Heritage School House

Back To Basics

At the top of the Investors411 blog are 5 different categories [HOME PAGE, HELP/EDITOR, STRATEGY, POSITIONS   & OVERVIEW] These are designed to help you access more information and describe the basic viewpoint of this blog.

Investors411 follows mega trends and how they influence stocks, politics and your lives. See yesterday’s blog as an example of how megatrends influenced solving a 30% of GDP deficit after the World War 2 and how a different set are hindering a solution to our 10% of GDP deficit now.

The world of the stock market has changed. In 2008 Investors411 clearly stated that the financial meltdown would have a “far, far, far, far, far” bigger impact than expected. It obviously has and will continue to do so.

Here’s the Good News - The 2008 meltdown threw global trends for a loop. But over the course of the last two months, technically, the same country stock patterns have reappeared. Old favorites like EWZ, FXI, EWY (S. Korea – 21% of exports to China vs only 10% to USA) have and are outperforming the US indexes again. Check these out by using the charts at the side of blog.

Led by Paul R and others in the comment section lists of individual stocks that may benefit from these and other mega trends are published and commented on.  See Positions below.

What’s Different – The Black Box/High Frequency Traders BB/HFT control the vast majority of trades. (50 to 80% on a given day) The vast majority of these are day or swing trades. They are NOT focused on historical long term technical analysis because they are short term traders that can swing either way (long or short) In the end fundamentals will catch up with them, but remember “the markets can stay irrational longer than you can stay solvent.” (Wish I knew the author of that statement)

Here’s the Bad News – We haven’t fixed our opaque shadow bank financial system. Neither has Europe. We have enormous future problems that will create more debt – military spending, social security, medicare. We have a fractured, less transparent political system and a media that plays to fear mongering and bias. I’m sure YOU could add to this list, but let’s end with this. Emerging market countries are providing a greater chance for upward mobility for their citizens than the USA

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!

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

Same Mantra for this week -The Black Box/High Frequency Traders BB/HFT control the vast majority of trades.

Stocks continue their Black Box rally in typically light, decreased volume.

The McCellan Oscillator – This is currently our #1 top forecasting toll for when the market will turn.

Significant Indexes-

• McClellan Oscillator (MO) rose  to +66.40 over the last few days [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. Even though the MO is in overbought (sell) territory, but it reached over 90 a few days ago. It could easily reach 90+ again before consolidating or making a significant fall. = Neutral
• US Dollar –  The dollar  fell significantly -0.74% yesterday [Anything over +/- @0.50 is significant.] The dollar/stocks relationship is strong – Dollar up = stocks down and visa versa. Dollar  is in a two month long fall and is approaching a major support level. The fall = Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also, good proxy of China.) BDI was in free fall from a high of @4200 to 1700 . This was a huge -60% drop in 8 weeks is very bearish Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI has staged a two week rally and is up +17% rally and is at 1977. Rate of increase decreased yesterday. That’s not bullish, but the 17% rise is = Bullish

Reading Tea Leaves-

We’re back to Magic Monday’s where the BB/HFT take the markets higher in lower volume.  This means we could see a rally on Friday as traders hope for another magic Monday.  There is still wiggle room in the MO (90-66 = 24 points) for the markets to go higher before becoming too oversold they have to retreat. Remember these numbers are NOT exact and a rough approximations.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

EWZ is the only long position at this time. Will sell 50% at 5% gain.

Sorry don’t have time  to go over these in depth, but they all seem to be worthy buy the dip candidates.(IMAX now questionable). But here’s YOUR Stock List (Mostly a list of the stocks YOU sent in) Both Paul & I have gone over these stocks. He has provided their earnings report dates of those that have not yet reported this quarter. Holding a stock into earnings is an obvious risk.

BIDU, AAPL, SNDK, PCLN (today), F, CREE (8/10), SAM (today), GMCR, HMIN (8/10), SWKS, RADS (8/5), SKX, VCI, UFS, IMAX, UPS.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

IMAX arc and camera

The Country is Headed in the Right/Wrong Direction

From Pollster.com a compilation of polls Note the trend.

Going Green to the Extreme

The Far Left has its own extreme views. Example – Lisa Hymas – Going Green is a reason NOT to have kids.  Her editorial - Say it loud: I’m child free and I’m proud. Money quote

“the single most meaningful contribution I can make to a cleaner, greener world is to not have children.”

Sorry Lisa, almost everyone feels completely different about kids than you.

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 each weekend

Another rally day in falling well below average volume. = Bearish

Stocks rallied despite a significant rally in the dollar, oil prices at new highs, and the 10 year treasury bond hitting 4.00% yesterday (see chart on right side of blog) = Bullish

This chart of the benchmark S&P 500 at top has something called the RSI (Relative Strength Index) It is another indicator like the McCellan Oscillator that show when a market is overbought.  In this case overbought= over +70. The SPX now stands at +73.96.. In fact all major US indexes, according to the RSI are overbought.

There many different ways to technically measure buy and sell points (overbought & oversold). The RSI is one and it, unlike the McCellan says we are overbought. Right now the McClellan is working better than the RSI because we haven’t yet crashed and burned. So, for now, Investors411 is going to stay with the McCellan because its working.

When to Hold ‘em and When to Fold ‘em

Stocks – Investors411 has historically sought long term positions (hopefully years or many months) that follow trends. For a List of those trends click on Overview at top of blog. Unfortunately, along came the September 2008 meltdown/recession and those trends got interrupted or broken.  So shorter term positions became more desirable.  The lack of transparency clouding invstments and technology making everything quicker has impcted trends and markets.

Let’s look at two recent buys. IMAX & DWA One worked the other did not. Why.

IMAX – Up 40 to 50% since purchased.

• First there was a fundamental reason to buy IMAX. New technology trend in 3D is emerging and people are willing to pay more for the IMAX experience. Technically the long term chart also looked good.
• But now IMAX’s RSI is at 79.14 (well into overbought territory) and it is the furthest it has eve been over its 50 day moving average. There are a lot of other warning signs but I’m trying to keep this simple.
• Why hold fundamentally – the technology  trend/ demand is still in place and growing for 3D technology. More Imax theaters and a move into TV is emerging. Some potentially block buster 3D movies like Iron Man 2 and another Shrek are coming out.
• Why hold technically – For longer term investors, even though this stock is overbought, it is melting up in weaker volume. If there was a big volume rally (going elliptical) it would be time to sell.
• Technically IMAX is ahead of itself and you’d love to see a sideways consolidation. Yep, you could see a sudden dip, but right now there are plenty of investors wishing they had bought and they will purchase the first dip.

So for now Investors411 will stay put with IMAX and even nibble some more on a dip.

DWA – Lost -4%

• Dreamworks, DWA, looked like a perfect complement to IMAX. Proven kids films and a handful coming out in 3D would increase profits. So Investors “bought the dip” before the Dragons film was release. Technically a not great, but reasonable long term chart.
• What happened fundamentally – Dragon’s did not live up to expectations, in part because of the success of other 3D films (Titans & AIWL) Too many 3D films competing for too few screens. Good for IMAX and bad for DWA.
• I never like losses to exceed 7% (This came out of an old Investor’s Business Daily trading strategy) DWA did go up almost 10%, but Investors is looking for longer term holds or trends it was held.
• What happened technically – A downside move in heavy volume that broke a support level. So both technically and fundamentally there were reasons to sell.

Realize that there are lots of sharks that know more than you or me. What we can do is identify a trend and use some simple technical signs in trading. If the trend and the technicals covered are collapsing or going elliptical in big volume you fold ‘em. If the McCellan goes too high you fold ‘em.

Some of you use other ways to protect stock purchases like selling covered calls and using exponential moving averages.  These sophisticated investors like Paul R. know what they are doing. Most of you just want something to buy and hold that goes up or outperforms over a longer period.

CAUTION – There is nothing out there that’s a sure thing and everything has become riskier since the Lehman collapse and inability to fix the problem.

Significant Indexes

• McClellan Oscillator rose significantly to +19.12 yesterday.  [+60 or above = Overbought = sell. -60 or below = oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. – This downward trading pattern has been broken. Moving toward overbought territory
• US Dollar – rose a significant +0.51% yesterday. [Anything over +/- @0.50 is significant.]

As stated before -What the dollar does over the next few weeks is critical to stocks and economics around the world. Falling dollar good for stocks & rising dollar bad in the short term

Positions

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

Limited time this AM – Will try for YOUR Stock List tomorrow. FYI – one recommendation CREE was up over 10% yesterday.

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Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Paul Krugman

Sorry analysis of  YOUR Stock Watch List took a lot of time this AM  – so little on economics/politics

Health Care

The Baseline Scenario (MIT economists) agrees with NYT Nobel Prize winner Paul Krugman on Health Care – No Bill is better than a weak one.

Krugman – “In summary, then, it’s time to draw a line in the sand. No reform, coupled with a campaign to name and shame the people responsible, is better than a cosmetic reform that just covers up failure to act.”

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)

Rally Ho, but in the usual weak volume. The NASDQ did manage to increase its volume but not in any big way. Fundamentally news was not especially good yesterday so there is a bullish sentiment underlying the markets.

We are quickly approaching oversold territory and the higher we get above +60 the more I’d take profits.

Jobs numbers for February come out on Friday

British pound is falling apart.

Why stocks are moving higher - Attempts at serious financial regulations appear to be disintegrating. No health care reform that would lessen cost for Americans and cut profits for insurance companies. Lobbyists dominate both parties in Washington. Dysfunctional federal government means no regulations on stocks. Emerging markets are still growing despite a Chinese housing bubble building.  Obviously low volume indicates that No new investors are coming back into the markets. Many bubble’s building, the question is when they bursts.

Significant Indexes

• McClellan Index rose to +53.10 up a whopping  +21.37 points yesterday We are just below +60 Oversold territory. Time to seriously consider selling into any rallies. Especially one like we had yesterday.

Positions

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

YOUR Watch List of Stocks

Many Thanks!!! to several of you who keep sending in additional lists of prospective stocks. Cannot possible include all of them. The 4 new stocks were chosen because they were on more than one list.  If you have one or a group of stocks – I’d be happy to consider them.

Since the McClellan Oscillator is close to +60, or overbought – buying right now is far more dangerous than when markets are oversold – Its hard for almost all stocks to go against the tide.  The McClellan and other similar Indexes dipped down last week into mildly overbought territory (@ +25) and this gave many of the stocks on our watch list some room to run higher.  But, since the McC. is near +60 we are running out of rally room.

NB -Last Week’s Comments. black. This week violet

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

• CAAS – Lots of volume behind rally days and had big breakout – hold if you own or buy the dip. Big +10.90% move higher yesterday – volume confirming rally – A buy the dip stock
  
• PCLN – Now wait for dip. Breakout 5.22% move yesterday in good volume – A buy the dip stock
  
• F – Flatlining or Forming a base. Breakout 5.71% yesterday in good volume – A buy the dip stock
  
• IMAX - hold if you’re a long term investor Has moved up, but volume weak – Sell  into rally if you are short term trader – wait for pullback to buy.
• GS, Up a bit but volume dropping Not Interested Still weak
• CSCO, Techs new leader Not Interested Like AAPL moving higher – Slower steadier more for longer term investor
  
• SHOO, Great long term chart. Needs breakout – Tempting A 4.02% breakout in good volume yesterday – A buy the dip stock
• ICON, Slow steady move higher with breakout yesterday – A buy the dip Dipped back down and has formed a series of higher lows & higher highs – A buy the dip stock
• VPRT Moved up to breakout level and pulled back yesterday – A buy the dip Up +2.49% yesterday in what could be a breakout – A buy the dip stock
  
• DGIT Thinly traded but had breakout in big volume and is now dipping – A buy the dip Classic breakout and pullback - up @ 5% in last 2 days - wait for next dip
• CTCT Broke out and is in pullback - A little weaker than other choices, but buy the dip Nothing flashy, but building on higher highs and higher lows – Buy the dip
• VCI Major breakout, then rallied more and yesterday big drop – Too volatile for me – Dipped and has made up most of that loss, but in weak volume Tempting, but risky.

YOUR New choices (These were on several different lists) Thanks again for sending in your choices

• CREE – Owned this chip company in the past and on a great long term run. Too overextended to buy now - A buy the Dip stock
• SNDK – A tech flash storage company that had a 11.94% breakout yesterday. Overextended now but Buy the Dip stock
  
• VSH – Most sent in stock. On another breakout,but in weak volume and overextended -  Too risky
• HMIN – Up 4.02% yesterday in breakout, but weak volume. Too Risky

What most of you have chosen are technically high relative strength stocks – stocks that are HOT. Lots of these are Great choices. It looks like we should have another day or two before the overbought markets run out of steam. Sell at their highs and jump back in on the dips.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING