The Quantum Shift

• The US markets and soon all trading markets are involved in a quantum shift toward High Frequency Trading.

• US Stock markets have gone through probably the strongest three day rally  off a double bottom since 2008/2009. Not only did we have  one, but now two days have confirmed the first day’s massive move higher.

• This rally is happening in very weak, below average volume because the vast majority of traders left in the market are High Frequency Trader. They dictate the flow or trend.

• If one were able to predict what these HFT’s were going to do, you could make some serious $$$.

The Put/Call Ratio.

Investors411 has been using the The McClellan Oscillator as a primary diagnostic tool to measure overbought/oversold levels of the stock market.  The MO measures the NYSE. It does a good job. Readers of Investors411 can easily testify to this.

The problem is HFT’s look for leverage, because with leverage you can make more $$$. Therefore we need a tool with more leverage.

As most of you know Puts and Calls give you huge leverage. So sharing or taking the spotlight from the MO is going to be the Put/Call Ratio

This is the primary hunting grounds of the HFT’s and professional traders because it has leverage. Basic undersatnding  the Put/Call Ratio is simple. Above 1.00 is Bullish and below Bearish LINK Many analysts use moving averages for the P/CR. More on other ways to look at this later.

Bottom Line – The PCR closed at 1.14 and that’s bullish for stocks. One translation is that there are just more puts out there for HFT’s to mess with.

Therefore – The MO is at +79.86 - overbought = bearish. But the P/CR is at 1.14 (above 1.00) and the HFT’s have more puts to play with than calls. Also consider the past couple of weeks the P/CR has been way above 1.00. That’s a lot of Puts out there that have to buy to cover their positions or lose $$$

HFT’s dominate, especially in low volume rallies. So for now they trump the MO.  But, don’t ignore the CAUTION below.

So, even though we are overbought, the HFT’s have some juice (because of all the put positions out there) to move the markets higher.

Bulls Rule

The Caution

Fundamentals in the long term rule markets. The May 20th call of a summer downgrade was based on that. European banks and countries could crumble in September.

So we have a new forecasting tool, a new long term outlook, and a new understanding of HFT’s.

• Paul’s friends at HGSI turned positive last night (see comment section of blog)
• Investors411 Upgraded its Long Term Outlook  yesterday

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

I MAKE MORE THAN GRAMMAR/SPELLING ERRORS

Fresh Face for the Old Guard Corporations

Jobs/Candidates/Corporate Interests

Three of you in the comments section of the blog are aghast at the nomination of Republican Tea Party’s Christine O’Donnell in Delaware. You can see her lack of  qualifications on Wikipedia. Other sources are a lot harsher.

She is a far right religious person [masturbation = adultery]  a Perky Pretty Palin, & most important she has backing from the major corporations/industry groups that dominate America.

Bottom Line - There are perhaps a half dozen major old guard industry groups that are focused on one thing – profits. They use scaling and create their jobs abroad instead of at home. These giant companies gobble up smaller ones then (think Gordon Geko) then decimate the jobs of the acquired smaller company to make greater profits. Even the smaller companies in an industry group devour the start ups and diminishing their work force is a top priority. That’s the giant jobs eating food chain for America’s old guard globalized corporations.

O’donnell is perfect for Wall Street. perfect for the Koch Brothers (& other wealthy oligarchs) that finance the Tea Party, Perfect for the old guard major corporations. Perfect for religious groups & others manipulated by fear. But devastating for the job starved middle class.

Jobs/ Helping Small Business

Two Republicans broke ranks and voted with Democrats to break Republican Senate filibuster that was against helping small business. House should vote on this today or tomorrow.

“would create a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms.

It would also exclude from taxes all capital gains on sales of small-business stock, and ease tax rules for expending and depreciating equipment. Tax breaks in the bill total $12 billion.” Source ultra right wing CNBC

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!

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Technicals, Fundamentals & Analysis

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

Mantra for September - “The Black Box/High Frequency Traders BB/HFT control the majority of trades. Jim Cramer -”BB/HFT make up 80% of trades.”

Term for the Day – McClellan Index/Oscillator - From Investopedia (don’t worry if you do not understand what they are saying. EMA = Exponential Moving Average an adjusted daily moving average of price) -

“A market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. It is primarily used for short and intermediate term trading.

To calculate subtract a 39 day EMA (of advancing issues – declining issues) from a 19 day EMA (of advancing issues – declining issues).”

Investors411 uses this Oscillator because it is broad based & does NOT include volume. If you look at  the MO chart below, you’ll find a strong correlation between +60 and above showing markets overbought and -60 and below showing markets oversold. These are often the starting points for rallies or declines that last for weeks and sometimes months. Compare with the rises and fall of major US indexes. The MO works differently in different kinds of markets (bear, neutral, bull) so it needs tweaking and the +/- 60 are numbers not written in sand,

US Markets - From financial channel Volume is down 30% relative to last year on major US stock indexes. Volume no longer a decent forecasting tool for major US indexes.

Forex dominates (see yesterday’s term of the day) today’s trading. Bank of Japan yesterday dumped billions into their currency in hopes that the Yen would depreciate.

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar, rose  +0.43% yesterday.   For stocks trend is still =Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Fell a  -3.40% yesterday.  The BDI does not have the immediate impact that the MO or Dollar does. Third down day in a row with rate of fall increasing. If this continues BDI bullish trouble Right now longer term chart pattern Bullish/Neutral
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell to +38.99 yesterday. Very unusual NYSE rose =0.25% yet the MO fell a minor 14%. Trend is moving lower and indicator is = NEUTRAL

Reading Tea Leaves

Dollar market and Japan’s intervention for the first time in six years is what’s got traders attention. Japan an exporting country has watched the Yen (their currency) go up in price making their goods cost less. Governments around the world including our Fed (Permanent Open Market Operations) are all trying to manipulate their currencies so their goods cost less and their exporters sell more.  Is this the start of a trade war?  If so, China is way ahead in currency manipulations.

Positions

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

(I do manage 6 accounts that have other positions)

Current positions –  EWS (Singapore).

Trend is clearly bullish for stocks. If we can get the MO down to @ +20 (@a 100 point drop in Dow) and you can tolerate risk you could nibble. Also, of course, we get up over +60 on the MO and  a rise in the Dow/major indexes, that would be a selling or shorting point for those that can tolerate the risk. (see past Investors411)

Their are obviously safer entry/exit points, but that’s where the tea leaves tell me to start.

Long Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Fear Mongering

Thirteen Days is a docudrama about how close two nuclear powers, each with 1000+ atomic weapons,  came to annihilating the world. It is seen from the perspective of the American presidency during the very real Cuban Missile crisis of 1962.

You may or may not agree with the films bias, but the fact is the USA was confronting not only Russia (the other country with 1000+ nuclear weapons) but also the fanatical Chairman Mao and his multi million man Chinese army and weapons at that time.The world was a far far far far far more dangerous place than it is now in comparison.

Today, we face no enemy with 1000 nukes ready to strike, yet the country has been fear mongered into an Islamaphobia over renovating a building 6 blocks from the Twin Towers where Muslims have already been praying. (short video will show what everyone is afraid of) Muslims also pray within the Pentagon at a non denominational chapel just 80 feet from where the al Quaeda hijacked plane hit.

Paul Krugman

The Nobel Prize winning economist had an excellent editorial in yesterday’s NYT. Some excerpts -

• On Politicians who claim to care about the deficit - “these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.”
• On Obama’s proposal to let the $680 billion tax cuts for the uber wealthy expire - “Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year…the majority of the tax cuts would go to the richest one-tenth of 1 percent…the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year.”
• In conclusion – “this has nothing to do with sound economic policy. Instead, as I said, it’s about a dysfunctional and corrupt political culture, in which Congress won’t take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience”

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

Mantra for the month - The Black Box/High Frequency Traders BB/HFT control the majority of trades.

US stocks fell in pathetically weak volume.

Several economic data points are published this week – Housing today, Thursday’s weekly jobless number and last quarter’s GDP. All could move the market and all are expected to be bad.

Understanding The MO

An example

Are the worse than expected economic numbers this week already built into stock prices? We can’t accurately predict how much worse than expected the numbers are but we can get a general idea of how much is already built into stock prices by looking at the MO. (see below) Here’s how this works -

• Say the numbers just come in as expected bad. The MO is at -46 or almost oversold. (-60 = our rough estimate of an oversold figure). Since things are almost oversold expected bad news is probably already built into the market and we could even rally.
• Say economic numbers come in worse than expected bad. A little worse than expected probably won’t impact stocks too negatively because the MO at -46 shows this is already built into the market.  But if all three come in worse than the bad figures expected or, say, 2 of the 3 are much worse then down we go.
• If the MO was already at -100, stock prices could handle the much worse than expected bad news even better.
• If we get better than expected economic numbers you’re going to see a better than expected rally because so many folks will get cut short.

This is why the more we get oversold/the lower the MO goes the safer it is to buy. A second factor comes into play in this and that’s the existing trend or long term outlook. (more on this tomorrow)

Significant Indexes

• The Dollar (USD)  [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar rose +0.08% yesterday.  Two week rally in place. Now facing resistance at 50DMA.  For stocks = Bearish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Rally +3.08% yesterday. 5 week Rally trend is strong = Bullish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell to -45.58 Approach oversold, but still = Neutral

Reading Tea Leaves

Even though the BDI shows the economics of emerging markets and world trade are moving in a positive direction, they will get dragged down if the Big Kahuna (the USA) falls too far.  It’s simply a matter of size.

The dollar is moving higher not because the US economy is thriving, but (for the most part) the largest economic entity the European Union & Britain (Another big Kahuna that collectively is slightly larger than the USA) is doing worse. The second reason behind this is the USA is deemed a “safe” currency relative to the rest of the world. If Israel toasts Iran at least my US treasury bond will be safe.

So right now this makes the dollar the index to watch. As stated many times before you can track this by looking at the UUP.

Positions

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

Current positions – Small positions in EWZ (Brazil) & EWS (Singapore) & USO (commodity-Oil)

Again we are getting close to oversold territory. High risk traders could consider buying a dip. Regular traders wait till we reach at last -60 on the MO to buy the dip. Investors wait for -80 or below.

Remember every investment has a risk of loss. If the long term outlook were to change to Cautiously Bearish, I’d use lower figures like -60, -80 & -100.  Stocks are trending lower within an almost year long range. The SPX did break a support level at 1070 yesterday, but until it gets close to @1020 support level the Long Term Outlook should remain Neutral.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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Apple

Once again AAPL has hit a grand slam for is earning report. Apple is the 800 lbs. gorilla in the room and probably now beats out Exxon as the world’s #1 company. It is also the company most responsible for keeping the worlds economy afloat.

Their major new growth is, of course, in emerging markets. So Apple to meet the demand has to hire new workers? Guess where 100,000 new jobs were recently added? CHINA

Intel co founder Andy Grove has correctly identified the problem and calls it “scaling.”  Apple is simply opening outlets where the new growth is fastest and the labor by far is cheapest. Any US start up when it comes time for major production is going to do the same. It the mega trend of globalization at work.

John S writes in the comments section – “Perhaps as a country we’ve missed the boat.” He may be right. It is almost impossible to reverse this mega trend of globalization. But we can at least try to make a difference and lives better for our fellow Americans.

The progression goes like this.

• Globalization makes moneyed class in America rich.
• Jobs go abroad.
• USA – middle class suffers.
• Corporations gain power in USA and average Americans loose power (democracy)
• Chinese, one party state (oligarchy/dictatorship) gains power over both American companies (think Google) and its people the more it grows economically.
• US becomes more dependent on China economically.

Flying above the 800 lbs gorilla is the 1,400,000,000 people Chinese Dragon. We should be teaching Chinese in all our schools to get ready for the future.

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

The High Frequency/Black Box traders turned an almost -1.5% loss into a gain  of +0.75% yesterday. Volume was again , below average.

Fundamentals were bad – GS, IBM & TXN had disappointing earning, & economic news was not good. Yet the markets rallied on the bad news all day & into the close = Bullish

AAPL hit another  earnings grand slam after the market closed yesterday. Up +2.57% yesterday and was up over 4% in post market trading last night. = Bullish

Bottom Line –  High Frequency/Black Box trades that make up the majority of trades on US stock markets have shattered many former rules of traditional technical analysis. What used to happen is a week now takes place in a few hours in significantly lighter volume. Some conclusions

• The MO has basically worked as a predictive tool. +/-60 is not the exact overbought/oversold level market turn, but a useful rough guideline for when to be long or short.
• The Black Boxes, because of their size, stick to trading ETF’s and major liquid stocks. AAPL is their darling.
• At different time the algorithms Black Boxes use change.  Example – The religiously followed the dollar for weeks then switched away.

Significant Indexes-

• McClellan Oscillator (MO) rose to +49.90 [+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. = NEUTRAL
• US Dollar –  The dollar  rose +0.28% [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. Earning have trumped this indicator for now & we have consolidated for last two days. = NEUTRAL
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China.) BDI is in free fall from a high of @4200 to 1761 . This is a huge -59% drop in 8weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI rose for the first time in 8 weeks the BDI rose Friday.  Last two days also saw small rallies. At long last the BDI seems to be finding a bottom - a bullish sign, but still too early to tell. Fundamentally the -59% drop is very BEARISH

Reading Tea Leaves-

The MO is again approaching oversold territory. It is the currently the most significant of the indicators considered.

Positions

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

Updated over weekends Investors411 holds ONE position at this time

From Monday – “SH – The ETF that shorts the S&P 500 was bought at 51.45… 1/2 of SH was sold for 53.02 for +3% profit.  Letting the rest ride and will sell when conditions on MO near oversold.” The stop/loss on SH was removed and replaced at @3% below what it was bought for 49.95.

As the MO approaches oversold territory will again consider ETF’s that short the market.

Strategy - The same as before – as US major indexes become more overbought the more ETF’s that sort the market will be purchased. Starting out with SH. Then the higher above 60 the MO goes, the more SDS (200% short the S&P 500) and other even 300% short ETF’s will be used the higher the MO goes.  See POSITIONS section at top of blog for more.

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The Magic McClellan

In answer to Doggie’s Mom, Monitor, D & The Critic comments on the MO. First the McClellan Oscillator (MO) used to forecast buying & selling is obviously not magic. We did score big when the MO dipped and we bought in Feb.. We sold when the MO got too high, and we have had some quick outstanding gains this week.

There are well over a dozen other recognized methods  analyst use to measure just about the same thing. Each technical indicator has to be used with a little common sense, reasoning, and a bit of luck.

What happened is the MO got so low (the only time it was a little bit  lower was in the 2008 panic meltdown) or stocks got so oversold that we ran out of sellers.  The odds of a bounce back increased. Reasoning – the crisis was not as immediately bad as it was in 2008. (In the long term things could get worse) This is Warren Buffett type of investing - buy when there is panic in the streets and sell when bulls are stampeding out of control.

For more see  Technically Why Markets Moved Higher & McClellan Oscillator below.

Caution – Nothing is close to 100%. Also, when something starts working well all analysts use it and it stops working. There is a lot of interpretation beyond and in the +/-60 overbought & oversold levels.

Teabaggers

John Sovjani, Who is in no way a Tea Party, Sarah Palin (their darling) or FOX News (their promoters) advocate, has a point. Deficits and Big government (you can go overboard and perpetuate poverty in social welfare) can be very harmful in the long run – A mantra of the Tea Party. These problems need addressing in a systemic fashion but not in a fear mongering, white only, anti Obama fashion as JAB, Popeye and Paul R have pointed out.

The biggest deficit creator of the last few years happened because of the 2008 shadow bank meltdown. Paulson, Bernanke, Bush & later Obama & Summers had two paths

• Another Great Worldwide Depression.
• Bailouts, Print money,Stimulate the economy and tax cuts.

The second choice is far less harmful, but obviously created a deficit problem. Letting the insurance and banking system collapse worldwide would have been catastrophic. The folks who created the over leveraged banking problems were the shadow banks themselves and their supporters. The tea baggers were virtually silent when it came to reform of the banking system. Therefore, I understand their power, but see hem as hypocrites.

There is a need for Big or strong government to regulate Shadow banking. Who else will?  The 3 Republicans and 30 Democrats who voted for Kafman/Brown legislation limiting the too big to fail banks are the Teddy Roosevelt’s/Heros of our time. It’s hypocritical to only speak out against Obama and to protect the Shadow and the opaque system that forced a growing deficit on us all.

Defending Capitalism

Answer to Popeye tomorrow

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

Stocks moved higher in decreased volume. Volume, was NOT a confirmation factor. However after a climax sell off volume usually decreases, and the pattern before markets dipped was rallies in weak volume. Patterns tend to repeat themselves = Bullish

All week long the 50DMA of the benchmark S&P 500 has been mentioned as a key resistance level = RED light for markets. Yesterday the SPX (S&P 500) stopped right on at the RED light. If we can close above this level before the weekend its bullish for stocks.

Technically – Why we rallied - We had a climax selling spree in HUGE volume.  All the weak holders panicked and sold. Everyone left is a more committed to holding investor. Lot of major institutions bought “puts”(bet the market was going to go lower) and were forced to “buy to cover.”  So right now there are not many sellers out there and stocks are moving up. Ultimately we will find some equilibrium or point where a consolidation period begins. (See above on SPX as a possible consolidation point)

There are a small amount of buyers/traders, but no long term sellers right now.

Repeat Great source for what’s happening live in markets around the world & in the US before 9:30 EST Wall Street opening at CNBC Slight upside bias for US right now,Europe, Asia basically up, but this could change in an instant

Significant Indexes

• McClellan Oscillator fell dramatically to -13.40 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is NEUTRAL territory.
• US Dollar – rose +0.32% yesterday. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important  Dollar is close to breaking out to new yearly high. = Bearish
• The BID – Kept climbing. It has broken out to a new 5 month high. The Baltic Dry Index measures the cost or flow of goods/trade between countries. This is positive for export countries like Brazil and China and commodities. Goods costing more means trade is increasing =Bullish

Positions

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

I again revised all positions held by Investors411 yesterday because so many stocks/ETF’s were bought in the last 4 trading sessions. POSITIONS is also located at top of blog. (Click on the word at the top of the blog and scroll down to 2010)

McClellan Oscillator has reached NEUTRAL territory – Time to STOP any buying – and because of momentum start thinking about taking profits. If you are a trader and can find an individual stock that is not over extended, you can squeeze in a buy.

I really wish things were different (buy and hold forever), but if we see another major rally today Investors411 will take a little money off the table = sell. If/when the McClellan starts to turn into overbought territory its time to think more about selling.

