Crossroads – Nation Building

Violence in Pakistan

The Huffington Post has become a major focal point in opposition to expanding in Afghanistan.  Site founder Arianna Huffington has an excellent article “Why Joe Biden Should Resign. ” LINK Biden has opposed the Afghan buildup in favor of a focus on Pakistan. Three of you have chimed in on the blog and agree that since Pakistan has Nuclear weapons, many more al Qaeda and affiliates it makes sense not to focus resources (financially 30 to 1 ) on Pakistan instead focus on Afghanistan. 41 were killed yesterday in a coordinated attack on Pakistan Police stations. LINK

Looks like we are going to have a do over election in Afghanistan LINK and then send in more troops for another long costly war.  After that Pakistan, perhaps Yemen, the Sudan, Iran, then back to Iraq.  The LOOOOOOONG war in Afghanistan means nation building in a country whose #1 export is opium not oil.  How are we ever going to get out of debt while spending trillions nation building?

Seems like Obama without Biden is going down the same path as Cheney/Bush .  From an editor in London, Simon Tisdall – “With friends like the US, Pakistan doesn’t need enemies.” LINK Another from Paris by William Pfaff LINK Another from Paris by William Pfaff LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0.47%	down
NASDQ	+0,05%	down
S&P500	+0.43%	down
Russell2000	-0,10%	-

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

Last hour rally lifts stocks. Always bullish to close at highs of day. Volume falls. We held onto Dow 10,000 and that’s psychologically bullish. Holding Dow 10,000 into weekend important

Google hit and IBM missed earnings reports. Last night GOOG was up 3% and IBM down 3% in after hours trading. GE and BAC missed this AM.

Good news is NOT having the positive impact it had last quarter. How markets react to news is our #2 confirmation factor. It has turned BEARISH

Warning – Financial sector seems ready for at least a light correction. 1120 on the S&P in technical terms a 50% retracement number. If you don;t know what this means – just think the S&P is at 1097 and there is a big boulder in the road ahead to 1200.

Famed investor George Soros this AM is quoted on CNBC saying  “the US will be a drag on worldwide economic recovery”

Rotation/Sector Rotation

What happens in a bull market is different sectors take over leadership. Leadership rotates. So far in the US – energy, tech and financials have lead. Many foreign markets have broken out before the Dow and other indexes reached new yearly highs. (Brazil, Chile, Australia, Mexico, Germany plus more) The US sector now in the lead is energy. Rotation is what the bulls love to see. It’s like a relay race where another runner picks up the baton or carries the markets.

The supporting themes that juices everything is a falling dollar,  the huge stimulus packages around the world, & bailed out shadow banks/financials.

Oil prices have now also broken out over $77 (new yearly high) and if they go north of $80 Main Street is going to get hit and Wall Street will eventually feel it too.

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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 @ 40% (I haven’t done the math) 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 nine day rally flattened out two days ago and has fallen 99 points. It shot up a significant +91 points yesterday and closed at 2688 =  Bullish for stocks & world trade right now

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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.

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

Stocks went up so guess what happened to the dollar – The dollar reached a new yearly low two days and steadied yesterday at +0.04 % The dollar closed at $75.50. We have developed a support level just below $76 . The dollar closed below its support level. = Bullish for stocks

NB -

• Earnings will probably trump the dollar as the #1 influencing factor for the nest two weeks. But the falling dollar is the main driver of stocks right now and we have a long way to go till we hit last year’s $71 low.
• A slow decline in the dollar = good a rapid decline = bad .
  

Last year’s low was around $71, so there is a long way to go before the next major and very crucial support level.

Positions

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

I will try to revise this section to make it clearer – Open to any private suggestions – just went over it today.

Recommendations-

• Buy GLD on dips.
• Our other positions have gone way up and are NOT worth chasing at this time .
  
• If you are a stock picker or short term trader do not chase hot stocks – wait for a dip. Everything seems overbought. Financials on dips still decent plays. Looks like dip is coming.
• Traders – Bought small position in CSCO a few days ago
• Traders – NVS (Novartis) 11+% profit so far. Usually would take profits now or at least sell 1/2, but going to wait till swine flu hits.
• Having reached a higher high on major indexes, you start to think more about how much to hold and how much to sell.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Afghanistan

Huffington Post has a huge Afghanistan section. No other news outlet even comes close. LINK

Steve Clemons has one of the best websites on issues facing America. He is both realistic and a relative moderate. He features a big Af/Pak Debate by some foreign policy experts LINK Title of debate “AMERICA CANNOT AND WILL NOT SUCCEED IN AFGHANISTAN/PAKISTAN.”

Today’s WashingtonNote.com , Clemons blog focus is Iran – “Imposing More Sanctions On Iran Will Not Work” Both these articles give some in depth analysis.

Bottom Line – Afghanistan, Pakistan and other countries – I don’t want these countries to become havens to those who will attack America, but in no way do I want to continue  spend $100s of billions to nation build democracies around the worlds.  Our results in Iraq are a Shia government that is corrupt, best buddies with Ahmadinejad, and still a nation deep in poverty despite having huge oil reserves. Furthermore, while we focused on Iraq, Afghanistan/Pakistan deteriorated.

Just like in the colonial empires of the 20th century (from England to Russia) you’ll find that nation building has brought former dominate powers down. This is just history repeating itself. In the middle a recession for Main Street these funds should go to help Americans not nation building abroad.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+1.37%	up
NASDQ	+1.71%	up
S&P500	+1.37%	up
Russell2000	+1.84%	-

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

The Dollar is currently the #1 factor influencing stocks.  Yesterday’s significant move down created a major rally for stocks.  Earnings season which officially opens today (Alcoa reports) will be a fundamental driver of stocks, but the dollar will still be very important.  What investors are looking for is top line sales growth. Last quarter Inel Computer had some top line growth and that sparked a rally. INTC is obviously again a key factor.

Volume moved up, but only the NASDQ was above average. You might call this partial confirmation of the move higher.

Australia raised interest rates and this show signs of an improving worldwide economy. LINK The US is not going to raise rate for a while until the jobless situation turns.

Mortgage applications are at a 4 month high as rate falls is the headline on the major financial news channel LINK – Bullish news

Markets are overbought, and you should notice that huge amounts of $ are NOT entering the market

There are some strong technical resistance areas around the old S&P high of @ 1070, 1120 and 1200. (more later on this) These are areas I’d take some money off the table. Especially 1120 & 1200.  S&P or SPX is at 1055.

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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 @ 46% 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 +79 points yesterday and closed the day at 2441 .   Longer term (since the June high) the rate of decline has softened, but its still going in the wrong direction. We seem to have started to reversed the longer term June move. We’ve had a rally 8 of the last 9 days from a low of 2166 .  Resistance level of 2491 (last months high) first major hurdle to cross – Bullish for stocks .

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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.

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

The dollar fell -0.51% yesterday. Three down days in has brought the Dollar to $76.31 less than 0.50 of its yearly closing low of $76.00 (major support level)

Last year’s low was around $71, so there is a long way to go before the next major support level.

Positions

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

See yesterday’s update for a full outline of current positions. Sold XLF for +7% gain. Over the course of this year Investors411 has sold XLF (financials) for 23% gain (10% of portfolio) and twice for 7% gains (both 5% of portfolio)

Both GLD and EWZ are trading at new highs. Like US markets right now these stocks (GLD might be termed a commodity – gold) are over bought. Looking for a buy the dip opportunity .

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

Index	Percentage %	Volume
Dow	-1.25%	up
NASDQ	-1.11 %	up
S&P500	-1.27%	up
Russell2000	-1.58 %	-

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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

Trends –   The worshiping of violence in the USA. Gun permits = mass murders. Shadow banks used to wait for the latest gift from the Bush administration. Now they wait for their gift from the Obama administration to rally the stock market. New Shadow Bank Watch Sector posted in STOCKS section of blog. Happy Passover.

Gun Permits – The Common Thread in 57 Mass Murders Since March 10th

Bravo to local news station Channel 10 in Syracuse NY. The above photo from them is the gun permit of Jiverly Wong who killed 13 innocent people in Binghamton NY.  This story and more carried by Huffington Post.

The recent rampage of mass murders in the USA all had one thing in common – these killers had GUN PEMITS. No where in the developed world is it easier for a mentally deranged or emotionally disturbed sicko to get a gun. 

Americans Love their guns. The National Rifle Association (NRA) protects all gun lovers. Our 3% of the population produces 50% of the world’s weapons.

The Huffington Post story carries examples like the bill in Texas that will allow 300,000 Texans to bring guns on college  campuses.

“There are 280 million guns out there in the USA” says Scott Vogel of the Freedom States Alliance  Do the math 280 million guns is a humongous amount of weapons – you’re bound get an “epidemic” of violence. Just like Tthe more you keep increasing the amount of nuclear weapons the easier its going to be for a terrorist to use one.

You can do something about the causes behind growing violence and join FSA Then again you can wait till one of these emotionally disturbed sicko’s with a gun permit shatters a life close to you.

Happy Passover

 

 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Index	Percentage %	Volume
Dow	-2.34%	up
NASDQ	-2.81%	down
S&P500	-2.39%	down
Russell2000	-3.54%	-

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Technicals & Fundamentals

 Markets lost ground as volume was well below average.  You never like to lose over 2%, but volume did not confirm the move so technically  last two days retreat = still short term bullish – a weak declining volume retreat. 

Baltic Dry (Sea) Index - (see chart link on side of blog)  Measures flow of goods/trade and is a leading economic indicator.

Since 3/10 the BDI has fallen each day and yesterday was again  no exception. Another @1.35%  Total loss from high more than 31%.   How many days in a row can an index fall?  Right mow it’s 20 trading days in a row.  The rate of change (fall) has slowed a little. Perhaps a positive.

Reading the Tea Leaves - From Yesterday - As long as  Shadow Banks/Institutions are going to get bailed out by taxpayers instead of bond/stock holders then the rally is on. That seems to be the direction Geithner Summers & Bernanke are headed. Trillions in wealth is changing hands.  

Forget all the other chatter, this massive transfer of wealth to shadow banks, and allowing them to be less transparent is what is holding up US stock markets. 

If your just a dumb taxpayer you have plenty to worry about because it sure looks like your getting robbed.

Shadow Banks Watch

XLF (financials/banks) is therefore the key sector to watch. Checkout the chart and tecnically you will see that the XLF has tried to move above @9.75 for almost 3 weeks and failed. It closed at 9.15 yesterday down -2.87%.

Earnings season does matter, but what happens to the power of shadow banks in the shorter term, (next month or two) dictates what happens to the markets. Shadow banks/industry will break out above 9.75 when the next large gift from Summers, Geitner and Bernanke gets showered down on them. 

Next up comming decision – How much of the insurance industry (think companies like AIG) will be allowed to take TARP funds.