Iran

What was supposed to be demonstrations marking the 29th anniversary of the Iranian revolution turned into a night and day that members of the Green Revolution let their voices ring out. Professor Juan Cole’s website has details and video. Its heatening to see so many protest (“huge crowds”) despite those that have disappeared into Ahmadinejad’s Iranian prison system. LINK

Vietnam & Iraq/Afghanistan – Optimism

Even though many including this blog have focused on the negatives surrounding the “unjustified” invasion of Iraq and long term consequences,there are some major reason for long term optimism.

In Vietnam we used chemical weapons (agent orange) carpet bombing and even resistance was slow to organize. These weapons were not used in Iraq. Democracy was insisted on by Sistani (the #1 Shia religious leaders) and after a year of demonstrations the US relented. In Afghanistan the poll numbers have already turned negative LINK This poll was before the election debacle.

In no way does this excuse our growing nation building disaster in the Mideast under Bush and Obama. But, it is a long term ray of sunlight in an otherwise dark cloud.

US Elections

Republicans won two governorships in NJ and VA formerly held by Dems. The Dems won a congressional seat in NY – formerly heavy Republican district.  Overall a better night for Republicans and bottom line is about the economy.  Three out of mainstream observations

• NJ Democrat Gov. candidate was a mucky muck at Goldman Sachs.  GS & Wall Street are loved about as much on Main Street as the New York Yankees outside NY metro area.
• The “conservative” running in NY congressional race considered radical right wing FOX commentator Glenn Beck “his hero.”  He had huge support from the “tea bagger” or dominant wing of the Republican party.
• Long time incumbents spent huge money and had difficulty getting elected – example mayors Bloomberg in NYC and Menino in Boston.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.18%	down
NASDQ	+0.40%	down
S&P500	+0.24%	down
Russell2000	+1.46%	-

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, Fundamentals & Analysis

This is the last post for the week

Friday’s jobs report is the news for the week .  What we have is an oversold market going nowhere. Wall Street term for this is “churning.” Because we are so oversold a good jobs number (loss less than 200,000) would probably move market higher.  Oversold also limits downside risk.

Best Read of Tea Leaves – We will not get a sub 200,000 number.

For traders – A high unemployment figure means the stimulus will keep flowing  and I’d buy the dip. Even though everyone is watching Friday’s employment figure – keep an eye on the dollar. If we have a significant break through of the resistance level expect a meltdown in stocks as the dollar rises.

In Asia and Europe oversold markets rallied last night, so this could carry a positive bias to the USA today.

FOMC meets to day – expect no change.  Any changes in wording would be negative and a shock.

The Dollar War - (Part 2) The big news of the day was India buying $6.7 billion dollars worth of gold from the International Monetary Fund. This is an investment in gold not dollars. Still, obviously central banks did buy enough dollars to halt any dollar decline yesterday.

FYI - Best 25 preforming stocks since Obama’s election LINK

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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) .

The BDI is @ 24% off its high (early June) Before that it gained almost over + 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 )

The BDI rose a significant +62 points yesterday and closed at 3247. The rate of change is diminishing slightly. A higher high price on its chart pattern has been confirmed The BDI has rallied almost 1100 points since late September. =  Bullish for stocks & world trade right now

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The Dollar is currently the #1 forecasting tool .

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

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

US dollar rose a modest -0.12% yesterday. The dollar closed at $76.33 . The dollar did briefly rise above its 50 day moving average.  The dollar is technically doing what prices do in front of major resistance/support levels – hesitating. The longer it hesitates the better the chances for reversal.

From yesterday – The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at $76.67 this AM . So dollar is only 0.34% away from major resistance. It’s the line in the sand – Best read of the tea leaves is that it will hold. In fact, Investors411 will add to some positions  as we get close to this resistance level.

Positions

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

Our major core positions into weekend. (See Monitor’s post in comments section)

NB  – These core positions have been long term positions for years and are STILL OUTPERFORMING the benchmark S&P 500 – For more see overview section

GLD – Gold rose a significant 2.41% and broke out to a new all time high in huge volume. This was based on the news of India buying a huge hunk of the shinny yellow stuff. (buy the dip)

EWZ – Brazil – has gone up too far too fast and was overdue for a correction. (see past updates)It had about a 10% correction (see chart) and its 50 day moving average is acting as strong support.  Think those of you who bought the dip will be rewarded in the long run.

FXI – China -  too recetly had almost had a 10% correction, another buy the dip opportunity.

Both China and Brazil could go lower if the jobs number is bad or the dollar rises too high. They go down faster than US markets, but rise much faster than US markets. The BDI recent move higher is favorable for both.

Considering diversifying into Indonesia & Vietnam ETF’s Also, for traders as an individual stock AMZN – great technicals& fundamentals, but also a swine flu play. If the flu ends up keeping folks housebound AMZN should profit. (more on Monday) It is currently dipping.

Concerns – 10 even 20% corrections are healthy for FXI and EWZ in the long term. Yes, these and other emmerging markets are recovering fundamentally far faster than the USA. But anything that goes up to too fast forms a bubble and they burst.

SPX – Selling entire position as soonas I get back from art show – taking profits and freeing $ for other investments.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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.

——–

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!

WHAT’S UP? – Iran’s Elections – The “Obama Effect” – The “Green Revolution” – The Big Hate – Paul Krugman – Home grown Terrorist and feeding their hate.

Iran

“Green Revolution” supporter – Photo by AFP

Major elections today in Iran.

Already the USA is taking advantage of the Lebanon victory (see last few Investor’s411) and US diplomats are flooding into Syria and Lebanon. Winning means nothing unless you capitalize on it.

The Wild card in Iran Election: Obama by Christian Science Monitor’s Howard La Franchi lists some of the changes. It is one thing for the “Obama Effect” (Link to polling results on Obama effect ) to influence an election in a more liberal Lebanon and quite another to influence an election in hard line Iran. A sitting president has never lost a bid for a second term and Ahmadinejad is heavily favored.

You can read a lot more on Iran elections at Professor Cole’s site , including The Iranian American’s voting in these elections. Iran is a quasi democracy and the real leader is the head Ayatollah.

Our hope here is that there is a strong vocal alternative to Ahmadinejad in the “Green Revolution.” They probably will not win, but it consists mostly of younger Iranians and that’s the future.

The Big Hate

Nobel Prize winner, Paul Krugman editorial in today’s NYT is titled The Big Hate To his credit he differentiates between right wing haters in the media and those who refuse to go along with “The Big Hate.” He concludes

“Yes, the worst terrorist attack in our history was perpetrated by a foreign conspiracy. But the second worst, the Oklahoma City bombing, was perpetrated by an all-American lunatic. Politicians and media organizations wind up such people at their, and our, peril.”

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	+0.37%	up
NASDQ	+0.50 %	up
S&P500	+0.61%	up
Russell2000	+0.45 %	-

-

Technicals & Fundamentals

A 1 to 2% rally melted into the close. Not a good short term technical sign. Volume still below average except for the NASDQ. This indicates that the NASDQ (mostly tech stock) still has the power of leadership position.  We are at yearly highs for most major indexes.

End of the quarter buying will begin to take place.  Many of the major players are waiting (a bit like Investors411) to buy the dip. Mutual funds and others would like to show off positions in some good performing stocks. Therefore, the end of the quarter (2nd 1/4 ends last day of June) is often bullish.  But even more so because we have rallied.

$USD – Repeat – 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. Stocks went up so guess which way the dollar went.  Actually the dollar going down is leading stocks higher. It’s the horse and stocks are the cart.

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. Financials had been leading the 2+ month long rally. Techs seem to have taken over leadership role, but hard to see any sustained move higher without financials. Yesterday financials down +0.81 %

WTIC - Oil prices exploded higher +3.01 to $73.90 Chart starting to look like it is going elliptical. Fundamentally the talking heads/ experts see no reason for oil prices to be so high.

BDI - The Baltic Dry Index measures the flow of goods (world trade). Stated before -  This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) 24 up days in a row, 6 down day in a row, & yesterday a rally.  Bullish sign.

Reading The Tea Leaves

From yesterday – Right now, markets seem to have over extended themselves and a 10% correction would be good in the long run for stocks . Trading is very light except for the NASDQ which is near average. (Summer trading is usually light)

Many US market is showing signs of stalling out. The breakouts do not seem to be getting any real traction. Watch the Dollar and the BDI.

Position s – (See positions section of blog for more)

• FXI – our major position rose +2.43% yesterday. BREAKOUT to new high, but volume did not confirm the move. For the second day in a row the FXI was actually up 2% more and then pulled back.  This is a weak breakout.
• GEX – alternative energy - +0.38 yesterday. Dollar/Oil trade influences this. If oil goes up so doe GEX.
• PBW – We are going to change from GEX to the other major ETF that does alternative energy PBW- chart This alternative energy ETF is more liquid and its also outperforming GEX. We have been in PBW in past years and went with GEX because it outperformed then. This will be a slow transition over the next month. Already sold 1/2 position in GEX and will add that $ to PBW on a small (5%) dip.  Then sell other 1/2 and wait for a dip.
• The HEDGE – Little change again.  You can get a rough idea how this position does by looking at the difference between the NSDQ and S&P 500 – (-0.11% and multiplying it by 2) instead of looking up SDS and QLD

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING