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Market Manipulators vs. Oil Prices vs Democracy

CNBC’s best known cheerleader for stocks, Jim Cramer, says Dow will rally 1000 points if Ka Daffy problem ends.

• However, the Ka Daffy problem shows no sign of ending and this weekend may bring a  a far bigger event - “Day of Rage” in Saudi Arabia.
• However, last night the UPI says this Day of Rage is postponed. Saudi’s produce almost 10 times the oil that Libya does.
• However, Kuwait, the world’s #4 producer, just announced a protest movement
• However, What about all the other oil dictators or Arab countries fighting for democracy

Confused by all the “However’s, “I am. Democracy is messy and ruling oligarchs/dictators will band together to crush it.

Bottom LIne For Stocks- $100+ and growing oil prices will kill any recovery. Even a Fed manipulated stock market will suffer.

Bottom Line for USA – Our hypocrisy of supporting dictators for decades over democracy is already blatantly obvious to the world, as is our dependency on oil and lack of a coherent energy policy.

Bottom Line for World - A struggle for freedom, democracy and justice should be nurtured and applauded by all who cherish these concepts.

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The Below Cartoon is Also So Appropriate

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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!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Index	Percentage	Volume
Dow	-0.66%	down
NASDQ	-1.40%	up
S&P 500	-0.83%	down
Russell 2000	-1.54%	-

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

BUBBLE-ICIOUS - Investors411 term for the stock market – We are all riding on the outside of an ever expanding &  Central Bank manipulated stock bubble. See Investors411 STRATEGY section for more

• Yesterday we got a semi save as the bullish manipulators tried to overcome the threat of higher oil prices. They failed.
• If UPI report is right and the Day of Rage in SA is postponed maybe MO support level will hold (see below)
• CNBC’s best known cheerleader for stocks, Jim Cramer, says Dow will rally 1000 points if Ka Daffy problem ends.

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Shorter Term Forecasting Indexes

• The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] Dollar rose a meager 0.12% yesterday. Chart for last three weeks clearly bearish for dollar.   Oil prices now are by far the #1 forecasting index and its trumping the dollar’s fall (see below) For stocks dollar short term trading pattern = Bullish
• McClellan Index - (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] MO fell to  -27.88. Over the last three months the new parameters seems to be +/- 30 as an overbought/oversold level. MO Stocks outlook = Neutral

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Reading The Tea Leaves

Today’s the big day – For three months the bulls have built a strong support level at -30 on the MO. Each time it has been approached it has held. We are just 2 points away. The bears have a big battering ram - oil prices over $100+ for an extended period of time.

What’s holding up the bulls is the Fed’s market manipulation, O% interest rates to the TBTF & other shadow banks and quantitative easing.

Here’s what makes this interesting  - If the stock market capitulates and the -30 falls – then the case for keeping quantitative easing becomes stronger. Also the case for intervention in Libya becomes stronger.

Fundamentals Rule - Who knows how all the freedom/democracy movements in the mid east are going to play out. But, for stocks, an important resistance level may fall on the MO and that’s Bearish

Special Note – Considering changing the Long Term Outlook to NEUTRAL at long as oil prices keep rising above $100+

What to watch today

• USO - ETF for oil - Oil up = stocks down
• UUP - (Tracking ETF for dollar) Clear 2 month pattern of bears ruling Remember - The dollar is a contrarian indicator. Bad dollar = good stocks
• AAPL – Took a hit yesterday as it approached former high.

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Positions

A 5% trailing stop today on both REMX & RJA today.

5% trailing stop on UCO  today.

One strategy of Investors411 is to take 5+% profits on 1/2 the position and let the rest ride.

Will post when I buy/sell in comments section of blog.

UCO -(2x oil prices) Why not, its also a hedge against higher gas prices.

REMX (Rare Earth ETF) - Really believe this a good long term holding.

DGP – (ETF is 2X gold) . Set to follow silver SLV and approaching breakout. Broke out to new all time high and has started to pull back. Buy the dip to 17 DMA of SLV or DGP

DBC - (Commodities ETF) For a more complete list of commodity ETF’s see POSITIONS listed at top of blog  DBC is tilted to energy.  A good alternative would be DJP that is more agriculture and metals - Both DBC & DJP are on breakout runs. Buy the dip to 17 DMA

RJA (Agriculture commodities Index)An ETN, not an ETF. Hopefully longer term holding. .

UWM (2x small cap stocks) TNA (3X small cap stocks)

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See “POSITION“ section of blog (at top of page) for lists of potential stocks & ETF’s including the new “YOUR Stock List.”

Special Note - Considering changing the Long Term Outlook to NEUTRAL at long as oil prices remain above $100+

The Holy Grail of Stock Predictions

Goldman Sachs Prediction’s for 2011

Investors411 has an inside look at what GS sent its preferred clients on Dec. 30th about 2011. Each year the Chief analyst David Kostin, the chief economist Jan Hatzius and their staffs put together an outlook for 2011.

Why is it the Holy Grail of Predictions?

• Bias -I hate these bastards. No one firm shares more of the responsibility for the 2008 meltdown that cost a huge drop in housing prices, soaring unemployment and a worldwide Great Recession.
• Former GS CEO Robert Rubin was Sec. of Treasury under Clinton when investment banks (GS) were deregulated. His protegee was Larry Summers became the new head of Treasury after him and is now the outgoing Chief Economic advisor to Obama. Another CEO of GS, Henry Paulson, was Bush’s Sec. of Treasury from 2006 to 2009. He oversaw the massive over leveraged shadow bank buildup and the 2008 bailouts when the financial/housing bubble burst. All these men have profited enormously while working Americans and homeowners have suffered.
• NO other entity even comes close to GS in being tied to government finance and therefore understands the role of government (has access to inside information) in the markets. If you’ve been paying attention, Investors411 has reported how our Fed and Treasury Department are now manipulating stocks and bonds to the tune of trillions of dollars.
• CNBC popular analyst, Jim Cramer, was a mere hedge fund manager for GS. When GS speaks he listens.
• No other firm has an inside connection to the Fed & Treasury than GS.
• David Kostin’s 2010 predictions were so good he made Partner at GS & Jan Hatzius (Wikipedia calls him usually “bearish”) is one of the most respected economist on Wall Street. Once he speaks his views are parroted by everyone from Cramer to a bevy of lesser economists.

Does GS take advantage of its position as puppet master to government finance? – An old line from the 1939 movie Casablanca used by Claude Rains sums it up -“I would be shocked shocked to find out theirs gambling going on in Casablanca.”

Goldman Sach’s inside knowledge and ties to government give them an advantage that no one else has. This is vastly more important now because both the Fed & Treasury are manipulating far more than they have than they have at least in my lifetime. Therefore its the Holy Grail

Basically Goldman Sachs is bullish on almost everything from except the dollar and natural gas.

Here’s the Chart  GS is giving its clients that outlines their outlook.

They see a flat first 3 months, but a very strong finish to 2011.

Note – The Fed’s quantitative easing ends in 6 months. This has got to be factored in. If we have a QE #3 over the course of those months my read of the tea leaves is that the figures go up.  I think its nothing short of a minor miracle that the government/Fed has been able to stimulate the economy without  interest rates going significantly higher.

Barr

Change in Long Term Stock Outlook

See Positions section below for why stock outlook was upgraded and editorial

CNBC – Las Vegas/Glenn Beck

CNBC is easily the #1 financial channel. With shows from “Fast Money” to “Mad Money” CNBC hypes the quick buck on Wall Street by combining the glitter of Las Vegas and the antics of Glenn Beck.  The blatant emotionalism sells for CNBC and their advertisers – the stocks they want you to buy. Confession – I have CNBC on a lot as background when I work and its on right now waiting for the 8:30 jobs report.

CNBC so lauded Greed based Capitalism (“Free markets” as opposed to rules based capitalism) it can be said it was a significant contributing factor to 2008s economic meltdown.

Jon Stewart’s Daily Show took CNBC’s star Jim Cramer to the woodshed over this. CNBC has put together a formula of hype, emotionalism, screaming that sells to fear/greed short term investment crowd.  Indeed this is a style diametrically opposed to the one Nobel prize winning psychologist and founder of Behavioral Economics Daniel Kahneman uses.

(to be continued)

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!

Index	Percentage	Volume
Dow	+0.46%	down
NASDQ	+0.51%	down
S&P 500	+0.37%	down
Russell 2000-	+0.49%	-

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. (No changes this weekend)

Stocks rallied (minor rally) in weak volume AGAIN.  This is the Bull markets mantra. (See editorial and change in Long Term Outlet below) Fundamentally there was some good weekly jobs data, but the big news is the monthly jobs numbers coming out at 8:30 EST this AM

Jobs Report -  February employment numbers  – Unemployment held at -9.7% and jobs down -36,000, a bit better than expected -60,000. January revised down -6000 (minor)

This is about as good as it gets for stocks. The fact that employment is NOT declining means interest rats will stay low and the Fed will keep flooding the economy with money.  Expect a rally.

Good news is monetary policy has helped stabilize the employment decline and we are down from 3 months ago.  The bad news is we are still at 9.7%

Significant Indexes

• McClellan Oscillator slipped slightly to +52.43 yesterday We are now just below +60 or Overbought territory. Stockcharts has a better version of the McClellan chart ($nymo) LINK We are still close to oversold territory, but have fallen over 10 points in last few days. This gives us a bit of up side wiggle room. However, still holding onto the sell more into any major move higher.  The McClellan Oscillator would have to at least get 5 or 10 points above recent high of 62+ to sell.

Because of the change in Long Term Outlook to Cautiously Bullish - any pullback in the McClellan Oscillator to say +20 would be an opportunity to nibble again.  This market wants to move higher.

Positions

The  Positions Section = latest buys and sells – (Revised positions last weekend) - These are positions I actually own

Even though markets are close to being oversold in the short trm – the Long Term Outlook has been upgraded to CAUTIOUSLY BULLISH. from NEUTRAL The reason for this is technically that the benchmark S&P 500 (see chart) has for 4 days traded above its 50 day moving average. It has also formed a series of higher price highs and one higher low. Yes, volume, the #1 confirmation factor, has been weak, except for the first two+ months of the Bull Market that started in March. In fact, the chart shows volume has basically declined since May.

Behaviorally – there are many investors out there who have been burned by the Capitalism of Greed that they are holding onto other investments like bonds. There are two main possible ways (perhaps more) that these traders would buy into stocks

• Greed based capitalism becomes Rules based capitalism – Some transparency is reintroduced into US financial markets – From standardized mark to market accounting to regulated Credit Default Swaps to eliminating to big to fail institutions.
• Seeing the markets move higher, greed overwhelms those on the sideline and they jump in building another bubble. Its hard to predict exactly what behaviorally would trigger those that are seeking safer havens than US equities.

For decades volume has been the #1 confirmation factor of a price move. This is simple supply and demand economics. The more people that want to buy something (demand) – the higher the price grows (assuming basically the supply of stocks is relatively constant).  In the end something has to give. However, technically, higher highs and crossing the 50 day moving average are both bullish indicators. The lack of volume is the caution.

NB – We are in a position of change and sometimes markets can reverse themselves quickly.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

China

CHINA RULES (or at least is beginning to) – The Shanghai stock exchange has dropped over - 20% from its summer high (You have to be Chinese to invest) Monday it dropped -6.7% and had slight gains overnight. This plunged commodity prices lower (example oil down -3.82% Monday) China imports lots of oil.

Here’s CNBC’s Jim Cramer on why China rules LINK Here’s another analyst CNBC LINK – “I don’t think China is driving the rest of the world, I think that’s a little bit of an over exaggeration,”

Bottom line – China’s economic power is growing and becoming more crucial to the world each day.  To put it bluntly their managed capitalism is kicking the butt of our “free market” system relative to growth and has been doing it for almost a decade. These short three paragraphs are an oversimplification, but the China is kicking our butt part is very real.

Stop Escalating in Afghanistan

Conservative columnist George Will is calling for a serious draw down in Afghanistan. Obama – Afghanistan is a “necessary war.” It may have been one back when it started, but there is a lot of logic in what Will proposes.

To start, The elections in Iraq were less than honest, but it sure looks like the elections in Afghanistan were an outright fraud.  Times of London LINK

Here’s Will’s editorial in the WaPo LINK

His conclusion (the military industrial complex dominates the Obama administration will never allow this) below

“So, instead, forces should be substantially reduced to serve a comprehensively revised policy: America should do only what can be done from offshore, using intelligence, drones, cruise missiles, airstrikes and small, potent Special Forces units, concentrating on the porous 1,500-mile border with Pakistan, a nation that actually matters. ”

Iraq/Iran

The Green Revolution has been pretty much crushed, but still smolders in Iran. An emerging power struggle between the Supreme Leader and Ahmadinejad seems to be taking place. NYT & others have run front page stories on this recently.

Perhaps the first three entities to recognize Ahmadinejad as the “legitimate ” president in Iran were Iraq, Hamas, and Hezbollah. Iraq is looking more and more like Iran’s best friend rather than what it used to be – its worst enemy.

History repeating itself – Remember Russia depleting itself economically and militarily trying to Nation Build in Afghanistan. As my favorite philosopher Yogi Berra would say, “Déjà vu all over again.” – The USA is spending trillions trying to nation build in the mid east and quietly but very successfully China is rising. Teach your kids Mandarin .

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.50%	down
NASDQ	-0.97%	down
S&P500	-0.81%	down
Russell2000	-1.34%	-

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

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

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals and Fundamentals

Volume decreased as stocks fell.  The lack of volume is a sign that the predicted correction (see yesterday’s update) might not be upon us yet .

The 5 deeply trouble bailed out institutions (AIG etc) had major corrections yesterday. AIG chart link . Volume decreased significantly. These shadow institutions obviously have some more volatile days in front of them. But for now falling in lighter volume is what bulls want to see.  Even though the Obama administration & Fed are not going to allow these institutions to fail & they do not have to use mark to market accounting (no transparency) the fundamentals simply do not justify the run up in price.

If you prefer gambling to investing, I’d wait another day or until prices get closer to 200& 50 day moving average before putting bullish chips on the table.

Therefore , FEARLESS FORECAST – is for a down week .

The  jobs report for August comes out Friday most important fundamental of the week. ISM (manufacturing ) report out today.  What’s key here is  we get a good number (above 50 would mean manufacturing growth) If market does not move higher on good number, it is a strong indication that market correction underway.

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S significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern .

The BDI Retreats – What are its drivers ? From Seeking Alpha LINK

“Remember almost every country has based their recovery on exporting their way out of this mess” The infotainment financial channels and analysts used the BDI when things were going well and are now ignoring it. The #1 factor behind the BDI’s retreat is China seems to have stopped or seriously slowed down buying commodities.

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

The dollar was rose -0.19 % yesterday. Dollar closed at $78.15. Its  major support level is @$77.5 & it has 2 major resistance levels – a falling 50 day moving ave. at @$79.20 and the August highs of @ $79.5 .  If it breaks down through support stocks should rise, if it breaks up through resistance stocks should fall.

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

This is the index to watch because its impact is immediate.

Positions

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

The BDI and Shanghai Stock Index’s fall are cause for concern in our Brazil  & China positions. China has turned off the stimulus spigot and its impossible to tell just how much further these ETF’s positions will fall.  We have made some huge profits that are getting eaten into.

Investors411 has slowly tuned more toward US equities because of this (XLF & SPX) and cut some foreign positions.

In the long term China Rules, but shorter term expect further losses . Considering taking some more profits.

Your Comments

Both privately and in the comment section of the blog you are asking for individual stock recommendations. OK I have a few. Stay tuned.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

WHAT’S UP? – 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.”

photo – Time mag.

Jim Cramer

Our government and others are flooding the world with printed money. We all know deficits are bad and can lead to crippling inflation. Cramer’s answer (see yesterday’s blog for more)

That’s exactly what they were worried about in 1929 to 1931. Hoover was very worried about tremendous inflation, so he did his best to avoid that, and we had the greatest depression in history. So perhaps we learn from history and worry about inflation after we worry about taking a Great Depression off the table. 

Arianna Huffington

Web entrepreneur, Arianna Huffington has not only turned the Huffington Post into the #1 news source for hundreds of thousands of people, she catapulted this into a media presence on everything from the financial news channel to late night TV. Some of her insightfull comments on the future of capitalism. (Time pg. 54)

“…there has to be a moral component…What happened is that capitalism was reduced to Ayn Rand-ian selfishness

…the agreement among serious economist that we’re doing the wrong thing by trying to protect the Wall Street Oligarchy. What’s amazing is that we’re not having enough of a populist outrage about that.”

 

 

 

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	+2.85%	down
NASDQ	+3.11%	down
S&P500	+3.58%	down
Russell2000	+3.98%	-

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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 !

Whose getting the preferred treatment? Shadow banks/institutions like Citbank or American manufacturers like GM – A cartoon. Fixing the Financial News Channel- CNBC – Remember Jon Stewart’s drubbing of Jim Cramer? Now comedians are banding together. A fearless market forecast- wear your rally cap.

cartoon credit – Daryl Cagle

Fixing Financial News – CNBC

The major financial TV channel, by far, is CNBC. We all remember when Jon Stewart opened a can of whoop ass on its most politically moderate host Jim Cramer. The hosts of the rest of the shows like Cramer are  basically cheerleaders for their advertisers - Wall Street

Now a group of comedians is doing something to fix the biased network. “Jon Stewart made the case, now we’re demanding action.”  A funny 4 minute video, but more importantly 20,000 people and economists have asked CNBC to start holding Wall Street accountable. 

You too can sign up to make financial journalism accountable at – FixCNBC.com

Together we can make a difference – take a minute and sign the petition – In the long run it will protect your money, our economy and your job if we have less biased financial reporting.

(Sorry yesterday’s link allowed for no comments and it took a long time to appear- I have no idea what went wrong.)

 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Index	Percentage %	Volume
Dow	+0.61%	flat
NASDQ	+1.86%	down
S&P500	+1.81%	up
Russell2000	+2.41%	-

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Technicals & Fundamentals

 Markets moderately moved higher yesterday. Volume was well below average.  Therefore volume offered NO confirmation of the price move.  

Overall this week looks like a consolidation of the previous three weeks gains. Just what you want is you’re a bull.  The chart to watch is XLF (ETF for financials – See below) Usually after a big move & then consolidation, stocks continue to move in the same direction,  This should make bulls happy.

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 @0.20%  Total loss from high more than 31%.   How many days in a row can an index fall?  Right mow it’s 21 trading days in a row.  The rate of change (fall) has slowed dramatically.  We could be seeing a  bottom here.  This would be positive for markets

Reading the Tea Leaves - Same mantra - 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.  

Fearless Forecast – The consolidation will end & the rally will continue as shadow banks announce better than expected earnings.   With diamonds, rubies and gold being showered on shadow banks and a big treasure chest to hide accounting procedures in these banks are going to SHINE this earnings season. Its baseball season so put on your rally caps.

Shadow Banks/Institution Watch

XLF (financials/banks) is therefore the key sector to watch. Checkout the chart and technically you will see that the XLF has tried to move above @9.75 for almost 3 weeks and failed. It closed at 9.20 yesterday up +0.55%.

Add Insurance companies  to those receiving bailout funds. Beyond the infamous AIG others are lining up. The reason for the modest rally in stocks yesterday is insurance companies shot up significantly. Story from MSNBC here.

Bottom Line - The more the tax payers bailout shadow institutions and the less transparent they are allowed to be the better these stocks will perform in the short term. The worse it will be in the long term for taxpayers and the national debt.