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!

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!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

Note: Last Investors411 for the week.

Health Care, Obama and Leadership

Huffington Post Photo

Does anyone really know what Obama’s heath care plan is? NO. Unlike Hillary over a decade ago he has set broad goals – he wants to save Money. Congress has come up with a slew of different plans. Perhaps this attempt at consensus building is the best way to achieve results. After all Hillary Clinton failed.

However, the best way to show leadership is simply to lead.  Congress is fighting like chickens in a hen house over health care, each individual and side protecting her/his specific interests. The powerful interest groups who want NO change are spending huge amounts of $ to shoot down reforms health care. It’s a waste of time to go on TV to defend a non existent plan that has no concrete structure.

Obama set a charismatic vision and followed though in his campaign for president. American’s back someone who leads and right now all Obama is doing in health care is following.

Stats on Tax Rates

10% on income between $0 and $8,025

35% on the income over $357,700.

15% on investment income

For single individuals – From the Fed tax tables

An interesting editorial by Tohm Hartman called The Great Tax Con Job is worth reading. One interesting point he makes is that both times we had massive tax cuts for the wealthy they ultimately lead to a period of growing over speculation and collapse.

• Massive tax cut in 1920 from 73% to 25% led to the roaring 20’s and the Great Depression
• A 70% to 90% tax rate from 1930 to 1980 on the uber wealthy lead to America becoming the strongest economic power on the planet.
• A Reagan tax cut from 74% to 38%, later followed by cuts on investment income, and another 3% cut led to the biggest meltdown since the Great Depression.

There are some mitigating factors, but the bottom line is clear a culture that focuses on  giving massive breaks to the wealth does NOT prosper

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

All the major US indexes are screaming OVERBOUGHT conditions. You can only go up so many days in a row. Only the NASDQ has shown  some moderate volume behind the move higher. This increased volume acts as confirmation of the trend.

The major US indexes have all reached new closing highs, except for small caps (the Russell 2000 is almost there) This does set up a longer or mid term bullish trend for stocks.

Check out on the bottom of the charts for the major indexes ( see list on side of blog) the CMF (Chalkin MONEY FLOW) We are over 3 standard deviations away from the mean. ( the green color is above 0.3) This is about as overbought as markets gets without some kind of reversal.

Fundamentals (earnings reports) have driven this rally.  At first company’s like Intel surprised. Others followed, but now that surprise is built into stock prices. Last night AAPL (Apple Computer) hit another grand slam home run earnings report. More here

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . The rate of decline increased on the BDI yesterday.  We have had a series of lower lows and lower highs since early June. We have a way to do before we establish a new low (see yesterday’s update), but we definitely have a momentum change. Bears are gaining momentum

In a nut shell the BDI is

• short term - Bullish
  
• mid term -  Bearish pattern
• long term - Bullish pattern

Here’s an ominous forecast on global trade from the Director General of the World Bank. – Pascal Lamy.

$USD - The Dollar went down and tested its major support level yesterday.  It held. Dollar ended up flat +0.04% . The last remaining support level is the June lows at @78.4. The dollar index closed at 78.90 . Breaking this support would be very bearish for the dollar and bullish for stocks.

Conclusions

The “Fearless Forecast” predicted a down week because we are overbought.  Now we are way overbought , the BDI has turned negative and the dollar stopped dropping at its support level. Technically everything is turning negative. Bears are growling

Both the dollar and the BDI are the indexes to watch. If the rate of fall in the BDI increases – take more $ off the table. No one ever went broke taking profits.

Positions

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

IFN - (India)  Sold entire position yesterday. Gain @ + 3.5% See Positions section of blog.

FAS – Perhaps the third time is the charm. Last two times (see Positions) Investors411 took defensive position we got burned. Opening a small position (2.5%) in FAS (3X short the financial sector) Overbought markets & BDI falling call for some caution.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

Debt/Globalization

Debt is  bad. Globalization, and economic planing has led some countries to grow and others to suffer. Take a look at China and South Korea . Their managed economies (as opposed to our free market economy) have prospered over the last decade and continue to have stock markets that that are outperforming ours again this year.  In both these countries you see 10’s of millions of people who tended rice paddies a generation ago becoming the computer programmers and manufacturers of today.

These economies severely restricted their imports and benefited from other countries going into debt buying their exports. – part of globalization and managed capitalism. The USA went trillions of dollars into debt buying their products ( add some other countries especially those that sold oil) over the 8 year Bush administration.

Some companies and wealthy individuals grew rich in the USA as we personally and as a government fell further into debt running our unregulated free market system. This all collapsed when adding to this debt we discovered that shadow financial institutions were running a giant ponzi scheme of fake profits called credit default swaps on home mortgages, and other forms of credit.

Baddaboom, we almost had a world wide economic meltdown when just one shadow bank, Lehman Brothers,  collapsed. The cumulative debt hole is enormous.

Historically, in good times and wars (Iraq) you are supposed to pay down debt. We didn’t.

Historically in bad times you stimulate the economy and this does add to debt. We are.  The problem is that we re already up to our necks in debt. This debt was is not as bad as the debt that flatlined the world’s #2 economy for over a decade, but its very bad. To this you add a shrinking work base caused by globalization.

The real problem is we are sending more of our citizens to the rice paddies (unemployment) and our companies to maximize their profits send jobs overseas. This is one major part of the globalization mega trend.

We have fortunately seen a decrease in job loss since January from about 700,000+ in January to 500,000+ now. A good trend, but still a big loss. When many small companies reaches a certain size, (let’s guess 50 people)  they realize that everything from bookkeeping to information technology can be done for a cheaper price abroad. Where are the new jobs going to come from?

So simply as an Investment adviser – You’re far better off with economically growing managed capitalism rather than debt ridden free market of the USA – This is why Investors411 has a record of beating the S&P 500 . Why FXI, EWZ, EWS , and other managed economies are better investment choices.

The catch 22 – Of course, the more a US company outsources the better it will do (cheaper labor cuts cost), but the greater unemployment here will grow here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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 leading NASDQ again moved higher in increased volume. Even though it was not above average volume, the increase coupled with the break down of the dollar (-o.84% )(see below) is bullish for stocks.

Other major indexes have reached new closing highs, but have NOT had as much volume behind their moves higher.

Obviously US markets are now overbought and need a breather

Bernanke reports to the House today and the Senate tomorrow.

Whole bunch of companies reporting this AM. These fundamentals will drive stocks. Merck , DuPont, Coke , UTX. & Caterpillar all seem to have better than expected earnings. So many major S&P companies are hitting doubles triples and home runs. Rally is on again

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern. The BDI turned lower yesterday and the short term bullish pattern is getting wiped out. Longer term this is not good for the global recession recovery. BDI at 3511 and 2975 is the line in the sand support level that must hold . So no reason to throw in the towel yet but Bears are gaining momentum

In a nut shell the BDI is

• short term - Bullish
  
• mid term -  Bearish pattern
• long term - Bullish pattern
  

$USD - The Dollar broke down through support levels yesterday . Down a significant-0.84% . The last remaining support level is the June lows at @78.4. The dollar index closed at 78.87 . The dollar goes down usually = stocks gold and oil prices rise. This contributed to yesterday’s rally. Obviously this is bearish for the dollar, but Bullish for US stocks. (not small but important one word change – this is bullish for US stocks in the short/mid term)

That 78.4 support level is very important.  A weak dollar does have its downside, but it certainly fueled the last rally stocks had this spring.

Positions

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

QLD – (2X what the NASDQ 100 does) which was bought at 38.2 was sold at 41.1 for a 7+% gain yesterday.  Why be greedy? We added a lot of positions last week. (QLD, IFN, EWZ, EWS ) Time to take profits on one.  Will buy back in on another dip. Taking profits now looks like a mistake . If the dollar keeps breaking down OLD will keep going up.

IFN - (India) The technicals behind this trade are just not as good at all the other trades. India has not broken out to a higher high and developed a series of lower highs and lower lows. Going to take profits. – Will put in what’s called a stop sell order (send me an email if you do not understand this)  Looking at S Korea (EWY ) as a better foreign investment.

Another reason to sell India is the BDI seems to be establishing a bearish pattern. (see above)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

-

"That Big Sucking Sound"

Some of you might not be old enough to remember Ross Perot’s famous line about globalization (in this specific case it was about a treaty called NAFTA) "That big sucking sound " was jobs getting sucked outside the USA.

Globalization is a multi edged sword. For more on the good, bad and ugly of globalization see Investors411 here Globalization helps developing countries (think China, India , etc.) explode in job growth, but it sucks jobs out of the USA at all but the very top levels of American business.

One of the biggest economic lies you are constantly overwhelmed with is – Cut taxes on private business and this will mean more jobs .  This is a pure Bulls__t . The jobs go overseas . Everything is outsourced and practically all that remains is the tip top upper management.

It’s "Shocking" just how little jobs growth in the USA was created by the private sector over the last decade. Michael Mandel , the Chief economist for BusinessWeek chronicles private sector jobs growth over the last 10 years here

Some rough quotes

Private sector job growth rose by 1.1% in the last decade…the worst decade for private job growth since the Great Depression…a lost decade for the American economy…big job growth in health care (mainly government funded) , education, and government…this growth was funded by growing trade and government deficits…Its just horrible, just horrible… private industry is just not a jobs creator… and manufacturing is in free fall… an unalloyed bad.

Needed to be done according to Mandel – Innovate, help keep manufacturing jobs, take a step back and look at what  globalization means to us.

Take a look at a country like Germany that protects and builds it’s manufacturing/export sector. Germany is seeing the light at the end of the recession tunnel here.

• I nvestors411 can’t emphasize enough what a bad investment the USA is relative to counties like China and India because of globalization. This mega trend will continue until the dynamic of globalization change.
• This economic meltdown is not going to significantly recover in the USA until there are some dramatic changes in both financial institutions (see past Investors411) and how we look at globalization.
  

Many thanks to one of you who spent 30 minutes going over this with me yesterday

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

Technicals and Fundamentals

Finally above average volume.  A major battle yesterday between bulls and bears . We hit the 875 support level of the benchmark S&P 500 and there was blood (volume) everywhere .  For a while the bears crashed through the barricade, but the bulls fought their way back and the index closed above 875 .

As predicted at the beginning of the week we are already challenging the major support level.

We did briefly establish a lower low, but the bulls held.  This is significant because of the volume.

Reading of the tea leaves – The longer we stay above 875 the better a chance of a rally has of getting started.

Huge bullish factor – No matter how you think this impacts the USA in the future. The Obama administration is NOT going to let any big banks fail. Also, they keep kicking the can down the road on any major fix of the problems that created the economic meltdown.

Earnings season around the corner.

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

The BDI has become the best of these three forecasting tools .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell for the 6th day in a row. However the rate of decline decreased slightly. After a 5 month rally the last six weeks have seen a decline where the BDI,technically, has had lower highs and lower lows.   We are currently establishing a lower low for price. WARNING -  The breakdown in trade is very significant to any worldwide recovery . BEARS RULE

The BDI is now the first chart I look at each day. – Globalization has greatly added to the interconnectedness of the world’s economies. It’s a worldwide recession, and if trade prices break down so will individual economies.

$USD - The Dollar was flat yesterday -0.07% The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down. Dollar closed at $80.66 and has been trading for  a month between @$81+yesterday= and $79+. So the dollar nearing the top of its consolidation range. Long term Bearish pattern for Dollar ( bullish for stocks ) We bounced off the lows in early June and are now in a consolidation pattern .

WTIC – Oil dropped a huge -4.43% yesterday, and 15% over last week+. (see chart) The 6 day fall has been significant and has NOT been accompanied by a significant rise in the dollar. (dollar works inversely to oil prices) What oil markets seem to be saying is demand is weak out there and the world’s economic picture is less bright than traders thought. The entire move higher for oil prices may have been manipulated. (see above WSJ article)

Therefore, Oil prices are no longer accurately acting as a decent tool in forecasting stock prices. Investors411 will keep an eye oil prices, but no longer use it as a forecasting tool for stocks. In fact, right now falling oil/gasoline prices are good for the overall economy, but bad for related companies (energy & alternative energy)

—–

Our Positions (For more see Positions section of Investors 411-scroll down)

I plan to buy back all recommended foreign ETF’s – just hopefully at a lower level. Perhaps when  S&P dips to support level @875. Perhaps lower. Wait on Brazil EWZ – too tied to oil prices

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

JUST STOCKS

Economics – What’s happening — We have moved away from the edge of the economic cliff and now folks are realizing that the world’s economy is in trouble. Its possible that Brazil, China and India will lead us out of the mess created mostly by the USA. Time magazine’s Justin Fox has an interesting article on what has been the mantra of Investors411  here

The Baltic Dry Sea Index is a critical gauge of the world’s economy (trade) and is has broken support levels. This is NOT good news. (see below) Can’t over emphasize this chart enough!

I’ve mentioned before, the problems with Larry Summers and Obama’s economic plan .  One major problem is that the stimulus plan is back end loaded and we need the help now. We’ve only spent 10% of the stimulus so far. A lot of states would have gone under and employment would have rocketed if there was no stimulus, but the new jobs were NOT shovel ready.

Until we rebuild our financial system its hard to see any long term recovery.  So far all we’ve done is talk about it.

However, the major problem is in underestimating just how huge  the economic mess really is. See Overview & Strategy Section of blog and lots of past daily updates.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 record – 4 1/2 years of beating benchmark S&P 500 (see results click  6/25 & scroll down)

Technicals and Fundamentals

Another major meltdown in below average volume. The S&P has now fallen back down through two major support levels – its 50 & 200 day moving average. As stated before the line in the sand is 875 support level (see past updates and look at chart on side of blog) SPX at 881.

As predicted at the beginning of the week we are already challenging the major support level.

Earning season starts as Alcoa (AA) reports at the close of US markets today.

The lack of volume still troubling factor. – One things for sure-money on the sidelines is staying here. Its hard to make a long term forecast with volume as a confirming factor .

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

These are important forecasting tolls, but secondary to volume .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell sharply again on Monday & Tuesday. Trade has broken through its support level and that decline was confirmed by another drop Tuesday. WARNING -  The breakdown in trade is very significant to any worldwide recovery. BEARS RULE

$USD - The Dollar rose +0.34 % yesterday The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down. Dollar closed at $80.72 and has been trading for  a month between @$81+yesterday= and $79+. So the dollar nearing the top of its consolidation range. Long term Bearish pattern for Dollar ( bullish for stocks ) that is consolidating pattern now ( neutral but turning bearish )

WTIC – Oil dropped another -1.75% yesterday. and 11% over last week. (see chart) The 5 day fall has been significant and has NOT been accompanied by a significant rise in the dollar. (dollar works inversely to oil prices) What oil markets seem to be saying is demand is weak out there and the world’s economic picture is less bright than traders thought. = More Bearish news for stocks

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Back to CAUTIOUSLY BEARISH outlook. This is in anticipation of a further breakdown of the BDI and S&P 500 .   Both of these have happened.

Our Positions (For more see Positions section of Investors 411-scroll down)

Monday/Tuesday’s  Recommendation -  take some $ (1/3) off the table in China (FXI ).

The Hedge – So far the QLD has lost -10.39% and the SDS has gained +10.88% Check out Positions section on top of blog = total gain +0.49%

I plan to buy back all recommended foreign ETF’s – just hopefully at a lower level. Perhaps when  S&P dips to support level @875. Perhaps lower

Bottom Line – The BDI has rolled over. This is important.  Investors 411 has closed a lot of long positions over the last month or two. The last being 1/3 of China investment. The short term may not look good, but it should also son be another buy the dip opportunity.  We will use the BDI turning back higher as a reentry point.

More tomorrow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

140+ Dead in Demonstrations in China

You’ll here a lot more about Iran, but the Muslim minority has demonstrated or rioted (depends on which side your on as to which term is correct) in a far western Chinese Provence. The BBC headline story here

China owns a huge part of our debt and we need her cheaper goods. Will condemnation here be as great as Iran or hypocritically silent?

Biden – We “Misread”  Problems

Photos – Huffington post

Since last fall Investors411 has continuously repeated “The problem in the financial sector is far far far far far bigger than fist imagined. Impact of this mess is going to take years to resolve.” See positions section of blog.

Investors411 continually cited a significant group of economic thinkers who clearly demonstrated just how bad the economic problem was. Investors411 also criticized Larry Summers and the economic crew of the Obama administration.

The only good news is they finally woke up and smelled the coffee . Tax cuts good, Stimulus plan good but way too back ended (only 10% spent so far) The same problems that led to the financial meltdown are still out there. Yes, we’ve moved back from the edge of the cliff and everyone starting with Paulson, Bernanke and Geithner do deserve some credit by throwing the car they were driving into reverse as we approached the cliff.

However Greenspan, expanding deficits, wars, housing and unregulated capitalism have created a massive economic black hole. Short term stimulus usually worked as a solution in the past. The problem here, besides the holes massive depth, is the accumulated debt was already humongous. Biden’s admonition of misreading economic crisis here

For in depth previous prediction and solutions see Overview section of blog.

Iran (Week 4)

Huffington Post’s Nico Pitney’s daily blogging on events here

There has been one group of cleric’s come out in support of demonstrators and he wonders what’s happened to the head religious leader in Iraq – Sistani. He supported democracy for Iraq, but has remained silent on Iran

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 record – 4 1/2 years of beating benchmark S&P 500 (see results at 6/25-scrolldown)

Technicals and Fundamentals

A huge price decline, but again in weak declining volume Friday. How markets react to news is just behind Volume as a prediction tool. In this case it was the Unemployment figures that sparked the fall are lagging indicators.  Therefore, the huge downside reaction is way more than expected = Bearish.

The lack of volume still troubling factor. – One things for sure-money on the sidelines is staying here. Its hard to make a long term forecast with volume as a confirming factor. Weakly forecast below.

Earnings season begins next week. Historically, this week companies that are not going to do well warn – this is bearish

Oil futures are way down this AM trading at $63.88 at 7:15 EST. = Bearish

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

These are important forecasting tolls, but secondary to volume .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell sharply Friday.  This index is winding up like a spring, within a consolidation pattern and is close to a downside breakout (3452 is breakdown point and index closed at 3529)  See chart  Watch out! Long term Bullish rise from bottom, but coiling right now for next move . Potential bearish breakdown possible this week

$USD - The Dollar rose 0.74 % . The strong inverse correlation between the dollar and stocks has existed for many moons. Market. Dollar up = markets down. That’s just what happened Friday Long term Bearish pattern for Dollar that is consolidating pattern now (neutral) = Bullish for stocks

Fearless Weekly Forecast – Last week Broke Investors411 winning streak of forecasts for the week  as US markets fell on some bad consumers confidence and unemployment data. Momentum is with the Bears as we enter earning season. Check out all the red bearish signs above.

The S&P resistance level (@875 & SPX now at 896 )  should at least get challenged, especially in the beginning of the week. Watch BDI. Forecast – Bears Rule

Back to CAUTIOUSLY BEARISH outlook. This is in anticipation of a further breakdown of the BDI and S&P 500.

NB – Volume has confirmed nothing. So confidence in above predictions is a bit shaky.

Our Positions . -  China, Brazil, & India (FXI, IFN & EWZ )(Partial list)

Unlike the USA that has seen two economic bubbles burst housing and financials these growing countries have been relatively less impacted. The decline in trade with US is going to impact all 3.  China and India have positive GDP’s predicted for the year and resource rich Brazil’s GDP is predicted to be close to zero. The World Bank predictes a -2.9% loss of GDP for the rest of the world..predicts a-2.9% loss of GDP for the rest of the world.. For more see Positions section of Investors 411.

Recommendations – Investors has a very big position FXI a very small position in IFN , and a closed position in EWZ .  Again see Positions section of blog. Short term traders might want to take some profits in FIX and both traders and investors  should look at possible “buy the dips” opportunities that should emerge this week or next in IFN & EWZ .

More tomorrow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Iraq Fireworks

US troops are leaving Iraq cities today. Last night there was a different kind of fireworks in the skies in Iraq. (Huffington Post photo)

Here’s one big problem – The fascist government in Iran is a major backer of their fellow Shia in Iraq. This includes Sadr who fought US occupation and immediately recognized Ahmadinejad as President. Reasonable to predict the "Supreme Leader" in Iran will try to have the same fascist and militant influence in Iraq as they do over terrorist groups Hamas and Hezbollah .

Iran (week 3 )

Nico Pitney’s blog at the Huffington Post has broke and provided more info than any other US news outlet . here

Elections were certified by Supreme Leader’s government. More, but smaller (in thousands not 10’s of thousands+) demonstrations and increasing arrests. Iranian protesters are shouting Allah Acbar on their rooftops every night in defiance.

Climate Change/Environmental Legislation

Willing to bet that 75% of America’s population has no idea that this legislation is working its way through Congress. Yesterday Investors411 went over one reason why this legislation is important – to combat global warming . Let’s go over one more.

#2 Pollution

Close the garage door, turn on the car engine, open the car windows, go to sleep and you don’t wake up. Pollution kills

We are a carbon based economy and this has had a huge positive economic impact. But the cumulative effect of growing population and increasing pollutants has turned many Chinese cities days into nights where cars have to drive around with headlights on and use windshield wipers to view the road (massive pollution mostly from coal). Simply put, pollution kills by everything from cancer to emphysema.  Trillions in health care costs could be saved and life expectancy would grow with less pollution.

Realism is needed here . Carbon based energy is very efficient and transitioning to alternatives is going to take many decades.

Chevron has "human energy" ads that proclaims we are going to need to work on ways of creating new sources of energy – wind, solar, geothermal, natural gas and oil. They’re right. You simply can’t just shut down oil exploration without devastating the world’s economic structure. But we can take some concrete steps to more environmentally friendly solutions.

(to be continued)

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Your Market Questions (part 1)

Thanks for all the public and private comments on how well Investors411 did in the first 1/2 of the year .

See Positions section & last Thursday’s update . (click on calendar) The major question is will we do as well in the first 1/2 of the year in the 2nd 1/2. Also, a general worry over the long term viability of stocks and the economy .

These questions are  outlined and addressed  in the Strategy and Overview sections of blog. Most of those sections were first introduced at the beginning of the year, then added to a few months ago. Little has changed.

The long term economic problem is the huge hole that was dug by removing the regulations on capitalism and letting greed run wild.  When it takes decades (especially the last one) to dig an economic hole, you don’t climb out of it overnight.

What’s happened is most savvy investors realizes that we almost had a complete world wide financial collapse last September and it now looks like we will survive. The major problems is getting banks to make loans, keeping loans affordable, and fixing growing unemployment.  Fixing these now could have long term negative impact.

China, India, Brazil simply have better balance sheets than the USA and in the case of Brazil more natural resources. They also did not did deep holes.

If we don’t develop alternative energy we will be stuck in a downward energy spiral forever. Cheap oil (the kind that bubbles out of the ground) is a finite commodity. Any recovery is going to be accompanied by rising oil prices.

Will the second half be as good as the first? I doubt it. Our core holdings should outperform, and if stocks do go higher in the USA our ETF’s should do even better . Investors411 biggest mistake is not being disciplined enough in buying dips.

(More later)

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown. Added the VIX back as a prediction tool .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . If trade is diminishing through out the world then a worldwide recovery is in big trouble. BDI started back up yesterday Long term Bullish although consolidating right now.

$USD - The Dollar fell-0.72% Friday and -0 0.04% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons. Neutral – we are in a consolidating pattern.

Long term momentum for dollar is bearish. Short term  mo is neutral, but we are closer to a bottom side breakdown than an upside breakout. Any breakout or breakdown would be significant.

VIX – Measures Volatility in S&P 500. Notice this chart is in almost a straight line down.  The less volatility means the better investors are feeling. Yesterday the VIX fell to the same level it was when Lehman Brothers collapsed and markets exploded to the downside.  Stocks still have not reached the level they were when Lehman collapsed. Long term Bullish for stocks

NB – The above are secondary indicators. Our mantra has always been Volume is the #1 forecasting tool – Right now volume is not giving any clear long term signal.

Reading the Tea Leaves .

This weeks fearless forecast – A rally, but one that does not get to new highs. Yesterday we had a mild to moderate rally in 3 of the 4 major indexes. Small caps(Russell2000) lost ground, but this is probably due to the annual rebalancing where some stocks are added and others kicked out of the index.

Short term – Volume dropped and markets rallied – you like stocks to go up, but when volume drops in a rally a reversal is usually around the corner.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Iran Day 6 – Health Care, Despite 76% of American’s wanting a public component, its in trouble, why – The regulatory rewrite – Reading the Stock Tea Leaves – India – Stock predictions and more

Iran Day 6

Best sources for what happening remain The Huffington Post , Andrew Sullivan’s blog, and the BBC . (See yesterday’s post)

• Day of mourning for fallen proclaimed by opposition leader Moussavi
• Demonstrations continue and Ahmadinejad government continues to censor press (foreign and Local) and beat/arrest demonstrators

Scott (see posts on the right) reminds us Ahmadinejad is not a dictator and more like a "Secretary of State." He’s right. The "Supreme Leader" Ayatollah Khamenei is the religious dictator . He is backed up by a group of other religious leaders whose head is a Moussavi supporter.  The question is will this oligarchy of conservative religious leaders win or will "Supreme Leader."

Remember there were over 300 candidates for President and only 4 approved candidates allowed to run.

Health Care

76% of Americans want a public heath care plan to go along with a private plan NBC/WSJ Poll Link Unfortunately this legislation is in trouble. Here’s why.

• Opposition by HMO’s who fear competition
• Opposition by Drug companies who fear decline in prices
• Opposition from AMA. Doctors who fear loss in revenue.
• Decline in Obama popularity because of the depth of the economic problems.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

So far Volume has simply not confirmed any price move. Yesterday volume, although higher was not yet even close to average.

The exceptions is the NASDQ – Yesterday’s modest rally was accompanied by above average volume.  This is not yet significant because the rally was so modest +0.66%

Jobless rate for week =

Long Awaited Government’s Regulatory Fix

The administration released its prescription for regulatory fixes for what went wrong in the financial meltdown (102 pages) The reaction from Wall Street – Stocks went nowhere .

You’d think at least financial companies (shadow banks and related institutions) who got us into this whole mess would be in panic over regulatory changes. The XLF (financials/shadow banks) did loose -2.93% yesterday and is down this week in anticipation of this report. But this drop is not nearly as big as many over the past few months.

Conclusion – Too early to draw a conclusion about how effective some of these changes may be. They have to get through congress. Simply judging from the reaction of the Shadow Banks prices.  Their concerned – prices have fallen – but not panicked.

Just judging from how investors are reacting to proposed regulations – The suggested regulations are not tough enough. If they were we would have seen a bigger meltdown.

This is, hopefully, going to be the biggest regulatory rewrite since the Great Depression .

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown

$USD – The dollar is the index to watch. 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% Tuesday & -0.59% Wednesday. Investors 411 mantra is Dollar rallies = Oil & Stock prices fall.

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. -2.93% in noticeably higher volume .

WTIC – Oil prices closed up -0.67% yesterday. 

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 5 day rally. But yesterday the move higher was minimal and we have not reached the highs of 6 days ago.

Reading the Tea Leaves

Monday’s lead statement - " Expect a tired low volume market to retreat this week ".

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.

NB – Volume is confirming Nothing. So it looks like the support levels will hold. This prediction yesterday looks premature . The XFL (could fall off a cliff if they think financial regulations are too stringent) and this would bring stocks down. Of course we need good regulatory laws and enforcement to prevent the same thing from happening again.

Positions

IFN (India) - Bought a small amount of IFN yesterday (India) yesterday at 27.6) This will probably fall more in sympathy when US markets fall.  So I may be premature in buying. Will buy more on larger dip.

The dollar is still key to market & oil prices.

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 !

WHAT’S UP? - A Standing O at Notre Dame; India/Democracy’s big win; Jim Cramer on who brought our nation to its knees. Soaring stock market – after9 weeks in a row takes a breather; Of course more on Shadow banks; Reading the Tea Leaves.

Photo – Charles Rex Arbogast/AP

Obama’s Sanding Ovation at Notre Dame

The contrast between Obama and the previous administration is like night and day.  Where Cheney Bush projected fear and confrontation, Obama, who inherited two wars and and the greatest economic meltdown since the great depression, worked on ways finding common ground. You can listen to his compelling 30 minute address at this link

Those who tuned in to see Barack the pro choice “baby killer” were soarley  disappointed.

photo BBC

Big Victory in the World’s Largest Democracy

The Congress Party in India surprised the pundents and came close to winning a majority in parliament. The party that saw the biggest drop was (Hindu Nationalist Party) who, as the name implies, fosters nationalism and fear of those who are different.  Also shrinking in size were the many independent parties including the Communist. (Congress will be less dependent on the Communists who were their allies in last government)

Its hard to say how big or small a role Obama’s election in the USA played in the victory of the more moderate Congress party. But the bottom line – a more moderate, less confrontational, and pro business victory in India benefits the world. Congress did reach out and gained more votes from the lower classes in India. Stocks in India have surge 17% – BBC

photo – Time mag.

Cramer’s Interview 

Money quote from CNBC’s most popular stock analyst Jim Cramer, in Time magazine  on the financial innovations of last several decades -

They almost brought our country down. The only guy who really called this right was Carl Marx. Marx understood what would happen if you let the markets run amok. Of course, it was done by right-wing Republicans. They brought our nation to its knees, and we’re not going to end up being a great power because of what happened.

Cramer did take it on the chin in a Jon Stewart interview. Stewart’s  attack was directed rightly at the financial channels concept of cheerleading unregulated markets. Cramer obviously took the attack personally.(See past Investors411 for more)