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

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“A Very Angry President”

One thing American’s seemed to have made clear – they want an angry man in the White House. Standing up to BP and General McCrystal is the mojo American’s want.

Josh Green from the Atlantic and the Boston Globe, goes into depth on the Obama Presidency. It’s substantive, different and an interesting editorial.

Financial Regulations Finished

Breaking News this AM is congress has finished its work on the FinReg Bill. Here’s the WSJ on the major provisions within the bill. There are lots of knowledgeable people skeptical of this statement but FDIC chair Sheila Bair says, “This will end Too Big to Fail.”

Perhaps the best judgment of how effective this is what happens to the shadow banks stocks – GS, BAC, C, JPM etc. How to judge if Wall Street or Main Street won Will you continue to socialize risk while the shadows privatize the gains? -A major decline in these shadow bank stocks means too big to fail worked.

Afghanistan and Beyond

Both Mama Jama and Jim J came up with some very interesting points on Afghanistan/Iraq//Middle East yesterday.

• The Israeli’s have tried all sorts of different means over the last 5 decades to change the Mid East. They failed – why should the US succeed?
• If some sort of democracy establishes itself in Iraq, to will be confrontational to the USA like Turkey’s democracy now is to Israel
• If Egypt were to change to a democracy tomorrow, that democracy would be far more hostile to both Israel & the USA.
• Would add that the only “seemingly” pro western Muslim governments like Dubai & Kuwait are dictatorships.

Why keep pouring $ down a sink hole that grows our deficit and divides our nation.

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

Repeat - ” 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 comprise 80% of trading and right now the huge currency markets are dictating their moves.

The upcoming battle - Check out the chart of the dollar below. The dollar has stated to move sideways after a three week fall. The major support level/50 day moving average is rising @$0.15 each day and now within $0.80 of the dollar.  The fact that the dollar has stopped falling in front of strong (rising) support level has spooked currency traders. The 6 day consolidation of the $USD means its lost some downward momentum that was lifting stocks.

The falling dollar rising stock army (green) has charged the enemy (the 3 week drop which rallied stocks) Technically, the rising dollar falling stock army (red) has built its technical defense on the 50 Day Moving Average. The green army, having seen the strength of red army forces is now moving sideways hoping to find some hole in the red army lines.

Perhaps some kind of fundamental news (like the European economy is better than thought)to shift the balance and the green army will then find a hole and break through the red army’s barricade/50DMA support level. However right now the sideways movement (consolidation) shows a weakness in the green army

The red army’s 50 DMA is steadily advancing. Yesterday whole bunch of the green army cut and ran and stocks declined in moderate volume. The bottom line for stocks – BEARISH

One hope for the green army is that the conditions become so oversold in stocks that they can mount another charge. We’ve gone from +80 on the MO to @-30. (see below)

Significant Indexes

• McClellan Oscillator (MO) fell significantly to -28.91 [+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. NEUTRAL
• US Dollar –  The dollar fell slightly yesterday -0.04% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar up = stocks down and visa versa. The dollar has fallen for the last 3 weeks, but has consolidated (traded sideways) over the last 6 days as the 50 day moving average/support level moves higher. This is where the Black Boxes have focused their attention. Bearish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped. BDI is in free fall from @4200 to  2502 yesterday. This is a huge -40% drop in 5+ weeks.  Often a leading indicator for stocks. Now at/just above a major support level. Rate of fall declined again yesterday. This index often makes slow changes, so diminished decline  could be the start of a reversal. However, clearly long term  = 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 weekend but there are NO positions held at this time.

Dust off  YOUR stock List and ETF’s. Check out Paul R and others worthy suggestions in the comments section throughout the day. Which stocks/sectors have been holding up the best?

The MO has gone from @+80 to -30 and sure looks like momentum will carry us to to -60 and beyond. When US equities get oversold (-60 on the MO) the odds of at least a short term rally, especially in sectors or stocks that are outperforming, are in your favor.

Still watching DGP (ETF that’s double long gold) for a dip close to its 50 DMA) – Will buy.

We are on the cusp of change again for stock’s long term outlook. Technical aspects for stocks are bearish and it looks like the currency market is turning bearish for stocks. (see above) The fundamentals or the outlook of companies in earnings season (two weeks away) will ultimately determine the direction. Even the Black Boxes will notice. But, for now downgrading to CAUTIOUSLY BEARISH.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

What’s Up? Mullah’s at war – Split in Shia Muslim Orthodoxy – Obama’s financial Fix – Change in Market Outlook & Why – Iran want’s nukes – IAEC’s #1 – The dollar, BDI & other forecasting tools – Reading the Tea Leaves and more.

Major Develops in Iran

photo of yesterday’s opposition demonstration -Huffington Post

List of Major Devlopments

• The “Assembly of Experts” Top Mullahs in Iran that choose the Supreme Leader will hold an “Emergency Meeting”
• Massive demonstration again yesterday (see photo) More scheduled
  
• Continued violence/deaths and signs that some elements of Army are supporting/protecting demonstrators.
• The most Senior Ayatollah is backing the opposition.
  
• It’s like the cardinals of the Roman Catholic Church split into two large different warring faction. Perhaps like when Martin Luther and the Protestant reformation split Christianity centuries ago. Remember this is the Shia branch of Islam.

The three key sources continue to be The Huffington Post’s live blog . Andrew Sullivan’s blog and the BBC .  News breaks there well before cabal or networks. The first two are 24 hours a day bringing live twitters and videos.

One Caution – Like many I’ve been caught up in the “fascist” oppression of the Iranian people. (one of your posts – “One suggestion. Instead of calling Ahmadinejad a holocaust denier, why not label him a fascist beast who would kill anyone from Israel to his own people to rule the world.” )

What if the opposition wins and still wants nuclear weapons? How different are they from their predecessors?

Iran wants nukes – Mohammed ElBaradei – Nobel Prize Winning head of International Atomic Energy Commission.

New Financial Rules

Obama is announcing the new financial rules and regulations today. Lots of it has been already leaked. This is just a start, but at first blush it looks like they are weaker than many expected . NYT’s lead story on this.  Basically think economist Robert Reich has clearly defined the changes we need. “The Three Changes We Need” is his Tuesday, June 16th editorial.

Sorry, have not spent enough time on analysis and time is short (more tomorrow)

This is just the start – Congress is going to debate this over the summer.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Markets took a less sever, but still significant hit yesterday. Again the volume was below average. (The NASDQ was close to average) Volume is NOT confirm the breakout of the trading pattern over two weeks ago and volume has not confirmed the move back into that trading patten. The benchmark SPX (S&P 500) closed at 911 and has several significant support levels around 900. (see charts)

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down-stocks and oil prices go up and visa versa. After two significant days where the dollar was up a total of over 2% it fell -0.58% yesterday The dollar broke to higher through a resistance level (see chart). Investors 411 mantra is Dollar rallies = Oil & Stock prices fall. Yesterday was one of the rare days this did NOT happen.

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. -1.73% in increased but weak volume

WTIC – Oil prices down -0.21% yesterday. Closed at $71.15

BDI - The Baltic Dry Index measures the flow of goods (world trade). 24 up days in a row, 6 down day in a row, & now a 4 day rally. Bullish sign.

Reading the Tea Leaves

Monday’s lead statement - Expect a tired low volume market to retreat this week . This technically still looks like a market that just got too over extended – went up too far too fast and needs a breather.

The rising dollar is technically the most important influence on stocks. The correlation between the dollar rising and stocks doing the opposite is perhaps greater than 80% over the last few months.

Because we have fallen back into the old consolidation pattern, technically we have had a failed or false breakout. Therefore the Long Term Outlook is changed back to NEUTRAL

You have a Grand Central Station of support levels all converging around SPX 900. SPX now at 911. Then the last line in the sand the May low @875 Taking out  these levels would be a bearish. If 900 falls expect 870/875.

NB – Volume is confirming Nothing. So it looks like the support levels will hold. View this as an opportunity to buy (especially for traders) Longer Term investors IFN (India)  is beginning to look like a buy the dip opportunity. Strong volume is the enemy of bulls.

CAUTION – “This is not your parents buy and hold forever market” We have moved away from the edge of the financial cliff, but the long term structural problems still exist in the world’s # 1 economy and fixing those is going to hurt economically.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING