Obama’s Brain Freeze

Obama is seeking to Freeze many Domestic programs headlines the NYT today. Also check out Bob S’s & Mama Jama’s recent comment on right side of blog.  We have the answer as to what Obama would cut - domestic programs.

Here we are with a 10% jobless rate and well over 16% jobless rate if you count those no longer on the rolls. US Corporations from IBM to Apple  are growing because they are growing their investments (now well over 50%) overseas. Housing numbers still hurting, banking mess not fixed and the vast majority of US workers and unemployed believe we are in a recession and Obama freezes domestic spending.

It’s a huge flip flop – Stimulate the economy to create jobs – now a year later he cut domestic spending and guess what’s going to happen to jobs & the economy.  Job loss has decreased from -700,000 to about -50,000 per month. Not bad . However, we are still NOT anywhere close to creating the kinds or number of jobs (+250,000 a month) it takes to stimulate a jobs recovery. Take $300 billion of the stimulus away in domestic cuts and hopes of a recovery will evaporate.

When the jobs picture flattens or worsens and Obama asks for more $ to stimulate it you will have a flip flop flip

So maybe this will buy Obama a few points of popularity this week, but it is just what Herbert Hoover did and FDR did. They took away the stimulus too soon and in both cases the depression got a whole lot worse. Bob S first mentioned the FireDogLake site but it has an excellent compilation of criticism on Obama’s move

We the Corporation

Common Cause and Talking Point Memo are both reporting that the recent Supreme Court decision (see past few investors411) opens the way for Foreign Investors/governments who own chunks of US corporations or whose companies are registered in the USA to contribute to US campaigns.

Example  A Saudi Prince or wealthy Chinese investor (really their government) who owns say @ 5% of a US shadow bank will have a lot more power to intimidate or influence any candidate than.  Foreign investors have over the last decade bought huge hunks of American companies and are very influential in corporate board rooms. You the far less wealthy  taxpayer and voter will soon have even less power in YOUR democracy than rich Communists or Arab dictators

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

See Positions , Strategy , and Overview for changes made over weekend.

Stocks rallied a bit in decreased volume. Volume,our #1 confirmation factor of price move, is still very Bearish. We’ve had at least 3 significant falls in BIG increased volume. This is enough distribution (major players moving to sidelines) to turn a market.

AAPL reported after markets close d. This is one of the stocks whose results can move markets. Last evening there was no change in price after its report. Lots of news surrounding a new Apple product Wednesday

Fed meets over next two days – expect little/NO change.

Bernanke reconfirmation vote – Looks like he will get reconfirmed and that should help stocks. But two problems –

1. he/the Fed will be weakened because the Fed chair usually almost unanimous
2. The Fed is like everything else from the Supreme Court on down an almost totally political organization. Any appearance of his independence was shattered by him lobbying senators for his appointment.

State of the Union – Markets are worried about what Obama will do about shadow banks. See Sunday’s and Monday’s Investors411 for more on this. We need to fix the too big to fail systemic problem – this will hurt stocks, especially financials in the short term – but stocks, our democracy and our country will be better off in the long term .

Significant indexes

• McClellan Index at -64.84 =  still significantly oversold.  (see Sunday’s Investors411 for more)

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends)

These are positions I actually own

SELLING & BUYING

Did not pull trigger on any longer term ETF investments. Waiting for state of the Union address to see what Obama does about Shadow banks.

YOUR Stock watch list

NB – I feel much more confident with ETF’s because they reflect global trends than individual stock. Too many things can go wrong with individual stocks.

• SEED – In a buy the dip position directly above 50 day moving average
  
• AAPL – obviously a market mover who again is sitting on its 50 day.
  
• AMZN – Lower highs lower lows on chart – removed from list
• HMIN - Failed breakout . China play. Will recover when  China does.  Will drop from list soon
  
• CAAS – CAAS hanging in there 50 day moving average.
  
• PCLN – Fell below 50 day moving average, but no big volume on downside move. A potential buy in any market reversal.
  
• F – Now less over extended.
• DRWI – New – Big exporter to China -  Was too overextended to buy, and now only a bit overextended. No big volume as stock dropped= good sign. Potential buy the dip.
  
• ENOC – New – Reduces costs for utilities – No big volume behind its recent fall. Potential but the dip when it hits 50 day.
• ATHN – New - Software reduces costs for health care - Broke its longer term bullish trend in big  volume – Will drop from list soon.
  
• IMAX – Great long term chart – falling back to its 50 day moving average. Still a buy the dip opportunity

All these are better buys in an oversold market. That condition exists NOW.

The problem is not knowing how aggressive Obama is going to be about shadow banks/too big to fail institutions.  We should have a good idea by state of the Union – Wednesday night.  You could gamble either way.

Caution – I have continually overestimated Obama when it comes to almost everything. He may be all talk about business accountability and the Paul Volker/Elizabeth Warren faction within his government will loose.

See POSITIONS (scroll down) for details on this and what’s under consideration for 2010. Sorry have not had a chance to work on this last weekend.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Iran Day 11

Iranian protestors – Photo from Andrw Sullivan blog

Neda Agha-Soltan has become the hero of the Iranian revolution from American media (LA Times here ) to Arab media here In fact al Jazeera has a whole section devoted to "Iran in Crisis" here Al Jazeera is an outlet for mostly Arab Sunni’s and Iran is Persian Shia’s. No love lost between these two groups. You heard and saw Neda’s story at Investors 411 3 days ago.

More of the same in Iran. Less on street demonstrators and more violence. Previously listed best  sources are still telling the story to the world. Some predictions from BBC – What’s next for Iran here

One issue that many on the far left are not going to like to hear. Israe l has certainly made mistakes in its two recent wars with Iran and her proxies (Hamas & Hezbollah). But seeing how the Iran’s "Supreme Leader" treats his own people you can see how hard it is to make some peace with him or his clients. Of course, the first the recognize and lavishly praise Ahmadinejad’s & "Supreme Leader’s" victory was Hamas (here) and Hezbollah (here )

Barack "Hoover" Obama?

Yesterday Abby posted an article by Kevin Baker on Obama from Harper’s magazine. Unfortunately you have to be a subscriber to reference the article. You can view some excerpts here The focus is that Obama has not and may not be able to change the strong intrenched interest that created the economic mess we are now in. President Hoover (his picture above) did nothing and the Great Depression grew.

Context We tore down the regulations on "free" markets and developed a massive credit debt over the last decade that has exploded. Yes, Paulson, Bernanke (more the previous Fed chair Greenspan) and Bush were leaders in creating this mess, but late last year when we stood on the edge of economic catastrophe they (PB & B) instituted a plan and prevented world economies from falling off a cliff. Bernanke, Geithner & Obama have followed through and added to that plan

Remember Lehman Brothers cause over $400+ billion dollars of debt to spread throughout the world when it went bankrupt. People were lined up in panic at insurance companies and banks. What if AIG, CitiBank, Merrill Lynch Fannie, Freddie. AIG and so many others had followed Lehman. The end result would have rippled through out the system and economic catastrophe would have been the result.

How Obama handles the economy is priority #1. Because it is the world’s economy and he is easily the most important/influencial figure. Unlike Hoover whose inaction significantly added to the Great Depression Obama has acted. But its those entrench interests that have dug in. Time will tell.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

US markets took a major hit on a bad economic forecast from the World Bank.

The volume was again below average. It hard to be sure about making a forecast when our #1 forecasting tool – volume – gives no indication of which way prices will flow.

Major event – Fed Meets today and issues statement on Wednesday

Yesterday’s major event was The World’s Bank lowered its outlook for the world’s economy this year from -1.7% to -2.9% .  This is some truly bad new s for long term investors.

Since volume is out as a forecasting tool right now, today’s price move will act as a confirmation of yesterday’s move. Do we fall further (bearish) or rebound (bullish)?

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown

Right now, there are two indexes that are significantly influencing stocks in the USA & world. The US dollar in the short term and the BDI in the longer term

$USD -  The dollar is the index to watch. Dollar went up +0.57% yesterday. Any move over 0.50 is significant.  It looks like the dollar may be establishing a short term bullish pattern (see chart)  of higher highs and higher lows. Still to early to tell.

All together now -  our mantra – when the dollar goes up stocks go down . This strong inverse correlation has existed for many moons.

BDI - The Baltic Dry Index measures the flow of goods (world trade). 24 up days in a row, 6 down day in a row,  a 6 day rally and the BDI fell minimally on Friday and significantly yesterday. This is a very important chart that has just rolled over. It usually moves in one direction for an extended period of time.  If it moves past and creates a lower low than it had eight days ago it would be a serious sign of trouble Right now, the momentum is with the bears.

If trade is diminishing through out the world then a worldwide recovery is in big trouble.

You can play with the chart and create different settings to get a better idea of what’s happening, (the same with all other links to different charts)

Reading the Tea Leaves

Still think this market has moved too high to fast and is a technical rebound. As stated two weeks ago we may see a 5 to 10% technical fall or consolidation. This week fearless forecast – Another down to flat week. The benchmark S%P 500 has already broken through support and fallen 6 to 7% from its high to  893. Next significant support level is 875 to 880. As stated above volume is NOT confirming (or has yet to confirm) the downside move. So far this still is a technical correction of a market that went too high too fast.

Both the dollar and the BDI have started to trend in the wrong direction (If you’re a bull on stocks) Add the World’s Bank prediction and you have lots of reason to hear the bear’s growl.

Got burned with this the last time I did this, but buying a little protection on any minor rally. Adding small position in SDS (ETF that does 2X the opposite of the S&P 500)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Three influential  personalities are shaping future trends - Jesse “the body” Ventura; Jim “mad money” Cramer ; Arianna “she’s everywhere” Huffington.  Their views on the future of capitalism and American morality will impact your money and your lives; Investors411 just took +23%, +16% and +26% profits in 3 different areas – Was it a mistake?

Jesse Ventura

Jesse’s been a Navy Seal, a World Wrestling Federation Champ and the Governor of Minnisota. Last week he came up with the following quote on why we should prosecute Dick Cheney for torture-

“You give me a waterboard, Dick Cheney and one hour, and I’ll have him confess to the Sharon Tate murders.”

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

From yesterday – Let’s stick with the same prediction, for this week as last. More consolidation with a downside bias. After 9 up weeks in a row a consolidation is good for bulls. Going too far too fast creates bubbles. 

Major US and world markets couldn’t wait for a consolidation and instead on the India news (See yesterday’s Investors411) IFN India  ETF was up +21.5%) exploded higher. A relatively positive earnings forecast from Lowe’s (home building/remodeling supplies) helped. Competitor Home Depot had basically the same report this AM.

There is one ingredient missing - VOLUME - The #1 confirmation factor of any rally did not show up yesterday. Below average declining volume indicates that the huge amount of money on the sidelines stayed there. 

XLF - The ETF that tracks financials (mostly shadow banks ) exploded higher yesterday  +6.59% in below average declining volume. Volume is NOT confirming the price move. Of course, they again outperformed.

Market’s Major Mantra - Again – “If Shadow Banks go up – so will stocks. If Shadow banks go down so will stocks” 

WTIC - Oil prices fell from the $60+ high last week and have established a range between $54 and $60. Up Monday +4.54% to $59.59. This is directly below the the major $60 resistance level.  Hard to tell if stocks are pulling oil prices or visa versa. Both seems to be signaling a rebound in the economy. 

BDI - The Baltic Dry Index that measures world trade  broke through resistance last week and is at a new 6 month high. The BDI broke through a major resistance early last week and rose another +2.4% yesterday.  World trade is critical, because if protectionism/nationalism between countries grows over trade the recovery is doomed. Very Bullish indicator for world economics and stocks

Reading this weeks tea leaves - From yesterday - Lets hope and predict a consolidation with a downside bias this week in weak volume. BDI and India are both long term  positives. If 877 support holds on (Mon, Tues. & Wed.) the S&P 500, we could see  the nine week stampede of bulls continue later this week. 877 is the number to watch.

Looks like I was wrong – or I let hope of a consolidation cloud my judgement. The stampeding bulls did NOT wait till the end of the week to get the stampede started.  When bulls stampede they just blindly move. Today they’ll look around and wonder why their fellow bulls did not show up.

We’ve had 3 days in a row of declining volume as markets went south. Then a major reversal in still less volume.

Certainly looks like only short term traders are putting their money down. Benchmark S&P 500 closed at @ 910 and last week its high was @930. We could reach or even surpass that 930 resistance level. But without volume after another short term push higher expect a fall.

Reasons to rally-

• Markets are moving higher on good news
• BDI has broken out and moving higher
• Rising Oil prices reflect an economic rebound
• Financial analysts keep mentioning “green shoots” sprouting up all over.
• Obama is one good salesman.
• Shadow banks have government support

Why are the giant institutions and massive amounts of cash staying on the sidelines? Not having VOLUME confirm the rally is maddening and therefore definitive longer term calls are suspect. However, the mojo is back with the bulls.

Was it a mistake to get out of certain positions too early? +23%, +16% & +26% (See Positions section of blog) Perhaps, and will buy back into EWZ (Brazil) on dip.  Would buy back into XLF (financials) as longer term investment on dip -A smaller position than before. Also looking for a dip to buy some more GLD

However still short term trading FAS and UYG (ultra financials)on dips.

NO major long term  moves now – Be patient - But a tradable market.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !