Investors 411 Blog

Bob Herbert- NYT

Jobs, Jobs Jobs

Agree with NYT’s Bob Herbert, “Obama’s Source of Trouble” is Jobs. The Obama administration from the start has underestimated the depth of this recession and its underlying causes. The end result – JOB LOSS in the USA.

Unfortunately, research on YOUR stock picks takes time, and I’ve run out.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

See Positions , Strategy , and Overview for changes made over weekend. (No changes this weekend)

Lightest trading day of the year.  Markets went no where.  Basically, this is a slight positive for bulls, because it means Friday’s rally held.

CSCO has some big announcement today – 11:00AM EST – Usually stocks run up before major announcements and investors sell the news.

NASDQ reached a new yearly high in weak volume. Think the benchmark S &P 500 has at least one more push to a new high this week or next. Then it should pull back. Longer term Outlook Cautiously Bullish.

Significant Indexes

• McClellan Oscillator dropped a bit to +68.29 yesterday. We are still well above +60 or Overbought territory. StockCharts has a better version of the McClellan chart ($NYMO) LINK.

• BDI – The Baltic Dry Index, which measures the cost of world trade (also a good indicator of how China is doing since they are huge exporters/importers) has exploded higher in the last few weeks = Bulls rule Yesterday the BDI, like stocks leveled off in front of a strong resistance level.
• USD – The US Dollar has been range bound for about a month after moving significantly higher. Early Dec the dollar bottomed at $74+ and is now at $80+. There are some pluses and minuses to the strengthening dollar. For US stocks the fact that they and the dollar are near highs together is Bullish

Positions

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

Since the McClellan Oscillator over +60, or overbought – buying right now is far more dangerous than when markets are oversold. I’m waiting till we get around +20 just to  nibble some more on some of  these stocks. Most stocks move with the overall markets. YOUR decision on when to trade is also based on how long you are going to hold the stock and YOUR level of risk.

If you are considering individual stocks I strongly urge you look at the charts and learn something about technical analysis.

NB -Last Week’s comments in black. This week’s violet. Charts underlined in Blue

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

• CAAS – volume confirming rally – A buy the dip stock. Ever since this stock was put on list it has gone up big time. A buy the dip stock
  
• PCLN – Breakout 5.22% move yesterday in good volume – A buy the dip stock Dipped last week and now in rally mode A buy the dip stock
• F – Breakout 5.71% yesterday in good volume – A buy the dip stock. Too over extended or above 50 day Moving Average.
  
• IMAX Investors411 owns this stock – Broke out to new high. Up +8.16 yesterday. A buy the dip stock
• CSCO, Slower steadier more for longer term investor. Like AAPL at new high this year. For longer term investor. A buy the dip stock
• SHOO, A 4.02% breakout in good volume yesterday – A buy the dip stock – traded flat after breakout – in consolidation A buy the dip stock
• ICON, Has formed a series of higher lows & higher highs – A buy the dip stock Broke out and is on run higher. Too over extended now.
  
• VPRT Up +2.49% yesterday in what could be a breakout – A buy the dip stock – Did break out. A little overextended. A buy the dip stock
• DGIT Thinly traded A buy the dip Consolidating A buy the dip stock
  
• CTCT Building on higher highs and higher lows – Buy the dip Thinly traded but Good volume and another breakout A buy the dip stock
  
• VCI Dipped and has made up most of that loss, but in weak volume Tempting, but risky Another breakout, over extended Tempting, but risky
• CREE -  Too overextended to buy now - A buy the Dip stock Starting to Dip A buy the dip stock
  
• SNDK – . Overextended now but Buy the Dip stock Dipped then moved higher. Too over extended
  
• VSH – . On another breakout,but in weak volume and overextended -  Too risky. Consolidating and now looking better, a little over extended Tempting
  
• HMIN – Up 4.02% yesterday in breakout, but weak volume. Too Risky Falling Too much downside volume

I like PCLN, VPRT, & SHOO because I understand what they do (buy their products), not because they are technically superior to the other stocks on this list. F (Ford) has just gone up too much. Personally, even though many of these are tempting, I’m waiting till conditions are more favorable to buy.

I would buy dips in IMAX. Thanks to two of you for reminding me they have their earnings report on the 11th. Alice in Wonderland has confirmed people will pay a premium for 3D movies.  With 3D TV’s already being sold and a 3D channel coming I think it clearly going to grow.

Bottom Line - Right now thinking more about selling (taking profits) than opening new positions because of short term over bought conditions.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

-

National Georaphic – Great Wall of China (Emerging Markets)

Trends, Wars, & YOUR Money

Investors411 has followed 3 or 4 major investment trends over the last decade - Globalization, Peak Oil, Spread the Wealth & The Great Recession (the later needs some revision).  Global politics and events have impacted these trends and therefore investment choices.

• Fall 2008s financial meltdown proved again Free markets need regulations or they form boom and bust cycles . Even, arguably, the #1 proponent of self regulating free markets Alan Greenspan admitted he was wrong
• Working middle class taxpayers in the USA and around the world bailed unregulated markets with stimulus, packages, printing money, TARP programs, taxes , etc. This was socialism for the rich . It further expanded the gulf between the rich and poor in many countries.
• Emerging markets have kicked our asses as far as growth is concerned for almost a decade. Globalization and Spreading the Wealth to a growing, not shrinking, working class were the primary causes behind this.
• Most emerging markets have a managed or planned economy vs. our more unregulated economy. Few emerging markets were involved in highly speculative trading vehicles (example – Credit Default Swaps)

More recent events impacting trends.

• Wars - The US weapons budget has exploded over the last decade to the #1 budget sector and to @ 50% of the world spends on weapons. Obama has increased the weapons budget and the secret war in Pakistan is no longer a secret.
• Trade war brewing – Relationship between the world’s #1 economy and the world’s fastest growing economy is souring. Check out NYT’s stories on China over last few months
• China – has moved to defuse a growing housing (people moving to cities for better jobs) and a possible  inflation bubble before it pops. Decent month old editorial on this. Remember Chinese banks did NOT sell credit default swaps on housing, so this housing bubble is not as sever as USA’s. But, this is still a serious problem.
• JOBS – While the job losses have declined in the USA from -700,000 to @ -50,000 a month, we increased last month. Obviously US jobs over the last decade have been lost to globalization and consumers in the USA are now saving more. Considering the above 3 bullet points its hard to see stimulus plan alone keep this figure from flattening or falling. (more later)

Bottom Line – Let’s try to be as objective as possible and look at the technicals. In this case, the chart of either the FXI (China) or EEM (Emerging Markets)

Both charts are similar, but China (FXI ) is a little more sever. Notice how fast they exploded in the first 1/2 of 2009 and that growth slowing in the last 1/2. Now for the first time the 50 day moving averages are heading down . In fact China is trading below its 200 day moving average. The countries led us out of recession (Indonesia, Brazil, India, & China never even entered a recession)

It certainly looks like growth has peaked and emerging markets are now in a correction phase.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

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

US Markets basically held onto the significant gains of the last two days – an oversold bounce. Holding onto gains = short term Bullish

CSCO – again had a great earning report and is putting 2000 to 3000 new people to work.

Hard to see a major  move in stocks in front of – The Monthly jobs report t on Friday Each of these reports becomes more and more important.  In November we reached positive job growth (+6,000 ). But this is looking like retailers hiring folks for Christmas buying season.

Best Read of Tea Leaves – You’re NOT going to be happy with the jobs numbers.

Significant indexes

• McClellan Index at -32,18 = We’ve pulled way back from -90 or oversold levels two days ago. Over -60 + Oversold
• BDI – This chart shows the Baltic Dry Index (scroll down) , a measure of shipping costs, Has broken through a major month long  support level at @ 3000 and is keeps falling. Yesterday the BDI closed at  2673.= Bearish However the rate of decline is SLOWING and this almost always indicates at least a short term reversal.
  

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends – will try to update last few weeks today) – These are positions I actually own

SELLING & BUYING

Thanks to 5 of you who sent in suggestions fo r Stock Watch Lis t!

ETF’s – were still 6% FXI (China), 10% EWZ (Brazil), & 10% MOO (Agriculture) – Since we have rallied would consider selling  another 5% (hopefully in a rally – which seems unlikely today)

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Germany and Jobs

Berlin Wall Falls

The jobless rate fell again in Germany from 8.3% to 8.0% in Sept, then to 7.7% last month. LINK (World News Network which carries this story is a good source for news outside the USA.)

What does Europe’s biggest economy do right beside provide health care for all its citizens? Nobel Prize winner Paul Krugman points out some obvious differences in our economic systems. Basically, Germany has a more regulated free market/capitalist system. They take care of their workers. The rebound from recession is also evidence that outside the USA other countries (especially emerging markets) are recovering faster than ours. LINK

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

Dollar rose  a very significant +0.78 so stocks fell. The inverse relationship between the dollar and stocks is so strong it is easily the dominating factor in movement of equities.

List of best performing stock markets this year by country from Seeking Alpha – 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 @ 7% 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 VERY significant +206 points yesterday and closed at 3954. Up 12 days in a row. DANGER – This index is going parabolic – up too far too fast – building a bubble. A higher high price on its chart pattern has been confirmed The BDI has rallied about 1800 points since late September. =  Bullish for stocks & world trade right now. Especially good for our positions in FXI & EWZ

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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 was rose a VERY significant  +0.72% yesterday. The dollar closed at $75.68 . “ Usually a major support level at least temporarily halts any fall.” The $75 support level held and now the dollar is in the middle of its range.

The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at $76.25 this AM . The support level is a little below $75.00 . Both are EXTREMELY important lines in the sand. A breakout on either side will move US equities in the other direction and the world will follow.

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$NYMO The NY Stock Exchange McCellan (EOD) Index measures how much the NYSE is oversold or overbought .

The index closed at -17.81, down 207% – If you look at the chart – once major momentum starts in one direction it usually continues. If stocks and this index close down  below  25/30  today the trend should continue until we reach oversold levels – below 60. (note -207% is significant,but not as big as it looks)

Key to chart – Zero  is roughly  neutral and when you approach to @ +60 you are overbought and approaching-60 you are oversold . Buy at oversold and sell at overbought. Nothing is absolute in this chart. In fact using the moving averages as a central point is better than using zero. Nothing is absolute about the minus or plus 60 number either.

Oversold conditions = buy Overbought positions = sell

Positions

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

Sorry have not had a chance to update Positions section in over a week

Investors

Comments – NOT the time to buy or add to recommended positions. (FXI, EWZ, GLD)  Enjoy the rally. Shorter term investors may want to sell part of the 3 major positions while they are at highs.

Going to add Indonesia & Vietnam ETF’s – but waiting for dips. Also going to add DGP (this ETF does about 2x what the GLD does) – More explanation later. As a trade like GS. Again, waiting for dips

Traders (short term plays) These are not ETFs, but individual stocks

Extra Note of Caution here – Even though I always warn you AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! please note I’m far less confident in individual stock picks

CSCO – (5% of portfolio) Flat since we bought position a few weeks ago . – Going nowhere while markets have moved higher.  Selling soon for @ -1% loss – Hopefully into a rally. Sold 1/2 CSCO two days ago and the rest yesterday for -1 to 2% loss. Position CLOSED

Long Term Outlook – The dollar looks like it may break down through major support and the benchmark S&P 500 is on the verge of a yearly high – Outlook will change to CAUTIOUSLY BULLISH if/when this happens. Instituted change yesterday , but subject to further change back to neutral since breakout was weak.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

More than Just Wall Street Horrors

Photo from SeekingAlpha.com

Wall Street

Let’s call it the Halloween Horrors (See analysis below under stocks)

Mideast

Afghanistan – The run off election process in Afghanistan has broken. The challenger Abdulla Abdulla has withdrawn from the process.  The UN, as well as most of the world, determined that the first election was corrupt. The current president refused to even change the head of the Afghan Election Commission who was in charge of the corrupted election so the Abdullah Abdullah resignation is understandable.  This leaves the obviously corrupt Karzi as the only candidate and the future partner of the USA.  Story from BBC LINK

Latest news on tube is that there will be no runoff election .

Pakistan The UN (development agencies) is pulling out of Tribal areas. Story from Pakistan’s Dawn newspaper LINK Hillary Clinton’s recent trip to Afghanistan reviewed by Pakistani newspapers – Reviews basically NOT favorable – “White Goddess Should Leave Pakistan ” LINK Deterioration in Pakistan continues and another massive terrorist bombing LINK

Turkey/Iran – This may come as a shocker, but Turkey, who is seeking NATO membership, seems to be taking a pro Iran stand when it comes to nuclear development. Al Jazeera story (Remember AJ has no reason to have a pro Iran bias – AJ is Arab & pro Sunni and Iran is Persians & pro Shia) LINK

Bottom Line – Nuclear weapons in the hands of terrorist is something no one wants.  But the more we try to nation build the worse it gets. Let’s accept noble prize winner Joe Stiglets estimate that so far our nation building has/will end up costing us almost $3 trillion.

• How much is it going to cost to turn tribal Afghanistan from an opium (heroin #1 economic product) to a viable state?
  
• How much is it going to cost us to maintain Iraq? Remember the Iraq government along with Hezbollah and Hamas was the first to recognize Ahmadinejad. The two main Shia religious leaders – Sistani, refuses to even speak with Americans and Sadr lives in Iran.
• How much is Pakistan – almost 3 times larger than Iraq & Afghanistan combined going to cost?
  

Crossroads moment for Obama – Adding more troops and nation building in the middle of the worst recession since the Great Depression. Can we afford the trillions it will cost? Wouldn’t it be better to economically help Pakistan more right now than have to nation build their later.

Jobs, Jobs, Jobs

The mantra for Investors411 is that job creation is going to be even slower this time than after any other recession. This recession is bigger and badder.  The new jobs from American companies are going to first be in countries with growing middle classes like India, China Brazil and smaller countries – Cheaper labor and you are closer to a growing market.

Nobel Prize winning economist Paul Krugman in today’s NYT offers a short term solution LINK

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

Volume the #1 historical confirmation factor is telling everyone - GET THE HELL OUT. However, the dollar still rules .

The Long Term Long Term Outlook is back to NEUTRAL As mentioned last Wednesday – When the Long Term Outlook is changed we often go back and forth for a while as stocks move above or below key support levels

A falling dollar helped stocks move higher under Bush and its doing the same under Obama . (Check out weekly stock charts of S&P 500 & The Dollar for last 5 years) This inverse relationship between stocks and the dollar was quite different before Bush. (more on this later)

Lots of major economic events this week – The Fed meets and October’s unemployment # comes out Thursday are the big events.

FEARLESS FORECAST -  I’ve never seen volume be so huge on the downside days and the markets not continue to fall.  However, right now the dollar rules. It looks like its resistance level for the dollar (see below) will hold. Still downside risk is growing.

Investors411 has taken profits on its (20% of portfolio) position in the SPX and short term TRADERS might want to take a little of some other positions off the table (FIX & EWZ) in a rally. – There is NOTHING wrong fundamentally with these ETF’s.  In fact, the BDI is bullish,

Fundamentally, long term I see the dollar falling and technically it looks as if the resistance level will hold. This is good for stocks in the short term – next  month or two.

I’d rather have some more cash to buy any possible major sell off.

Long term – Bearish on the US economically. The mess in the Mideast could deteriorate rapidly and the long term cost are astronomical, especially considering the deficit & the recession. We still have NOT changed the same unregulated “free market” system that caused the financial meltdown. Agree with Krugman on stimulus/unemployment. Think things will hold up till the dollar reaches the low it had under Bush or the Mideast erupts.

——–

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 @ 29% 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 +90 points Friday and closed at 3103. . A higher high price on its chart pattern has been confirmed The BDI has rallied almost 900 points since late September. =  Bullish for stocks & world trade right now

——-

The Dollar is currently the #1 forecasting tool . It would be a wild guess to predict the daily moves of the dollar, but longer term fundamentals are clearly negative – the trend of a falling dollar should continue.

$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 SIGNIFICANT +0.52% yesterday. The dollar closed at $76.36 .  

From yesterday – The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at $76.74 this AM . So dollar is 0.40% 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

Friday – Going to sell some SPX-reasons – Free cash for other investments & take profits

Long term investors should realize that positions like EWZ & FXI are going to have more dramatic moves than American stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

GDP = + 3.5%

This better than expected number is obviously a positive . Its due to the Obama & Bernanke stimulus – Cash for clunkers, tax cuts, first time home buyers credit, low interest rates etc.

It’s the first positive growth in over a year . Since only 40% of the Obama stimulus has been allocated and interest rates should remain low -  the next few quarters should also be positive.

The question becomes when you take the stimulus away what will happen?

Globally the canary in the coal mine is Israel, Norway and Australia. We are a globalized world and these 3 countries have already started to raise interest rates. If their economies continue to grow with raised rates others will follow.

The US does have a specific unemployment problem that will anchor it down longer than other countries. (see below). However, we’re getting some real growth abroad, especially emerging markets. Hopefully, this growth will be strong enough to drag the US along with it.

Jobs, Jobs, Jobs

So far the recovery act has saved or created enough jobs to “shave @2% ” off the unemployment figures. You can get a breakdown state by state at Recovery.com LINK

You can debate their figures, but a jobs recovery is going to be harder than most predict because

• The financial shadow bank crisis created a much bigger hole than most people realize
• Globalization will send most new jobs abroad.
  
• Education of American workers/students has not kept pace with technology.
  
• Our huge deficit will limit stimulus needed to create jobs.
• Our manufacturing base has been seriously diminished.
  

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

The Lon Term Long Term Outlook is back to CAUTIOUSLY BULLISH As mentioned yesterday – When the Long Term Outlook is changed we often go back and forth for a while as stocks move above or below key support levels

The discouraging part of yesterday’s rally is THE LACK OF VOLUME . Once again upside moves have little volume and downside moves greater volume. Volume has historically been the #1 confirmation factor of market direction. So this is a very bearish sign

However – The Dollar Rules. Yesterday the dollar moved above the previous days high and closed lower than its low (See chart below). Technical analysts get very excited about a reversal that “engulfs” the previous days move. It fell  over 0.50% which is a significant drop. Investors411  predicted this because it was approaching its  strong resistance level – its 50 day moving average.  As long as the dollar remains below this resistance level - Bearish for the Dollar & Bullish for stocks.

Monitors Question/statement (see comments section of blog)  Sorry I’m not being clear. Yes, I did recommend adding (nibbling) to Brazil and China yesterday (I did) & yes I did lower long term outlook. These ETF’s (FXI & EWZ) had dipped more than 5% & were “buy the dip opportunities.”

NEUTRAL -  Even though it is a downgrade it is still an overall environment that some ETF’s should do well. When  CAUTIOUSLY BEARISH becomes the Outlook – t hat its time to sell. Secondly, as mentioned we are on the cusp of change. Lastly, This market is very difficult to call because the old rules about volume have been cast aside and the dollar now rules.

The Dow is outperforming other major US indexes – This is probably due to the fact that these 30 giant stocks benefit most from the falling dollar (relative to other US companies most of more of their profits come from abroad)

Bottom Line – There are no universal rules in market analysis. Right now the Dollar is trumping volume and all other factors in predicting the direction of stocks and this is quite unusual.

——–

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 @ 30% 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 modest +27 points yesterday and closed at 3013. Exactly what it lost yesterday. A higher high price on its chart pattern has been confirmed The BDI has rallied almost 900 points since late September. =  Bullish for stocks & world trade right now

——-

The Dollar is currently the #1 forecasting tool . It would be a wild guess to predict he daily moves of the dollar, but longer term fundamentals are clearly negative – the trend of a falling dollar should continue.

$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 fell a SIGNIFICANT -0.67% yesterday. The dollar closed at $75.96 .  This is almost exactly on its support/resistance level of $76.00 . 

From yesterday – The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at 76.78 this AM. 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.

Past statements -Last year’s low was around $71,(March 08 ) so there is a long way to go before the major and very crucial support level is reached . The dollar does have a support level around $74.00( a high from about a year ago – see long term chart)

Positions

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

Outside the USA in Emerging Markets (especially China, & Brazil) are much better in the long run - Our problem is one of timing. We can’t get a 5 to 10% dip to invest. Looks like we will get at least our 5 to 10% dip now.  Investors 411 should have much larger positions in emerging markets .

Current positions

EWZ (Brazil) – Bought at 69.5 (4% of portfolio)  Now = 20% of portfolio

FXI (China) – Bought at 42.75 (4% of portfolio) Now = 24% of portfolio

GDL = 11% of portfolio

SPX = 20% of portfolio

For traders also have positions in NVS & CSCO

• Going to sell some SPX -reasons – Free cash for other investments & take profits
• Need more diversity in emerging markets than just China and Brazil
  

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

More Troops – Bad Bet

Nicholas Kristoff’ s editorial in today’s NYT on why more troops in Afghanistan is a bad bet. Investors411 praised the fact that we tripled aid to Pakistan.  Here’s Kristoff’s money quote.  “American policy makers were completely blindsided in recent weeks by outrage in Pakistan at the terms of our latest aid package — and if we can’t even hand out billions of dollars without triggering nationalistic resentment, don’t expect a benign reaction to tens of thousands of additional American troops. ”

Jobs Jobs Jobs

Investors411 has painted a bleak picture of long term job prospects for Americans over the last few month. When you add to this shadow banks are still in the shadows and foreclosure problem is at best stabilized you have a bleak picture for Main Street USA.  Perhaps those that have seen gains in their stock portfolio’s since the spring will spend and juice the economy. However, especially for older workers, as Abby Gold in the comments section points out, on Main Street its not a rosy picture.

Solutions – One specific help would be to extend something like the $8,000 homeowner credit for first time home buyers. 350,000 buyers took advantage of this program – it worked especially for lower priced homes. The ripple effect is those new home buyers have to furnish those homes. Two respected individuals have offered their solutions

• Mort Zuckerman (right of center – editor of US News & World mag.) in an editorial titled “The free market is not up to the job of creating work” suggests a “massive program(s)to restore stable jobs growth.” He suggests a National Jobs bank and allocating $65 billion toward it. LINK
• Tom Friedman (left of ccenter/pro business – NYT columnist) looks at the failures of America’s education system to keep up with the increasingly  globalized world.  Here’s the money quote – “While the subprime mortgage mess involved a huge ethical breakdown on Wall Street, it coincided with an education breakdown on Main Street — precisely when technology and open borders were enabling so many more people to compete with Americans for middle-class jobs. ” LINK

Pay Cuts on Bailed Out Companies

Obama administration is forcing pay cuts on top executives of 7 bailout firms. Good first step, but what about all those other shadow financial institutions who used the Fed or collected big time from AIG’s  bailout? Goldman Sachs & many others gets away without any claw backs in this. Huffington Post LINK or NYT LINK

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 a US stock market dominated by professionals and traders.  Some sort of programed trade kicked in the last hours and the pro’s left the building.  The volume way well above average and the fall from what was a rally was over 1%. Volume increased significantly in the last hour’s price collapse = Bears asserting dominance

The dollar fell significantly which almost always means US equities rally. This again = Bears asserting dominance

The dollar fell so overbought oil prices rose significantly LINK to chart +2.25 to $81.37 . Obviously oil prices above $80 is going to hurt ma and pa consumer in any recovery.  Sure looks like some entity or group is manipulating oil prices. Up 9 of last  10 days and going parabolic (up too far too fast)= Bears asserting dominance

The BDI rose (probably did not have time to react to swift fall in equities)

Reading the Tea Leaves – There is no specific fundamental(s) that you can point to that says yea that’s the reason stocks tanked in big time volume at in the last hour of trading.  Obviously “the Pro’s” know something us common investors do not. Earnings season has been much better than expected with companies beating on both TOP and bottom line. The dollar fell. The BDI is rising.  Stocks should be rising.

Stocks falling on good earnings news, a rising BDI and a falling dollar is a disconnect from what has been a historically a positive trend .  Think of this as a sign in the road saying WARNING SPEED BUMP AHEAD.

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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 @ 30% 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 +85 points Friday and closed at 2917. A higher high price on its chart pattern has been confirmed and it sure looks like a bullish run could be starting. =  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 fell a significant -0.55 % The dollar closed at $75.12 . We have developed a support now resistance (it’s called support on the way down and resistance on the way up) 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,(March 08 ) so there is a long way to go before the major and very crucial support level is reached .

The dollar does have a support level around $74.00( a high from about a year ago – see long term chart)

Positions

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

Trades made this week are updated at the end of the week. -  Sold 50% of position in EWZ and all of EWY. Have no position in XLE. Also for TRADERS (not investors) strongly considering buying some companies listed yesterday that had outstanding earnings, but have fallen over last few days.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Jobs,Jobs, Jobs

To paraphrase James Carvill’s famous line “Its all about the jobs stupid.”  (he used the word economy) Obama’s mistakes-

• Obama’s took on Larry Summers and the Wall Street crew who dominate his economic team.
• Underestimating just how huge the economic meltdown was.
• Realizing that because of globalization and superior growth in emerging markets major US companies are going to hire first abroad instead of here. (see past Investors411)

What can Obama do to solve this problem? The stimulus and tax cuts help, but two noted economic experts offer solutions.

• Robert Reich – LINK – 4 steps – Use funds to bail out average people through states, 1 year payroll tax holiday on first 20k, Job tax credit for small business, & directly loan to small business (bypass big banks)_
• Bob Kutner – LINK – Makes the case for increased deficit spending for job creation. Bob looks at the most recent poll that show 53% believe unemployment is the #1 concern of Americans vs 27% who fear the deficit.

Bottom Line – Deficits are bad even crippling. This year the deficit will be about 11% of GDP. In World War 2 deficits maxed out at 29% of GDP. If Democrats want to stop an  implosion in the next election they have to create more jobs NOW.

Unfortunately from Nobel Prize winners from Krugman to Stiglitz , Obama has ignored the progressive side of his party.

Your Comments

#1) Mama Jama brings ups Thursday’s Tom Friedman column again LINK – about how radical and anti Obama the right has become in America.  This is alien for lots of us who don’t even consider Obama a liberal, but are also worried about the fact that no one seems to be standing up against this divisive hatred.

One of the latest examples was members of the right carrying guns to a health care town hall meeting.  Can you imagine the outrage if blacks and Hispanics carried guns to a Sarah Palin speech.

#2) Don’t worry about a 700 point dip, unless someone bombs Iran . Both the Obama administration and the Fed are flooding the economy with money forcing the dollar down. This in turn makes American exports cheaper and imports less expensive. As long as this money flows Wall Street will do well. Add to this less transparency and no real regulations on shadow financial institutions.

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

Volume fell as markets rose. Therefore, our #1 confirmation factor is NOT giving us a bullish sign.

US markets reacted positively to news that the service sector (ISM number) was back above 50%.

Rumor of the AM is that group of countries (Gulf oil producers) have been meeting to replace dollar as standard currency according to CNBC – lead story. Denied by Saudi’s – Should push dollar lower and stocks higher this AM.

Earning season officially starts tomorrow with Alcoa (AA) reporting Wednesday.  Any company that is going to have top line growth (increased profits from sales instead of cost cuts) is what Wall St. is looking for.

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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 @ 47% 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 only +5 points yesterday and closed the day at 2362 . After a sharp turn higher it looks like we are headed back down.  Longer term (since the June high) the rate of decline has softened, but its still going in the wrong direction.

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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 -0.46% yesterday.

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

S&P 500, SPX , our #1 position (20% of portfolio) is down 4 to 5% from highs – This is really a holding position instead of cash.

China, FXI, our #2 position (18% of portfolio) is bit less than 10% down from highs. (very long term investors should see this dip as a buying opportunity) So far this looks like China just moved too high to fast.

Brazil, EWZ , our #3 position  (12% of portfolio) has broken out to a new high. Like a huge group of investors now looking to buy the dip – so look at 3% pullback as a dip.

Gold, GLD, our #4 position (10% of portfolio) is close to a new all time high.

Financials XLF – (5% of portfolio) Selling remainder today -reason,  weak volume behind two day rally

S Korea EWY – (5% of portfolio) Up about 7% and @ 4% from highs.

Traders

– Instead of ETF’s – Investors411 does have a position in NVS Novartis (10% of portfolio) a swine flue play. Up 7 to 8% – We will exit this when flu season hits.

One of you recommended MVIS  Microvision- Missed a great buy the dip opportunity because of business trip Thursday & Friday – Looking to buy next dip.

Sold our AAPL position for a +7% gain. Would buy another dip

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Sorry to have been away. Unfortunately this is going to be another week of short and limited updates.

Just Stocks

Technically we’ve had some big volume  reversal days where volume has gone up and stocks down. Volume has been above average on these down days for the US markets. Our #1 confirmation factor is = Bearish short term signal .

We’ve had two down days in big volume and 2 or 3 are enough for a full fledge reversal of trend.

Out #2 confirmation signal how markets react to news has also change. Previously markets moved up on bad news or that bad news dip was bought buy investors. Now markets are falling on bad news. = Bearish short term signal

The good technical news is, in concert, major US indexes have fallen to just above their 50 day moving average (see charts on side of blog) and this should offer some support.  That’s why technicians call the 50 day moving average a major support/resistance area.

The BDI has reversed itself and moved higher over the last few days. (2185 to 2357 in last 3 days) = Bullish short term signal especially for exporting countries,

The dollar had moved higher, especially on Thursday when stocks had their biggest losses.

Remember Investors411 has been beating the drums for a 5 to 10% pullback and we’ve passed the 5% mark. The whole world stock markets have gone up too far too fast.

A more complete update later this week.Here’s an editorial from Dr. Doom, who accurately predicted the original crisis, Nouriel Roubini, on unemployment staying above 10% for most of 2010. – LINK

Fearless Forecast- Stocks should steady at the 50 day moving average, but the bulls have clearly lost momentum. It would be very troubling to see markets sink further today and the 50 day moving averages to fall.

Positions

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

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Note  - Last Update for the week.

Where are the New Jobs?

Dorothy Lange’s famous photo –  Migrant Mother from Wikipedia

Right now – job cuts are declining in the USA - down @700k in January to @200+k last month. Major reasons why -

• China India and other emerging markets keep growing and stimulus packages around the world stimulate their growth. Therefore US global companies  don’t need to lay off more workers.
• The US government stimulus package creates jobs and cuts taxes. In a year or two the Obama or US stimulus package will run it course.
• The Fed has injected massive amounts of capital into the system propping up the shadow financial system and keeping it from failing-thus saving jobs.
• The automotive sector has been bailed out preventing a total collapse of jobs in the sector.

What happens when the stimulus, and cash infusions run their course. Where will the new jobs come from?

Wall Street companies are playing cut throat with each other trying to get into Emerging Markets (China #1 on the list). Labor costs are cheaper there and they have growing GDP’s. (some of this is phony accounting, but overall they far outstrip the USA in growth) So Wall Street companies will as they have in the past hire lower cost and now better educated workers from abroad. Now there is even more incentive to hire abroad because of their growing markets. It’s even cheaper for US companies to hire European workers because they don’t have to worry about health care costs.

Bottom Line –  Jobs has historically been a lagging indicator after a recession because of globalization. It sure looks like job creation is going to be worse this time than after other recessions. What’s going to happen in the long term after all the stimulus, tax cuts, money printing etc. becomes no longer sustainable?

One major  Obama/Tom Friedman’s solution is to turn alternative energy into the next tech explosion (like the internet). But, the investment, so far is way too limited and others from Germany to China are already leading the charge in this area.

Your Comments

Check out “Doggies Mom” who has a LINK to an editorial on health care by Rose Ann DeMoro and Michael Moore .

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

Volume rose a bit as stocks retreated. Volume was below average. No real confirmation or follow through of Monday’s rally.  Probably means all eyes are on the Jobless claims at the end of the week.

There is some clear change in overall feeling. The BDI has fallen for 4 months – although the rate of decline has slowed. This indicates China, who was buying all kinds of raw materials because they were cheap has stopped.  China was a major growth factor in leading us out of the recession. This also indicates that the US did not buy as many holiday items from abroad. Potential for a slow holiday season.

The up side fundamental is the stock market. Because it has had a phenomenal run from the lows investors may feel like spending some of those gains.

Bottom Line – Although we could move higher and Dow 10,000 is drawing investors like a magnet, there is reason for CAUTION. If we get a reasonable jobs number – under 200,000 lost jobs in September you may see a short rally.  Its starting to feel like traders will sell the rally.  Still holding on to the Long term CAUTIOUSLY BULLISH outlook

Big news for week is the jobs number for the month of Sept. coming out Friday.

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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) .

2388 is support now resistance level/number to watch – After a short two day rally of +29 points the BDI fell yesterday -7 and closed at 2185. These are very small moves, but in the right direction.

The BDI is almost 50% 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 ) A 50% retracement from highs is a major support level. Therefore some stabilization is understandable.

What this means – World trade is in trouble – lots of ships are sitting in ports empty.  To some degree, China has stopped buying raw materials and/or the US consumer is not buying as rapidly as earlier in the year. Braking a support level is significant, but 2192 (current level) is still a long way from the Dec. 2008 663 low. = Storm clouds gathering

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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 rose +0.17% yesterday to $77.12 . Its chart shows it has clearly formed a short term higher high over the last two weeks. Higher dollar usually leads to lower stock prices.

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

revised to reflect recent trades last weekend

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 Has Returned from Summer Hiatus

Economic Outlook /Stocks

Late last week the US GDP figures came in better than expected, a -1.0 %. The expected number was -1.5% . This number while not positive should be compared to the previous quarters -6.4 % and the loss in the quarter before that of about -5.7% .

Clearly back  in September it looked like the US and the world’s economy was headed over a cliff. That no longer is the case. “In short, the recovery act turned this quarter’s economic performance from disastrous to merely bad.” See data/story here

The economic stimulus that the Fed and the Obama administration delivered has turned the tide. The economics have improved dramatically. Since our government’s stimulus plan is back end loaded and only @ 25% has been allocated, the economic picture should stabilize or improve in the coming quarters.

Consensus outlook is for moderate growth next quarter/year that should turn positive.

China’s GDP has also rebounded. Their economic low was a +6.1% in the first 1/4 of 2009 and is now at a better than expected +7.9% in the latest quarter.  Remember their stimulus package was far greater than ours when measured against GDP ( from memory something like $585 billion on a GDP of 4 trillion vs. UA 780 billion on GDP of $13 trillion.) Businessweek story here

So the world’s two most important economies are rebounding.

Apologies to the European Union whose combined countries have a slightly larger GDP than the USA. On the whole they are on par with the US. There expected to have a loss in 2009 of -1.8 % and a relatively minor rebound in 2010 of +0.5% These figures/projections are obviously far more consistent with the USA than China.

Bottom Line – China is once again going to outperform the other major economies of the world. Those countries like South Korea, Singapore, India and Brazil (see Positions section of blog) will continue to outperform the USA. All these countries benefit from the mega trend of globalization . (Will fill in details in upcoming updates.)

Jobs/Jobs/Jobs

In the up coming year or two the employment picture should like the economy brighten because of the stimulus .We are now losing jobs at the rate of about @ 400,000 a month (compilation of May & June) vs. @ 700,000 (Jan & Feb.) The overall figure will grow. However, as more of the stimulus kicks in this figure should fall.  Most estimates have unemployment going up to 10% this year, however the rate of unemployment is dramatically declining. The figures for July come out  Aug. 7th.

Like the small recession in the beginning of the Bush administration it will take a long time for the jobs picture to improve . What happens is that companies lay off US workers and tighten their belts in a major recession.  When it comes time to hiring back workers they do it where they find the cheapest labor – abroad. This is one result of the mega trend globalization (See Overview section of blog)

The “Giant Sucking Sound” (Ross Perot’s term) is middle class and working jobs going abroad. However, for a year or two the stimulus will help. It’s NOT all roses and sunshine but –  American companies will do far better than American workers. Foreign countries will continue to outpreform the USA.

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 S&P 500 joined the NASDQ in significant multi day volume confirmation of its price move last week

Off had, I do not remember US markets being this over bought. Just from a pure technical point of view it looks like rally has run out of steam. But there are an army of investors still waiting to buy the dip.

Big news is jobless figures for July come out on Friday.

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 . 2975 is the major support level and the BDI closed at 3320 – down last two days. As long as we hang in above 2975 stocks should do well.

In a nut shell the BDI is

• short term – Neutral (perhaps bearish trend starting)
  
• mid term -  Bearish pattern
• long term - Bullish pattern

.

$USD - The Dollar went down and tested its major support level all last week . The last remaining support level is the June lows at @78.4. . Breaking this support would be very bearish for the dollar and bullish for stocks. We broke that support on Friday and dollar now at 78.29. Bullish for stocks

Fearless Forecast

The FF did not get its “stabilization week” as stocks moved moderately higher. Technically conditions are still way overbought .

The dollar slipping (closing) below major support on Friday is bullish for stocks. Even though markets are overbought and oil prices rising to yearly highs (in large part because of dropping dollar) it looks like another rally week.

Buy the dips of trending sectors.

Positions

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

Buy the dips of recommended ETF’s (see Positions)

Adding to QLD , FXI and EWY (Korea) on dips.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!