Investors 411 Blog

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SOTU

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George “Been Forgotten” Bush went over the top with his “your either with us or against us” proclamation.  A line he later regretted.

Remember, those of us who opposed the Iraq war were hated as un American and not Patriotic. Emotions ran high because of the terrible 911 tragedy, but now some healing  has occurred over a war that was a tragic mistake.

The heart of Obama’s speech

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We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference – like a senior on a fixed income; or a student trying to get through school; or a family trying to make ends meet. That’s not right. Americans know it’s not right.

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Why are Romney’s Poll numbers Dropping?

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Romney provides the contrast to Obama SOTU and makes Bush’s “you’re either with us or against us”  milquetoast.

The following 20 second video is a perfect example of raging extremism. The kind of shouted hatred that twists the minds of so many of our fellow Americans into blind fear mongered emotionalist.  Romney -

“I’m going to Stuff it Down Obama’s Throat”

Click on photo for 20 second video

As far as timing goes Obama caught a huge break that his SOTU address came directly after Romney released just his 2012 tax returns (13.9% tax rate) that have opened a massive amount of new questions. (future editorials)

More on SOTU here and NYT here

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STOCKS

• From Last week – “We are in a low volume rally” In Paul’s Corner he points out the decrease in volume over the last five days. There have been lots of technicians who are calling for a pull back here. I tend to see 1350 1370 as the target on the S&P 500 before a significant retreat. (S&P now at 1314)

• Low volume rallies are a characteristic of Central Banks and friends manipulating stocks/bonds. They have become quite good at this and these rallies have tended to last.

• DAX (Germany) down this AM 0.67% at 7:00 AM EST. Italian bond’s two week long yield fall puts it well out of the 7% danger zone. But yields rose yesterday and this AM to  +6.23%. The Spanish and Italian bond reversal shows some economic stability returning to two of Europe’s largest economies and is bullish

• NFLX reports earnings after the bell. Watch comments section for details on possible combination Option Trade.

• Our government is simply overwhelmed by corporate lobbyist and money. For more Robert Reich

Special Note

Investors411 2012 Yearly Investment Outlook

is in the Stock Section Below

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One Big Party

The news of the morning - The first Florida prediction poll is out since South Carolina and its Newt +9%. Its only one poll, but there is a change in momentum. Its way to early to call this race.

Some interesting political analysis  ”Mitt Romney’s Misery in a Word Bain “(Politico)

Clearly Republican voters in South Carolina felt Gingrich won the debates, but there was another even more significant factor.

Super Pac Money

“There are probably less than 100 [obscenely wealthy] people fueling 90% of these Pacs”

LINK

In Iowa it was Romney’s Super Pac that spent millions on negative adds against Gingrich. He was caught flat footed. He obtained one agreeable billionaire and created his own giant super Pac They smashed Romney with negative adds in South Carolina and spent just as much money as he did.

Florida Super Pacs are already in full swing with the vast amount of money not spent on building a case for constructive ideas on how to help fix out economy, but scathing negative character assassination.

Everybody says they hate these adds, but the reality is they work. Romney beats Gingrich in Iowa by going negative with his super PAC and Gingrich beats Romney in Florida by going negative with his.

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In the last election we saw a massive amount of money go to Obama from Wall Street. Almost every progressive will tell you Obama has not delivered becuse he is influenced or ownd by big money.

Sure there is a difference between Republican views and Democrats (watch the debates) But in the end to compete with the winner of the Republican Primary Obama is going  to need his own Super Pac’s to go negative.

End result –

A group of wealthy oligarchs determine the outcome of what used to be called

Democracy

We are slowly morphing into one big party

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STOCKS

• From Friday – “We are in a low volume rally. This means the manipulators (central banks, HFT’s and other giant sharks) are in control.” Sorry I haven’t got the details on how this is happening, only a recognition of its existence (see yield rates falling below) Low volume rallies can last a long time as we saw when the Fed introduced quantitative easing (QE #! & QE #2)

• DAX down this AM 0.57% at 6:00 AM EST. Italian bond’s two week long yield fall puts it well out of the 7% danger zone at 6.13%. The Spanish and Italian bond reversal shows some economic stability returning to two of Europe’s largest economies and is bullish

• A record setting -599,000 have been eliminated from government. If these jobs were still in existence the monthly jobs growth figure would be higher.

• US corporations are sitting on more cash than ever before ($1.9 trillion) Most company profits are again beating expectations.

• Relative to the rest of the world – Japan (tsunami) India & China (GDP in decline) Europe (crisis) – the USA is outperforming (Thanks to EW for his heads up on this)

• While it may be just a little too soon to call the trend, there has been a three month surge in housing stocks The fall in housing prices was a dominant factor in the great recession.

The USA under Obama and his Fed Chair Bernanke is in a slow steady recovery with little sign of inflation on the horizon.

Later this week the Bad and the Ugly

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“The Most Brutal Campaign Video

Evah”

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• Italy stabilizing at 6.5% (good news) vs JMP’s disappointment balance each other. Every time the market has dropped over last couple weeks, buyers have appeared.

Yesterday Investors411 readers made almost 200% in one trade.

Find out more in the STOCK section below

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JOBS

Small Business

The engine of American Growth

The Good Guys

Posting – A $1,000 reward if YOU find someone to fill this job position in a small  (50+ people) company in the Boston area.

Overdrive Interactive is offering this reward for a World Class Web Designer. In fact, this growing business has taken on some new clients is looking for talent to fill a dozen new positions

Perhaps a major reason Massachusetts has a 7.3% unemployment rate vs. 9.0% for the rest of the USA is because we value education [Boston is a college town] – entrepreneurs and small businesses abound.

• Know a Outstanding Web designer?
• Want $1000 bucks.

Send me an email – You’ll find my email address on the bottom of the  HELP/EDITOR Section listed on the top bar. I do have an inside connection at this company – An intern their created this blog and my son is the CEO and principle partner.

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Wall St./Major Corporations

How Wall St. rewards Job Loss

The Bad Guys

Cisco is your typical big tech company. CSCO two days ago announced earnings. Nothing special happened to the stock after the initial announcement. But after the reorganization plan was detailed the stock started to climb and ended up +5.58% higher.

A major corporation announces reorganization – JOB CUTS - and wall street rewards them with a solid move higher. But,

if you’re an American job seeker you just got shafted.

This pattern repeats itself ad nauseum for major US corporations.

CSCO is just doing what everyone else does. Often those jobs quiety get replaced overseas.

• This is one reason the Occupy Wall Street protestors get so mad and frustrated at Wall Street.

• This is one reason why many of you get so frustrated at Republicans – Example, they block Obama’s small business tax breaks jobs bills paid for by the elite wealthy class.

You certainly don’t begrudge small time investors for making a few bucks off CSCO.

But, we must find a way for the Millionaires, Billionaires, Hedge Funds,  Shadow Banks, HFT’s who profit from the CSCO trade and other like it to contribute.

They are raking in huge gains by rewarding major corporations for cutting  jobs.  Some of their profits  must be put back into small business, Without this, the American economy will disintergate.

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Social Media

Think Social Media is important in an election? Every year companies devote a significant  growing amount of their budgets to social media adds. Here’s a link from my favorite small business on Social Media and the Presidential Candidates.

Also check out the top social media hits for 18 other categories.

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STOCKS

YOU made almost 200% gains

Our Feature Today – GMCR

But First Equities. US Stocks clawed back a small part of the meltdown two days ago and European stocks are up [DAX +2% as of 8:31 AM EST this morning.

Problem yesterday was the mother of all companies APPL was down 2.55%

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Our #1 technical forecasting tool, the McCellan Oscillator rose to +6.88. 50DMA at +21.23. = NEUTRAL

No real technical advantage for bears or bulls.

Europe dictates the open = up, but a second down day for AAPL would be a warning sign.

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Analysis of the GMCR

Put/Call Hedge Trade

Part Luck/Part Homework

This was an event driven (earnings report) Put/Call Hedge trade. Investor411 readers (see comments section of blog and blog post from two days ago) bought bot Puts and Calls on GMCR before the earnings report.

They spent/risked a limited and finite amount of $ on purchasing the put & call, and achieved almost a 200% gain per contract when the stock fell -38.99% (yesterday's close) after its earnings report.

Reasoning behind trade.

• Hedging close to the earnings report greatly diminished the impact of outside events on the stock/trade

• Past earnings reports had a major impact on GMCR - created big price swings

• A major hedge fund had challenged GMCR's business model creating  huge volume and volatility in GMCR

The homework part of this trade is recognizing the three circumstances listed above. It didn't matter which side won. We  were covered both ways.

FYI - I monitored three similar trades this quarter GOOG, AMZN & BIDU. Two of the three made decent $ (BUDU) lost. None of these trade had the added bonus of major controversy surrounding the stock.

Working together - we should be able to find some similar situations.

Kudos to Critc for taking the lead. Paul & HGSI are capable of quicky identifying high growth stocks that have moved significantly in past earnings reports. We can all discuss "special circumstances" that might cause a bigger than expected swing over an earning report.

End results - more winning trades, but don't expect another 200% on the next one.

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Popping Bubbles

Bubble Myths – Economics

Nations with More Deregulation Grow Faster

FALSE

The rhetoric – Campaign mantra of the right wing  is to cut regulations and the economy will grow and jobs will be created.

Let’s Pop This Bubble

Stephen Gandel from this week‘s Time magazine (sorry no link to the charts in Time) has an excellent short editorial on this. Using IMF & OEDC data he shows.

• The USA is one of the most business friendly countries (lack of regulations, taxes, time to start a business…) In fact we are rated #4 of 183 countries.

• USA GDP has grown +15% over the last 5 years (ending in 2010 & compounded)

• China is one of the least business friendly countries  - biggest bureaucracy in the world – it takes 311 days longer to build a warehouse there than the rest of the world and the communist party has its hand in every transaction.

• Companies spend 2600 hours a year complying with Brazil’s tax code. Another least friendly business country.

• China’s compounded growth rate for the last 5 years is 160%, Brazil’s 135%

• The list goes on and on -Least business friendly countries – Russia,Indonesia, India, Brazil, Argentina etc all have significantly higher growth rates than business friendly countries like the – USA, UK, South Korea, Canada, Germany.

Deregulation has, at best, a miniscule positive impact on Jobs and Economic growth. Just compare China and Brazil to the USA.

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PhotoEssay from We are the 99%

LINK

He’s not Alone – From CNBC

50% of all US Mortgages Effectively Underwater.

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STOCKS

The Super Computer from Space Odyssey

or

An HFT Super Computer

“What’s behind That Wild Final Hour of Trading” The answer from CNNMoney’s Maureen Farrell is “rebalancing of leveraged ETF’s” Something Paul has warned us about. Let’s expand on this to understand the full dynamics of what’s happening.

• US markets open in big volume, (first 1/2 hr.) focused on events that happened since the close. Currently the Euro Zone is creating the most significant events.

• Trading, volume, in general, dries up during the day

• A little after 1:00PM EST many stock traders (based in NYC) come back from lunch and an afternoon trend starts to establish itself.

• This is when the algorithms of the High Frequency Traders Stars to kick in.

• All the managers of the leveraged ETF’s see they are out of balance.  So do the super computers of the HFT’s. The race is on and the volume explodes sending stocks on meltups or meltdowns.

The Below chart is from Dave Fry’s ETF’s Digest

Yesterday’s Market

He gives more credit to HFT’s reacting to news (Italy) and I give more credit to imbalances. Whose right? You’d have to know all the different algo’s HFT’s use.  Fry also has an HFT Alert

Our #1 technical forecasting tool, the McCellan Oscillator fell to +38.61. 50DMA at +24.61. = NEUTRAL

Some sort of bad news from Europe this AM.

• Expiration – end of 11/11 or 11/19

• This is an event driven trade based on GMCR’s earnings report today.

• If GMCR moves big time in one direction we (I’m in on this trade too) win. Example PCLN close +8.61% higher after its report yesterday.

• Reasoning – There a huge battle between investors on the direction this stock will take. The earnings report (this evening) will give an indication what will happen. The wrong side will be forced to sell or buy to cover potential losses. So it should have a big move. If not we lose.

We are the 99%

Police in Oakland,  broke up the Occupy Oakland Protest.  Police used “flash grenades,”  ”tear gas.”& “riot police.” Officials used the same excuses and methods other officials to break protestors  in Egypt, and other Arab Spring countries that were fighting for jobs and democracy. Exception – There were no deaths

Photos of the incident and, are on front pages throughout the world. Just like in the Arab Spring.

Links/Photos/Videos - Al Jazeera, Britain, Huffington Post, Woman in wheelchair tear gassed

Here’s What We Are Fighting For

Reading Tea Leaves

Same as yesterday - Right now the news out of Europe trumps everything – Their financial Stocks move higher = so does everything else. Pro’s are bullish (PCR) takes some of the sting off how overbought we are (MO).

The major editorial yesterday said it all. Conclusion –  Europe is the same as the USA in 2008. If gains are allowed to be privatized by financial companies  and the risk socialized by the people the financial stocks involved will push stocks higher in the shorter term.  It will be more poverty for the middle classes who will pay the bill.

My read of the Tea Leaves is stock will keep erratically moving higher. If we close below 1225 support level on S&P 500, Long term Outlook will change back to NEUTRAL.

Our financial system desperately need  regulation, regulators,accountability & transparency. But few care about long tem solutions.

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Demystifying and Discussing

Simple Option Strategies

By JS

LEAPS

Today I’ll discuss investing in LEAPS ( Long Term AnticPation Securities).  Leaps are longer term options, for up to 2 years or more.  Today, you can by LEAPS that expire up to January, 2014.

Why buy out that long? Because it gives you a longer time to have your investment work. Many times my calls expire before the stock moves enough for my investment to pay off. I’ll watch my call expire worthless and then see 2 or 3 months later, (or a year later)  I made the right call but the wrong timing.

Example:  On June 20, this year, CSCO was $15.01.  It had reached a pretty good low. I’ve followed it since the mid ’90′s and felt it was way too low; they had lots of cash, little debt, and products that were necessary for the internet, especially with the cloud becoming bigger.

However, this market was very unstable at that time (even now). I could have bought 100 shares for $1500, but I wanted a bigger return, so I bought  LEAPS:  -CSCO130119C17.5, costing $1.33 per share or $133 per contract. I was able to purchase 10 contracts ( or 1000 shares) for $1330.

Today the result of this trade:

• Buy 100 shares :   $1501:    price today:   $17.50, or $1750,  a profit of $250 or 17%.
• Buy 10 contracts:  $1330:    price today:      $2.54, or $ 2540, a profit of $1210 or 90%

This option is still alive till Jan, 2013. My question (to me) is: is 90% enough or should I take my profit and run. In this market, I think I’ll take 1/2. If I had purchase shorter term options, one to 3 months out, I would have lost all or most of my investment. Also, the reason the price of this option was so low was that CSCO is not on many buy lists.

Note: this column is based on closing prices of Monday, Oct 24.

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Long Term Outlook

3 to 6+ months

CAUTIOUSLY BULLISH*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

Occupy Wall Street

Thanks to frequent blogger Popeye for the above cartoon sent from “Occupy Boston” part of the Occupy Wall Street movement. You can read his remarks daily in the comments section of blog.

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Jobs Jobs Jobs

It again started in the Comments Section of the blog between frequent bloggers JS and Jim J yesterday [LINK - then scroll down] and hopefully will continue today

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Pink Bikes and a Stripper

This short work for your reward add from France is creative, funny, sexy and very very clever. Thanks to MW for sending it in. The French woman’s secret -LINK

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Stocks

Bears should take control of US stock markets in the short term as a 1200 point Dow rally from this years low hits some key technical resistance levels.

• We are directly below key resistance levels on all major US indexes (see chart of S&P 500)
• We hit some of those resistance levels yesterday and fell back.
• Our #1 forecasting tool, the McCellan Oscillator is near OMG overbought levels at 75.31 = Bearish
• Our #2 forecasting tool, the Put Call Ratio, is in overbought levels at 1.31 = Bearish

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Make Friends With A Bear

Its going to be very hard or bulls to push stocks higher in the short term (days to week(s)). The High Frequency Traders, whose algorithms are programed to pounce on news out of Europe are going to need something spectacular to advance stocks. Therefore-

• Risk On Trade in Effect. There is an above average chance we will see at least a 5% fall before we see a 5% rally.
• For those that can handle the risk - short stocks (Puts or leveraged ETF’s that short stocks) or sell long positions. Preferable – into any rally today
• Mea Culpa – Due to my error this risk on trade should have happened yesterday when the Dow was up over 200 points. Link to Tuesday’s blog using calender above.

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Paul’s Corner

YSL 5 Review

Today a brief look at the charts, Stocks listed by best performance top down for the day as sorted by HGSI.  Comments are for education only.

Group performance from the start on Aug 18 to yesterdays close YSL 5 +4.85% vs S&P 500 +5.84%.  Looks like we are a wee bit behind this week.

Chart for your review. LINK

HANS – Hitting resistance, and is extended. All indicators green.

AAPL – Hitting resistance, extended, all indicators green.

CMG – sitting on the 17, buyable, most indicators green

HLF – sitting just above the 50, most indicators green

LULU – parked on the 50, most indicators green

ABV -  Hammer candlestick (usually a reverse coming) sitting at resistance

RES – well below the 50, needs time to decide which way it’s gonna go

TSU – don’t waste your grand kids money on this dog

CROX – Stalled at the 50

ZAGG – just below the 50, most indicators green

AKRX – just crossed the 50 and the 17, most indicators green

CPHD – Pulled back to the 17, usually a good place to buy, I bought a few shares yesterday

NLY – Most indicators red

GMCR – below the 50 and the 17, pull back Wednesday on heavy volume

Disclaimer, Disclaimer, Disclaimer, Disclaimer,

[Editor's Note - Paul is an excellent technical analyst whose insight can be found in the comments section of blog. Right now because of overall short term  bearish market conditions I'd be cautious about going long stocks - If he disagrees you'll here about it in the comments section]

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Long Term Outlook

3 to 6+ months

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

Jon Stewart

Amerigasm

On Monday night we had the CNN/Tea Party sponsored Republican Debate. “A truly remarkable pairing, as a fringe often derided incopetent bunch of yahoos was granted legitimacy by pairing with the TEA Party.”

How totally incompetent was CNN.? How horribly low and devolved into spectacle has news become? Watch the Jon Stewart video Their debate rivaled The World Wrestling Federation in hype and spectacle.

Our mainstream news media as devolved into a very laughable parody.

Einstein

Relativity

Obama’s Job Program

This week many of you made some excellent comment on Obama’s job program.

• Content credible
• He proposed how to pay for it – again credible with more to come next week on cuts to entire budget.
• It’s political – Obama  intends to run on this.
• Republicans have no plan or ones that include cutting taxes on big business/wealthy, and no specifics on deficit reduction.

Relativity – We have a patient whose dying and Obama’s job plan does offer  the patient  a pint(s) of blood. But the problem is that the wound is open and bleeding.

We have a dysfunctional shadow gambling/financial system that need regulating and regulators. This shadow system is now impacting Europe. Major US companies continue to bleed US jobs overseas.  Until the wound is stitched and closed the prognosis – negative.

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Investors411 Technical Forecasting Tools.

• Investors411 uses the PCR to measure the path of least resistance for HFT dominated stock market. HFT’s love leverage and if there are more puts then calls, there is simply a supply glut on one side that forces a move to the other. See above.

The McClellan Oscillator

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Reading The Tea Leaves

Short Term Outlook

days, week+

• Our forecasting tool are  Bearish/Neutral (see above) - You rather enter oversold markets and exit overbought markets. Advantage to Bears.

• If the PCR was below 0.80, the Bulls would rule. (See Current Positions below for more)

• We do have a technical series of higher highs and higher lows build on major indexes.

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Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

• Tea Leaves – Any @200 point Dow rally should bring the MO to or above +80.  Ideally we like a lower PCR. However, this (a potential +200 point Dow rally today) could be a risk on trade to nibble at - GO SHORT – Use a leveraged ETF like SDS or TZA or sell some long positions.

• Monday was a risk on to go long. It worked.

• If @+200 Dow points today – HTF will have pump this market higher and some technical levels will have fallen (higher highs). Institutions will get excited and buy, then HFT’s will dump it. CAUTION – This is contrarian advice. Most analysts will see  a +200 point move on the Dow as bullish. Longer term it technically is.

• Risk on = For those that can tolerate the risk you have a fair trading opportunity – GOING SHORT in this case -. It could be better, even much better, but the tea leaves put the odds in your favor

• If Investor411 goes short or buys GLD you will see it first in the comments section of the blog.

Positions

NLY - Annaly Capital Mgt. Ultra high dividend stock –a @14% dividend

GLD – (Long Gold ETF) Bought at 167.05 - Sold 1/2 for 8% gain. GLD closed at 174.40. Gold is contrarian to stocks and More willing to buy tan sell right now into a stock rally.

Disclaimer - I buy everything in the hypothetical Investors411 portfolio. If stock is mentioned and I own it you will know.

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Long Term Outlook

(for US stocks only – not our economy)

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

Why this won’t happen.

• It would lower unemployment and increase Obama’s chances of reelection – Republicans will therefore stall.
• It does NOT help the giant conglomerates who outsource their jobs overseas.
• The Too big to fail and other major US Companies are mega lobbyists who rule almost all Republicans and many Democrats by controlling media and campaign contributions.

You will see congress vote on a tax break for mega overseas corporate profits before you will see them help the engine of growth – small business in the USA.

Much More on The Civil War to come

Small Businesses, Taxpayers Get Shafted

Investors411 Technical Forecasting Tools.

The McClellan Oscillator

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Reading The Tea Leaves

Market momentum is obviously to the downside. Fundamentals matter. In this case its the news coming out of Europe - CNBC & WSJ However both the MO and the PCR are telling us that we are getting ready for at least a short term reversal.

Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500

LONGER TERM POSITIONS

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

Traders - If we get another strong move down today I would consider going long in a leveraged index ETF.  Technically, because we are so oversold and approaching support, any dip down close to support should hold.  It’s a risk, and you could get overwhelmed by some bank failure in Europe. However, if we get that MO to -60 and below we should get at least a technical bounce.

Investors - It’s sure better to nibble when the stock market is 20% down than when it was higher.  The Caution, of course is the breakdown through support for the major indexes. My best read of Tea Leaves is that it would take a major bank meltdown for this to happen. FT Link on this possibility.  A downgrade is NOT a meltdown, but there is risk.

Greece is going to default at some time and in some way. They have an interest rate near 50% on their 2 year gov’t bond. We have an under 2%interest rate. That 50% rate is unsustainable for Greece. The problem is derivatives taken on the debt and the shadow financial system, like Lehman and so many others, make this crisis worse. Many want this to happen sooner rather than later so we can stop twisting in the wind.

Bottom Line – If we have another meltdown today, technicals will show an overbought market. If we get to OMG oversold levels the technical Tea Leaves put the odds even more in YOUR favor to Buy.

Paul has said this is not a market to be in. He’s right unless you are protected (Puts or ETF’s that short the market) But, when everyone else has panicked there is no one left to sell. It’s hard to call a bottom exactly, but the Investors411 portfolio will nibble and risk a long position in a leveraged ETF if oversold and better OMG oversold conditions exist.

Positions

NLY - Annaly Capital Mgt. Ultra high dividend stock –a 14% dividend

GLD – (Long Gold ETF) Bought at 167.05 last week - Sold 1/2 for 180.4 (see comments section of blog on Friday) Almost +8% profit.

From yesterday - There are simply too many calls out there on GLD. Ripe for a bear raid by HFT’s. Investors411 also likes to take a 5 to 10% profit and let the rest ride. Last reason – Gold should have gone way up as stocks went way down.

There is a major political battle going on over gold. Sides

• The US government and most companies/banks want the US dollar to be the “fiat” currency of the world.  If everything is traded to the dollar standard is gives us a major advantage.  We can conduct our monetary policy independent of exchange fluctuations.

• The other side is China (plus other countries) and the Tea Party/Ron Paul who want gold to be the standard for the world.

Xinhua, China’s official news agency - “International supervision over the issue of U.S. dollars should be introduced and a new, stable, and secured global reserve currency may also be an option to avert a catastrophe caused by any single country.”

There are some major government/Fed/Commodity Exchange manipulators of gold prices. Often when gold declines in the USA you will see it bounce back in Asia overnight. This is probably due to Chinese intervention.

Disclaimer - Personally I own  a group of dividend stocks including NLY, SNH, KMP, MO, HTD, ABV & AGNC and a few other smaller positions I have puts half of dividend stocks I own. I also use leveraged ETF’s TZA & SDS to minimize downside risk or make a profit. I buy everything in the hypothetical Investors411 portfolio. I will be purchasing additional YSL #5 stocks when we have a lower MO.*

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Long Term Outlook

(for US stocks only – not our economy)

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

More people working = more tax revenues = lower deficits.

You have to spend money to make money

This should have been Obama focus in his 2010 state of the Union – Not the deficit and government reduction. My only concern is too little and too late.

Investors411 Technical Forecasting Tools.

The McClellan Oscillator

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Reading The Tea Leaves

Our forecasting tools give no advantage to bulls or bears. There is some slight momentum with bulls because of the double bottom and series of higher  highs. NEUTRAL is the key word. Perhaps the calm before the storm. DAX – German stock market (already in bear market territory) down over 1% at 7:30 EST. – Bearish

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by JS

CALLS

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Buying calls are a way of taking more upside risk while limiting your downside.

SDS is a contrarian ETF that goes up 2x when the S&P goes down. It’s a decent stock to buy during this “fear” market, as protection.

The price this week was $24.56. To buy 100 shares costs $2456 + comm.

Buying this option:

-SDS111022C25 ( Oct 22,2011 @$25 ) costs $2.10 per share = $210 + com per contract. Your downside is $210.  This option is a bet that the S&P will go down dramatically by Oct 22.  SDS at the market bottom of last year July 2010, SDS was $38; at bottom of market in ’08, SDS reached $120.

Projected profit if S&P reaches these lows again:

You will start making a profit on this call if the S&P falls 4.5%. If it doesn’t fall 4.5% from the current price by Oct. 22, you will lose your

investment.

$38 – $25 (the strike price) = $13 – cost of call option  $2.10 + comm = @$11 per share or $1,100 profit per contract.

If SDS reaches highs of 2008, $120, you’ll profit $120-25 (strike price) = 95- 2.10 (cost of option) = 92.99 per share x 100 sh =  $9,299 per contract.

So on $210 bet,  one can profit $1100, up to $9299  if market reaches the recent past lows.  I use these options  as a hedge against stock I’m holding, as insurance. My loss is limited to the $210, my “insurance” premium. Let’s me sleep at night.

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Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500

LONGER TERM POSITIONS

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

Until the Fed makes a commitment to more liquidity, its hard to add any unprotected long term position other than buying GLD on dip.

Strategy Outlined – A rough outline – The basic strategy is to buy the dip. Most crucial to this is our MO chart. Start buying when the MO dips to @-60 and add to positions if the MO goes lower. If the MO reaches +60 you either sell if still holding a position or short stocks (use puts or ETF’s that short stocks) This situation (@+/- 60) has occurred a bit less than once a month over last two years

Depending on what you invest in and if your an investor or trader you hold or sell. Examples –

• Shorter term traders – Sell 1/2 after 5 to 10% gain and can let the rest ride and become a longer term investment or until the MO approaches +60
• Shorter term traders – YSL#5 – Is more suitable for your investment style
• Shorter term Investors – Should use Puts and calls to leverage risk. Also a “protection” option for longer term investors in bad markets.
• Longer term Investors – Should only invest if the long term outlook is NEUTRAL. Your chances of success are better with a CAUTIOUSLY BULLISH outlook.
• Longer Term Investors – More likely to use Dividend stocks/ETF, but can use YSL’s.

Investors411 has just started using the PCR as an investment tool and will advise on how it mixes with the MO.

• For now extremes in the PCR (+1.50 & – 0.60) are sell and buy point.
• Remember how these charts (MO & PCR) mix and the Long Term Outlook is NOT and exact science, but Reading Tea Leaves.
• If you backtest results over the last two years you will find this a very successful method. But markets change and to will strategy.

NLY - Annaly Capital Mgt. Ultra high dividend stock –a 14% dividend

I still have a Put position to protect NLY. (strike price $17.00 for 3rd Friday in Sept) Also puts on other dividend stocks.

GLD – (Long Gold ETF)  Bought at 167.05 last week – a half position. GLD closed yesterday at 181.81. (I owe readers a column on this – hopefully Monday)  There are simply too many calls out there on GLD. Ripe for a bear raid by HFT’s. On other side – I believe it is likely that China is secretly buying tons of gold. If you have big position here I might take some profits.

Disclaimer - Personally I own  a group of dividend stocks including NLY, SNH, KMP, MO, HTD, ABV & AGNC and a few other smaller positions I have puts on over half of dividend stocks I own. I also use leveraged ETF’s TZA & SDS to minimize downside risk I buy everything in the hypothetical Investors411 portfolio. I will be purchasing additional YSL #5 stocks when we have a lower MO.*

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Long Term Outlook

(for US stocks only – not our economy)

*The most important foreseeable fundamental factor in determining the log term stock outlook is what The Fed (Bernanke) does to impact money supply (example – a new QE#3)

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE