Investors 411 Blog

Who are the 99%

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http://wearethe99percent.tumblr.com/

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Tom Friedman’s editorial in the Sunday NYT has an excellent article on the crony, casino capitalism we are fighting against.

Some major points –

• An under reported Citigroup Fraud “that made GS “look like boy scouts” – No one gets arrested while thousand of Occupy Wall St. protestors do.

• A comparison to Taharir Square in Egypt’s quest for justice where the “game had been rigged by the Mubarak family and its crony capitalists.”

• “Capitalism and free markets are the best engines for generating growth and relieving poverty — provided they are balanced with meaningful transparency, regulation and oversight. We lost that balance in the last decade. If we don’t get it back — and there is now a tidal wave of money resisting that — we will have another crisis.”

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Euro Zone Doubts

Lots of news outlets over the weekend cast doubts over last weeks  Euro Bailout. Here’s one from NPR’s Jim Zarroli .

But the best (easiest to understand)  is this two minute animated explanation featured in the Guardian.

Click on animation photo for link to video

The impact of these editorials on stocks covered below.

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Raising Cain

Huffington Post headline this AM is about “flavor of the month” (leader through October) Herman Cain having accusations of “sexual harassment” If there is any validity to these charges Cain is toast.

Candidate Rick Perry, last quarter in financially out raised Cain 6 to 1 and even beat Romney.  Money buys elections and flavors last a month. Perry, last week picked up endorsement of Mr Flat Tax -Steve Forbes. If Perry can stop putting his foot in his mouth he would be a very strong candidate.

Mitt Romney took a spank from mega conservative columnist George Will on Romney’s flip flops

Perhaps, Obama’s biggest weakness was how would he answer the 3AM phone call?  He did with Somali Pirate’s, Bin Laden, His #3, and Ka Daffy. Do we want an indecisive flip flopper answering that 3AM call?

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STOCKS

“Deja Vu, All Over Again”???

Yankee Star Yogi Berra

On July 21 st markets rallied on the news of a Euro Bailout Plan – Greek bond holders took a 21% cut , etc. The chart of the benchmark S&P 500 shows a significant rally in above average volume on the 21st. We held onto or confirmed those gains the next day just like last week and the second major Euro bailout plan.

After a weekend investors started to doubt the rescue plan and by Aug. 8th the S&P 500 was down almost 20%.   The question is – are the current doubts strong enough to have the same impact on the investment herd? (see above links and link below)

Click on photo for link

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Reading The Tea Leaves

• Our #1 technical forecasting tool, the McCellan Oscillator, is at +77.29 . 50DMA at 22.45. Overbought = Bearish.

• Our secondary indicator, the Put Call Ratio is at 1.00. Well below its 50DMA which is at 1.15 = Bullish/Neutral

• For more on MO & PCR see POSITION Section of blog (scroll down)

• China’s growth numbers has its critics, but again its GDP was over 9% again.

• Consumer sentiment is down, but consumers are spending more in USA.  Due to top 10% (income) on buying spree and the bottom 90% very worried.

Bottom Line – Too hard to make a definitive call on this situation because the manipulators (Central Banks) & shadow banks are hidden in opaque accounting.

However , if you use some inter market technical analysis, the kind John Murphy creates, you’ll see some clear hesitation across currency, bond and commodity markets. (What all this means in tomorrows Investors411)

Same long term outlook till/if we break down below 1225 on SPX.

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Long Term Outlook

3 to 6+ months

Investors411 upgraded its Outlook last Monday to CAUTIOUSLY BULLISH. Reasoning

• Technically, we broke out of this summers trading pattern. The resistance and now support level for benchmark S&P 500 is @ 1225.
• Fundamentally, the perception that European banks will survive (see Banksta at War) another over leveraged crisis
• A 2.5% GDP Growth in the third quarter is NOT a recession number.

CAUTIOUSLY BULLISH

Investors411 has 5 different valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

China

CHINA RULES (or at least is beginning to) – The Shanghai stock exchange has dropped over - 20% from its summer high (You have to be Chinese to invest) Monday it dropped -6.7% and had slight gains overnight. This plunged commodity prices lower (example oil down -3.82% Monday) China imports lots of oil.

Here’s CNBC’s Jim Cramer on why China rules LINK Here’s another analyst CNBC LINK – “I don’t think China is driving the rest of the world, I think that’s a little bit of an over exaggeration,”

Bottom line – China’s economic power is growing and becoming more crucial to the world each day.  To put it bluntly their managed capitalism is kicking the butt of our “free market” system relative to growth and has been doing it for almost a decade. These short three paragraphs are an oversimplification, but the China is kicking our butt part is very real.

Stop Escalating in Afghanistan

Conservative columnist George Will is calling for a serious draw down in Afghanistan. Obama – Afghanistan is a “necessary war.” It may have been one back when it started, but there is a lot of logic in what Will proposes.

To start, The elections in Iraq were less than honest, but it sure looks like the elections in Afghanistan were an outright fraud.  Times of London LINK

Here’s Will’s editorial in the WaPo LINK

His conclusion (the military industrial complex dominates the Obama administration will never allow this) below

“So, instead, forces should be substantially reduced to serve a comprehensively revised policy: America should do only what can be done from offshore, using intelligence, drones, cruise missiles, airstrikes and small, potent Special Forces units, concentrating on the porous 1,500-mile border with Pakistan, a nation that actually matters. ”

Iraq/Iran

The Green Revolution has been pretty much crushed, but still smolders in Iran. An emerging power struggle between the Supreme Leader and Ahmadinejad seems to be taking place. NYT & others have run front page stories on this recently.

Perhaps the first three entities to recognize Ahmadinejad as the “legitimate ” president in Iran were Iraq, Hamas, and Hezbollah. Iraq is looking more and more like Iran’s best friend rather than what it used to be – its worst enemy.

History repeating itself – Remember Russia depleting itself economically and militarily trying to Nation Build in Afghanistan. As my favorite philosopher Yogi Berra would say, “Déjà vu all over again.” – The USA is spending trillions trying to nation build in the mid east and quietly but very successfully China is rising. Teach your kids Mandarin .

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.50%	down
NASDQ	-0.97%	down
S&P500	-0.81%	down
Russell2000	-1.34%	-

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 decreased as stocks fell.  The lack of volume is a sign that the predicted correction (see yesterday’s update) might not be upon us yet .

The 5 deeply trouble bailed out institutions (AIG etc) had major corrections yesterday. AIG chart link . Volume decreased significantly. These shadow institutions obviously have some more volatile days in front of them. But for now falling in lighter volume is what bulls want to see.  Even though the Obama administration & Fed are not going to allow these institutions to fail & they do not have to use mark to market accounting (no transparency) the fundamentals simply do not justify the run up in price.

If you prefer gambling to investing, I’d wait another day or until prices get closer to 200& 50 day moving average before putting bullish chips on the table.

Therefore , FEARLESS FORECAST – is for a down week .

The  jobs report for August comes out Friday most important fundamental of the week. ISM (manufacturing ) report out today.  What’s key here is  we get a good number (above 50 would mean manufacturing growth) If market does not move higher on good number, it is a strong indication that market correction underway.

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S 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 Retreats – What are its drivers ? From Seeking Alpha LINK

“Remember almost every country has based their recovery on exporting their way out of this mess” 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 commodities.

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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 rose -0.19 % yesterday. Dollar closed at $78.15. 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

This is the index to watch because its impact is immediate.

Positions

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

The BDI and Shanghai Stock Index’s fall are cause for concern in our Brazil  & China positions. China has turned off the stimulus spigot and its impossible to tell just how much further these ETF’s positions will fall.  We have made some huge profits that are getting eaten into.

Investors411 has slowly tuned more toward US equities because of this (XLF & SPX) and cut some foreign positions.

In the long term China Rules, but shorter term expect further losses . Considering taking some more profits.

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.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!