Bada Bing, Bada Bang, Bada Boom!

YOUR Stock List gained +14.4% vs. a gain of +1.5% for the benchmark S&P 500. Just like YOUR first stock list earlier this year we crushed our benchmark index over the last 6+ weeks. (more below)

Fear Mongering/Globalization/Jobs

The biggest plate of warm turds being fear mongered to the US public through the Tea Party and like minded folks is that if we don’t extend tax cuts on the ruling oligarchy job growth will suffer.

Investors411 readers already know that jobs are being outsourced abroad through “scaling”.

Now, lets take a look at some figures from when we had the massive tax cut to the rich in 2000 to today. Figures are from the Financial Times and if you would like a video presentation check out Cenk Uyger’s presentation (sorry short add before 4 minute presentations)

1. $1.3 trillion in tax cuts for the rich since 2000.(not compounded) Result – we loose 7.3 million jobs.
2. 1950 to 1990 we have 3.5 to 7.4% real growth Compare - 2000 to now 1% real growth.
3. 1950 to 1990 investment in equipment & software 5.7% to 9.9% Compare – 2000 to now 1.9%

So where did all that money go?

1. Emerging markets grew 120% Compare to -6% for the USA (FSCI emerging market stock index)
2. US investment abroad in 2000 $1.3 trillion Compare to now $3.2 trillion

This means that the our weathy oligarchy spent $1.9 trillion (much more than just their $1.3 tax cut dollars) in creating jobs jobs jobs in China India and throughout the globalized economy.

Add to this figure Shadow banks money going abroad, TARP money going abroad, and US corporations building and investing abroad.  The American working class is getting crushed by our corporate oligarchy.

Postscript – If you like you can officially call me a hypocrite. Because for 6 years I’ve been telling anyone who’d listen to invest in emerging markets. If you go to the POSITIONS section at top of blog and click on it. Scroll down and you will find a list of emerging market recommended ETF’s to invest in. We have made money together

My only defense is every major US company is globally connected to some degree. Even smaller companies are at least indirectly connected to globalization.

But the Bottom Line is – Tax those who profit most off globalization and use it to help the US working class who are getting clobbered.

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 – 5 years of beating benchmark S&P 500

Mantra for September - “The Black Box/High Frequency Traders BB/HFT control the majority of trades. Jim Cramer -”BB/HFT make up 80% of trades.”

US Markets

Very Strange – Usually the big rally day (2 days ago) has more volume than the confirmation day that follows. We did basically hold onto the gains so the rally is confirmed. However this and what’s happened in the dollar (see below) are breaking usual patterns.

Bada Bing Bada Bang, Bada Boom

Paul R has computed the results of YOUR Stock List (more info in  POSITION section at top of blog)

“14.4% UP! Your Stock List (based on a dollar weighted index) from 8/3 to the close on 9/20! S&P 500 was up about 1.5% at the same time. PCLN has enjoyed a 48% gain during this time and it skews the return of the whole list a bit, but the dollar weighted chart buys an equal dollar amount of each stock so PCLN doesn’t effect the chart too much.

Here are the actual PERCENTAGE gains of the stock on the list from the 8/3 close to the 9/20 close.

AAPL 8.37
BIDU 7.75
SAM 1.95
UFS 4.39
F -1.59
GMCR 18.70
HMIN 12.60
IMAX 6.57
PCLN 48.91
RADS 25.46
SWKS 17.87
UPS 1.02
VCI -3.81

After yesterdays pop, many of these stocks “may” pause to refresh for a day or two (maybe). When a stock pauses to refresh like this, and takes off again this may give a chance to buy.”

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar, crashed  -1.10% yesterday. It ended the day right above key support level. = Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Fell a -2.51%yesterday.  The BDI does not have the immediate impact that the MO or Dollar does. 7th down day in a row, with rate of fall decreasing. After 8 week bull run trend could be changing to bearish,= Neutral/Bearish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell  to +23.67 yesterday.  A huge drop considering how small the fall was on the NYSE. Back just above 50 DMA/ support level which is at 19.03 Trend = NEUTRAL

Reading Tea Leaves

Something’s big is happening. The dollar fell a huge -1.10% and this usually translates into a sizable stock rally. Yet equities went nowhere. We are just above major support for the dollar. Is the inverse relationship between stocks & the dollar breaking down? Is the dollar @ to crash and burn? This answer is above my pay level.

Reality is there a whole lot of major institutions doing a whole lot of market manipulation (hedge funds, central banks, sovereign wealth funds, BB/HFT’s etc.)

One clear pattern/trend developing – We keep bumping up close to +60 on the MO & stocks can’t get beyond this now strong resistance level. It might be that stocks are just too overbought to move higher.

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)

Current Longer Term positions -

• EWS (Singapore)
• USO (price of oil/commodity)
• SSO (2x what S&P does- this ETF is more a trade that may turn into an investment) I have a 3% trailing stop on this trade

If, we get up over +60 on the MO and  the Dow/major indexes rally – that would be a selling or shorting point.

Recommendations -For everyone who uses trailing stops on trades -It may be time to tighten them. If you’ve made profits over the last month, no one ever went broke by cashing some of them in. That’s what the Tea Leaves seem to be saying.

Long Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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Fear Mongering

Thirteen Days is a docudrama about how close two nuclear powers, each with 1000+ atomic weapons,  came to annihilating the world. It is seen from the perspective of the American presidency during the very real Cuban Missile crisis of 1962.

You may or may not agree with the films bias, but the fact is the USA was confronting not only Russia (the other country with 1000+ nuclear weapons) but also the fanatical Chairman Mao and his multi million man Chinese army and weapons at that time.The world was a far far far far far more dangerous place than it is now in comparison.

Today, we face no enemy with 1000 nukes ready to strike, yet the country has been fear mongered into an Islamaphobia over renovating a building 6 blocks from the Twin Towers where Muslims have already been praying. (short video will show what everyone is afraid of) Muslims also pray within the Pentagon at a non denominational chapel just 80 feet from where the al Quaeda hijacked plane hit.

Paul Krugman

The Nobel Prize winning economist had an excellent editorial in yesterday’s NYT. Some excerpts -

• On Politicians who claim to care about the deficit - “these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.”
• On Obama’s proposal to let the $680 billion tax cuts for the uber wealthy expire - “Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year…the majority of the tax cuts would go to the richest one-tenth of 1 percent…the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year.”
• In conclusion – “this has nothing to do with sound economic policy. Instead, as I said, it’s about a dysfunctional and corrupt political culture, in which Congress won’t take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience”

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

US stocks fell in pathetically weak volume.

Several economic data points are published this week – Housing today, Thursday’s weekly jobless number and last quarter’s GDP. All could move the market and all are expected to be bad.

Understanding The MO

An example

Are the worse than expected economic numbers this week already built into stock prices? We can’t accurately predict how much worse than expected the numbers are but we can get a general idea of how much is already built into stock prices by looking at the MO. (see below) Here’s how this works -

• Say the numbers just come in as expected bad. The MO is at -46 or almost oversold. (-60 = our rough estimate of an oversold figure). Since things are almost oversold expected bad news is probably already built into the market and we could even rally.
• Say economic numbers come in worse than expected bad. A little worse than expected probably won’t impact stocks too negatively because the MO at -46 shows this is already built into the market.  But if all three come in worse than the bad figures expected or, say, 2 of the 3 are much worse then down we go.
• If the MO was already at -100, stock prices could handle the much worse than expected bad news even better.
• If we get better than expected economic numbers you’re going to see a better than expected rally because so many folks will get cut short.

This is why the more we get oversold/the lower the MO goes the safer it is to buy. A second factor comes into play in this and that’s the existing trend or long term outlook. (more on this tomorrow)

Significant Indexes

• The Dollar (USD)  [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar rose +0.08% yesterday.  Two week rally in place. Now facing resistance at 50DMA.  For stocks = Bearish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Rally +3.08% yesterday. 5 week Rally trend is strong = Bullish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell to -45.58 Approach oversold, but still = Neutral

Reading Tea Leaves

Even though the BDI shows the economics of emerging markets and world trade are moving in a positive direction, they will get dragged down if the Big Kahuna (the USA) falls too far.  It’s simply a matter of size.

The dollar is moving higher not because the US economy is thriving, but (for the most part) the largest economic entity the European Union & Britain (Another big Kahuna that collectively is slightly larger than the USA) is doing worse. The second reason behind this is the USA is deemed a “safe” currency relative to the rest of the world. If Israel toasts Iran at least my US treasury bond will be safe.

So right now this makes the dollar the index to watch. As stated many times before you can track this by looking at the UUP.

Positions

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

Current positions – Small positions in EWZ (Brazil) & EWS (Singapore) & USO (commodity-Oil)

Again we are getting close to oversold territory. High risk traders could consider buying a dip. Regular traders wait till we reach at last -60 on the MO to buy the dip. Investors wait for -80 or below.

Remember every investment has a risk of loss. If the long term outlook were to change to Cautiously Bearish, I’d use lower figures like -60, -80 & -100.  Stocks are trending lower within an almost year long range. The SPX did break a support level at 1070 yesterday, but until it gets close to @1020 support level the Long Term Outlook should remain Neutral.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

FEAR

Photo from great article “Fear is the Mind Killer” Link

Your Comments

This week many of you have offered very valuable comments and concepts on the health care debate. Check out the comments section on the side of blog.

The latest fear mongering is somehow “death panels” are going to be created if you pass a health care plan. LINK

The irony here is that insurance companies now have an army of agents who look for cracks in legislation (many consciously developed by corporate interests) to deny health care to those who need expensive often life saving procedures.

Why the far right Lies, Shouts down and tries to promote Chaos – It works! When you don’t have truth and facts on your side – you use fear to win.

Likely Course of Health Care Debate

Most Likely the House will have some sort of Heath Care Plan with a public option and the Senate will pass another watered down plan without a public option. Then there will be discussions.  Bottom line comes down to this – Are the Democrats willing to make the vote a simple majority rules vote rules? They have the power to do this or allow for  a Republican filibuster in Senate which will probably get less than a handful of Democrats to join in and therefore kill the public/private plan

The issue at stake is will we have a Public system like all the other industrialized Democracies who have for decades voted to keep them or will we have some watered down untested health care system.  Neither result will be universal health care. One plan may be a slight improvement, and a public option a significant improvement.

Cancer Breakthrough

Scientists at MIT have developed a ” a drug that can selectively target and kill the stem cells that drive the growth of tumors has been identified for the first time by scientists who searched more than 16,000 compounds to find it.” Story link here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

Fed meeting this week went pretty much as expected – they’re pledged to keeping interest rates low and that’s good news for stocks.

France and Germany announced positive GDP growth in last quarter (+0.3% ) meaning they are no longer in recession. Good news for world’s economy. Their banks were far less involved in financial weapons of mass destruction (CDS’s) than ours. So in addition to more managed economies like China and India add France and Germany instead of the more “free market” USA economy as leading us out of recession. The far right should cringe because this looks like the socialists leading us out of recession.

One of the keys to keeping this recovery on track is mortgage rates . Rates below 5.5% = decent and the lower the better. Here’s a decent chart and story LINK

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern .  After a ten day drop the BDI has turned back higher  – up +78 points yesterday. The mid term trend since early July is clearly bearish, with a series of lower lows and lower highs. Bulls need a good long run here to break out of the bearish trading pattern.

In a nut shell the BDI is

• short term - Bulls are back (for now)
  
• mid term -  Bearish pattern
• long term - Bullish pattern

$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.  What has become quite clear is that the dollars 50 day moving average has become and ultra strong resistance level . This is signified by the blue line on chart . Every time prices close to this descending line since the end of June they have failed to break out higher.

Once again we tested that 50 day moving average this week and failed to break out. The dollar has fallen the last three days in a row since the test. Down -0.61% yesterday. Long term the dollar is in a bearish trend and the short term bearish trend has returned. Mantra – Dollar down usually = US stocks up

A gradual reduction in the price of the dollar is part of the solution to global worldwide recession n

Positions

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

The Positions section will be revised this weekend to show new positions in SPX 10+% EWZ another 5+ % FXI another 4% and more.

Personally I have been day trading US financials (FAS &FAZ) – I do not list day trades in Positions

Sometimes it’s surprising at just how long a trend last. But buying dips of trending sectors still works. -We are coming up on historically the worst two months of the year for stocks Sept. and October.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!