No Updates till Wednesday – Short vacation to somewhere warm.
Green Investments
You can make a positive return on your investment within a year on the following three item’s for your home
* Programable thermostat
* Power strips
* Compact fluorescent bulbs
For more details and why they are cost effective from Daily Green .
Green Stocks/ETF’s – GEX and PBW have been the two green ETF’s Updates has recommended in the past
Tom Friedman controversial editorial on Gaza
This editorial has created a lot of buzz because of its focus on collateral damage.
War is hell. We dropped atomic bombs on Japan to hasten the end of WW 2 and the Allies firebombed/obliterated Dresden Germany in order to hasten the end of WW 2. In both cases there was a huge loss of civilian life. Friedman believes, contrary to most, that Hezbollah actually lost its 2006 war with Israel because Israel inflicted so much damage on Hezbollah’s infrastructure. This is what Israel is now doing to Hamas.
LINK to editorial
Also in NYT is a depressing and different point of view on how the war is marginalizing moderate Palestinians. LINK
The Bottom Line – Always happens after the fighting stops. Do the fundamentalists gain or loose from the results.
Osama Been Forgotten Speaks
Osama for the first time in 8 months spoke. He issued an audio tape urging jihad against Israel. LINK
Stocks.
AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING
Headline – Reacting Badly
Index % Change Volume
Dow -2.94% down
NASDQ -3.67% up
S&P500 -3.35% up
Russell2000 -4.35% –
Brown = same comments as yesterday.
US Market & Foreign Markets
Technicals – As predicted major indexes all have broken down through their support levels. This fall is being led by financial stocks. Volume slightly declined on the NASDQ, but up and above average on the other major indexes. As you know – Volume rising with prices falling is a bad combination for future prices.
XLF is the financial sector ETF Chart here . As the chart shows financials fell another -5.77% yesterday and XLF is close to its November low. Financials used to be the largest sector of the market and may no longer hold that distinction. But, they are certainly capable of leading all major indexes lower. Other banking indexes are approaching or have broken through November lows. Mega banks Bank of America and Citigroup are leading this deterioration. The problem is all their over leveraged debt. (credit default swaps)
Bad news is priced into markets, but as exemplified by the retail numbers published yesterday the bad news was worse than expected.
American stock indexes are technically oversold – you can only have so many down days in a row without some kind of bounce. However we have not had the big volume climax volume that usually shows capitulation by investors and indicates an end to stocks falling.
Chart of the benchmark S&P 500
Chart of the Russell 2000
Chart of the NASDQ
Chart of the Dow
Fundamentals – All the talk of passing the second 1/2 of the TARP ($350 billion) is focusing investor attention on the problems of the markets.
JP Morgan beat earnings expectations LINK . but unfortunately prices are slightly down on this good news. The big news this AM is the poor health of Apple’s chief Steve Jobs. Apple was down over 10% in post market trading yesterday. LINK
Nobel prize economist (Phelpes) on CNBC this morning is calling for TARP 2 and possibly Tarp 3. Another Nobel Prize winning economist (Spense from Stanford) on same show is echoing negatives. Mainstream economist do NOT see a recovery in 2009 that some investors still do.
The bottom line – Many thought bad news was built into market prices, but the news is coming out worse than expected. If good earnings (JPM) cannot lift a major financial stock price, stocks are still in trouble. Stocks are REACTING BADLEY Good news should mean prices move higher and bad news gets ignored/absorbed in bull markets
Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’s economic team & his proposed stimulus package.
Earnings season begins this week. However, Citigroup remains the stock to watch. Citi reports on Friday.
Forecasting Future Trends
The following is a group of indexes that are all interrelated and strongly influence how stocks moves. At different times one index may be more influential than the other.
LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.09% (good news for stocks)
LIBOR chart (3 month)
Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month T bill was falt at 0.07% and longer term treasuries were basically fell 10 year fell to 2.19% (low yields show fearfull investors flooding to Treasuries instead of stocks – Bad news for stocks)
Treasury Bonds chart
Baltic Dry Index – Measures flow of goods between countries . Yesterday it rose another 1% yesterday. Almost 85% drop since June. (short term good news a 2, 4, 6, 2, 2, & 1% gains in last 6 days)
BDI chart
Short Term Outlook/Strategy
Reading the Tea Leaves-
PANIC STILL RULES the credit markets
Strategy – Shorting rallies to protect gains is working. (see below) Until we some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.
As predicted Support levels have broken for all major indexes. Dow at 8200 and has a minor support level at 8148 (see chart) and the psychological 8000 number. Oversold conditions exist (6 down days in a row). This could temper any downside move. However the short term momentum is still with the bears
Dow 8200 within 800 points of last years low. Long term investors who can handle risk better might want think about nibbling just a little in any further dip (Obviously the bigger the fall the better). The Obama administration should get a honeymoon and perhaps stocks will get the same. This would be Obama/stimulus rally part 3. However, you should also be prepared to add a short ETF in any rally. (see below)
AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING
Long Term Outlook – BEARS RULE
Changes to Bottom Line Section Bolded and in Plum or crossed out
Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally phase 2 is underway . Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.
Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.
Asset Allocation/Recommended Sectors (long term)
50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally
*5+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)
*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA
*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area
*5+% Gold
GLD is the ETF for gold-
Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 9000 and huge uncertainty clouds the future.
The major trend now is volatility.
Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.
Shorting – Three ETF that short 2x what the major indexes do.
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500
As Always Do Your Own Research Before Investing
