under consideration for 2010.

Long Term Outlook = CAUTIOUSLY BULLISH

Ronald Reagan:

The Great American Socialist

All of you made outstanding public comments on Friday’s blog from a must see video of the Tea Bagger’s to an excellent editorial by economist Ravi Batra – “Ronald Reagan: The Great American Socialist. ” The far right is calling Obama a socialist because he wants to “redistribute the wealth” yet Ronald Reagan by this definition can be credited for a huge redistribution of wealth.

• Reagan’s 1981 tax cut was massive especially for the wealthy and corporations. This ” large reductions in income tax rates in 1981 were followed by abnormally slow growth” Source Wikipedia
• The rate fell from 70% to 28% 1980 to 1988 for wealthiest Americans. Check out changes starting in 1980 (when Reagan took office) Great chart of tax rate of wealthiest individuals and tax rates from 1903 to 2003 at TruthandPolitics.org LINK
• Batra continues – “deficit soared from 2.5 percent of GDP to over 6 percent, alarming financial markets, sending interest rates sky high, and culminating in the worst recession since the 1930′s”
• Reagan was in trouble so he “looted” YOUR savings in the Social Security system. To fix the massive losses YOUR Social Security trust fund (taxes you paid) were now used to pay for programs, stop inflation, fix the recession by paying down the deficit.
• By 2007 this totaled “$3 trillion dollars ” (including 1+ trillion in interest we would have had) and is a major reason why Social Security is in such trouble. But the reality is the fund is empty and used now to reduce the deficit.
• In fact “In 1986, Reagan slashed the top tax rate further. His redistributionist obsession led to a perversity in the law. The wealthiest faced a 28 percent tax rate, while those with lower incomes faced a 33 percent rate; in addition, the bottom rate climbed from 11 percent to 15 percent.”

So now we have Heath care/public option and are afraid to tax the wealthiest individuals to pay for it. Those that benefit from Reagan and Bush tax cuts and have accumulated millions in compounded tax savings to protect themselves from the lack of funds in Social Security or heath care problems.  Those millions/billions have been amasses since 1981.

45,000 Americans die each year because they do not have health care (700,000 go bankrupt each year because of lack of decent health care-figures quoted on Bill Mahr HBO show) That’s equal to the deaths of 15 world trade center attacks . All this happens in the only civilized country in the world that makes a profit off of breast cancer, heart attacks, leukemia, aids etc…

Heath care is one component of this wealth distribution. It would redistribute more funds to lower and middle class families.

Special Note – The Investment philosophy of Investors411 continues to be invest in countries with a growing working class of people NOT a growing oligarchy of wealthy individuals. This is why the ETF chosen are focused on India, China, Brazil, South Korea and other area where money flows because middle classes and those aspiring to the middle class spend money.

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Mea Culpa – Many of you sent personal and public emails or talked with me about Friday’s editorial “Why You Should be Afraid for America” One of you stated this is not a headline you’d find in the NYT and suggested , this is a fearful  “tabloid headline”  He’s right. I am an emotional guy who spent part of his youth marching for civil right, against the Viet Nam war, and income equality from the deep south to the infamous 1968 Democratic convention in Chicago. The headline was designed to attract your attention and in my heart I’m fearful for America’s future. I’ll try to watch it but please allow for the occasional over the top headlines.

Thanks to Paul R who sent inthe Batra editorial and all those other who make the comments section perhaps the most exciting part of this blog.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.42%	down
NASDQ	+0.24%	down
S&P500	-0.34%	down
Russell2000	-0.31%	-

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals and Fundamentals

Volume was way down and that’s just what bulls want to see on a mildly bearish day for the S&P 500 and the Dow. Considering how strong the dollar was it is surprising to see the markets fall so little. (see below) The NASDQ even gained ground.

The Dollar is still the key index to watch right now. The inverse correlation between the dollar and stocks dominates the US markets

Fed meets today and makes announcement tomorrow.

Fearless Forcast = Rally continues. this week.

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

2388 is support level/number to watch – Yesterday BDI fell -33 to close at 2357. This is not a big fall, but a major support level has been broken. = Bearish for worldwide stocks.

The BDI is 44% off its high (early June) Before that it gained almost over 630% from its all time low of 663 (April high of 4291 )

What this means – World trade is in trouble – lots of ships are sitting in ports empty.  To some degree, China has stopped buying raw materials and/or the US consumer is not buying as rapidly as earlier in the year. Braking a support level is significant, but 2357 (current level) is still a long way from the Dec. 2008 663 low. = Storm clouds gathering

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

As predicted the $76 support level held.

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

The dollar rose +0.40% yesterday and guess which way most major US markets went – D__N.  ) 0.40 is a relatively large move up for the dollar.

Note that if you look at the longer term chart of the dollar that it has NOT been above its 50 day moving average since April.  The dollar is in a short,medium and long term BEAR market . Would buy stocks if the dollar got close to 50 day MA.

The two day rally in the dollar has also impacted oil prices that fell -3.53% yesterday. Right now this looks like a technical correction.

Last year’s low was around $71, so there is a long way to go before the next major support level.

Positions

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

Individual stock – One of you last week has asked me about MVIS (Microvision) See chart This chip company has exploded and broke out of its trading pattern even though stocks have been down/flat the last few sessions.  Would buy this on any dip. There are a whole bunch of traders out there ready to do the same thing.

Our swine flue play NVS and tech play AAPL are out peforming US markets – but it looks like we are in for some minor correction as the dollar rises.

NB – I just offering these trades because you folks asked for something other than ETF’s – I do NOT know enough about the fundamentals and a zillion traders know more. Also,its far easier for major players to manipulate these stocks than ETF’s which are huge market baskets of stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Obama’s Speech

Yesterday, the administration announced a major address on Health Care  for next Wednesday – Will he take a Stand or whimp out again? From all accounts the White House is still split on what to do. From Politco “High Risk High Reward” LINK & “Obama to Address Congress” LINK

Simple reality is that like in the last 7 to 10 years health care is going to double again. Medicare as well as Americans not on Medicare are in danger of going under unless something dramatic is done.

Will you, your employer, Medicare be able to keep up with another 100% increase? Why do we pay almost twice the cost of other industrialized countries who cover all their people and they get better results?

Jobs & GDP & Deficits

Note – This chart from Crooks and Liars is a bit misleading because its the 2008 projections & faulty accounting under Bush & Obama (see below) Bush #2 & Obama figures should be higher.

What happens in a recession is jobs get cut and when they get added back American companies choose cheaper foreign labor. This is one major reason employment has been a lagging indicator in recessions.

The back ended stimulus is going to mitigate the job loss – keeps jobs in education, law enforcement, construction etc. But this has its cost in increasing the deficit. The problem here is we already had a huge deficit when Obama took over and it is obviously growing. Not good news.

The other major problem is  growth is the USA over the last decade had a lot to do with phony financial transactions made by shadow banks. (phony accounting)  Therefore, real growth in the USA was a lot less than 3 or 4% over the last decade. Under Obama we longer use mark to market accounting.  Obviously, I’m no expert, but willing to bet this reduces our GDP by at least a few points under Obama & Bush.

One major fact – the huge increase in deficits under Reagan/Bush upset almost no Republicans.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.32%	down
NASDQ	-0.09%	down
S&P500	-0.33%	down
Russell2000	-0.40%	-

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals and Fundamentals

Yesterday’s stock action confirmed the big downside move of the day before. Prices did not recover any of the losses and dropped further despite the fact that the dollar also fell. The dollar falling almost always translates into stocks rising.

A week ago I mentioned that Jim Cramer was wrong and we were due for a more significant correction. Yesterday failure to move higher on good news and marginal losses act as confirmation of a further decline.  The only technical point that is starting to swing in the bulls favor is that the Dow and S&P (SPX) have been down 4 days in a row and are a bit oversold. Would expect a rally today because of oversold positions

Support levels to watch on benchmark S&P 500. SPX currently at 995. The first is 980 . If that falls we could see a lot deeper correction .  Lots depends on the jobs data on Friday.

Lots of analyst look at this as a technical correction.  We came too far too fast. But there is a major underlying fundamental factor. The BDI shows worldwide trade falling. Much of this is due to China pulling back on buying commodities. China also has a technically overheated market. (see yesterday’s blog)

The big news for the month is the jobs report on Friday Right now we reacted so poorly to the good ISM (manufacturing) news, and yesterday’s dollar falling(which should have juiced stock prices), you have to worry about the employment news.

Therefore , FEARLESS FORECAST – is for a down week .

A major correction is underway many in some major exporting countries (China – see past Investors411), and importing countries (USA) seem to be following the downtrend.

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . The BDI has leveled off over the last 5 days, -10 yesterday

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

“Remember almost every country has based their recovery on exporting their way out of this mess” (Source – seeking Alpha)The infotainment financial channels and analysts used the BDI when things were going well and are now ignoring it. The #1 factor behind the BDI’s retreat is China seems to have stopped or seriously slowed down buying of commodities.

The BDI is 41% off its high (early June)

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

The dollar was fell -0.44 % yesterday. Dollar closed at $78.74. Its  major support level is @$77.5 & it has 2 major resistance levels – a falling 50 day moving ave. at @$79.20 and the August highs of @ $79.5 .  If it breaks down through support stocks should rise, if it breaks up through resistance stocks should fall.

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

The fact that the dollar fell a relatively significant -0.44% and stocks did NOT rise is another Bearish sign

The dollar is also reversed direction 9 days in a row. So today its probably going to go up and stocks down.

European Central Banks left interest rates unchanged this AM – Bearish for dollar & Bullish for stocks

Positions

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

Sold 1/3 (or 6% total stock) position in FXI (China) yesterday This position was bought on 3/12 (listed incorrectly in Positions as 3/20) Gain @+55% This will probably be the biggest gain of any position this year. The remaining 12% – 2% was purchased 3/12, 8% was purchased in April and is up almost +20% and the recently  2% is down perhaps -5% (Did not have time to accurately check these last 2 figures)

Right now, this is NOT some huge reversal, but a correction of an overheated market. If the BDI continues to fall from current levels, we are much deeper trouble. Plan to get back into FXI ASAP, hopefully at a lower price

Refuting all this is the credible Organization for Co-operation and Development OEDC that headlines “the worldwide recession may already be over.” LINK Sorry think the 41% fall in the BDI is cause for concern.

Those traders with guts may look at a fall to SPX the 980 support level as a buying opportunity or a chance for some quick money.  Right now, the best read of the tea leaves is for a 5 to 10% correction . If world trade prices collapse further through support then things could get worse.

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

Your Comments

Both privately and in the comment section of the blog you are asking for individual stock recommendations. OK I have a few. Stay tuned. Yes I’ve chosen them – NVS (Novartis)-  a swine flu play and Apple computer. (details when I have more time)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!