It’s important to look at how far above the 50 DMA a stock gets (compare on chart to other times your stock got too far above its 50 day moving average)- too far = sell

Our Investors411 Positions are up dramatically.  Some well over +10%. (See Tuesday’s charts)

• UWM
• TYH
• IMAX
• VCI
• SNDK
• FXI (weakest & this is troubling – see yesterday’s post)
• ESRX (expect this to be less volatile and slower, but steadier)

I apologize if this is seems complicated. I’m really trying to keep it simple. There are more than dozens of different ways to technically measure stocks/ETF’s.  But Investors tries to Keep it Simple by using only a few and staying with what works.

Paul R has some excellent resources he occasionally posts on the comments section. I’ve also, in the past, recommended the Chart School of StockCharts.com

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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EU Massive Bailout Package

The European Union & the IMF have done what they had to do to, at least temporarily, to  avert fears in Greece & Europe. From NYT

“European leaders agreed to provide a huge rescue package of nearly $1 trillion to combat the debt crisis that has engulfed Europe, and central banks began injecting cash into the financial system.”

This has sent European stock markets soaring & the US is following. Judging from the  reaction of traders and investors this plan has enough fire power to work.

More Analysis from Seeking Alpha – Too Much Too Late. & Greek Bailout Plan Increased by a Factor of Five

Like the USA the EU has chosen to use further debt to solve a debt crisis and to avert a global financial meltdown.

Nuclear Power (Round 3)

From Yankee Bob [Bolding/color by editor]

Dear John,

Wind, solar and geothermal only need gov. subsidies to level the playing field. All the fossil fuels and Nuclear are HEAVILY subsidized by the gov. so that taxpayer aid should be factored in any cost comparison.

When they, the fossil fuel industry and their apologists, show you cost comparisons,the fossil fuels are cheaper then clean energy. But they have not factored in the tax payer subsidies that the fossils get and dwarf what the clean greens get. They also don’t factor in the tremendous amount of water the fossils consume and waste.

If the coal industry is allowed to mine all of the Powder River Basin, there won’t be enough water in Wyoming left to support life. How many fish kills have the Nuke Plants caused? What happens if there is a terror attack on Indian Point? Can you really evacuate the NY Metro area? Why is the cost to decommission Nuke Plants not factored in to operating costs and why should the taxpayer be left, always, with that bill?! Show me one Nuke plant that opened on time and under budget  and lowered the electric rate!….

This editorial is continued here or in comments section of blog.

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 for changes made each weekend

Major markets fell again in massive volume. From Friday “On a pure technical basis we are near the end of the downside move.” The last two days of massive volume technically shows a classic selloff.  In laymen terms – almost everybody that’s going to sell has

Europe’s massive bailout package has seemed to positively impacted markets this AM (See above) = Bullish

How this works technically is that a massive amount of traders short the market + Almost everyone who was going to sell has. This creates a position where few sellers are left and the vast majority of traders are short (betting the market is going to go down). These shorts are forced to buy  to cover (buy the stock because they will loose money the higher it goes)

This is all one big fear/greed play and pre-market indictors are way way up. Dow +400 points. European markets up 4 to 9%

Last Weeks Fearless Forecast – “Down Week” We got toasted

This Weeks Fearless Forecast – “Up Week”  (see EU Bailout above) Not a difficult call with pre markets up +400 on Dow

Fundamentals (Europe Bailout and good US employment numbers) are too big to ignore. Markets have technically reacted. Because of the massive move in Europe and pre markets, everything is going higher.  We should get on the rally train at the first dip.

• McClellan Oscillator rose to -123.10 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. – In the last three years the MO has only reached pass this level 3 times –  10/08, 3/09, & 10/09 = We are way oversold = Bullish
• US Dollar – fell  -0.30%.  [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules. Rising dollar almost always = falling stocks. The bailout is going to send the euro much higher and consequently the dollar much lower

Positions

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

How The McClellan Oscillator works

Simply the more stocks get over sold the better the odds are of technically making  some sort of gain. The only time the MO had dropped lower (-123)was in the 2008 meltdown.  So it showed us the odds were in our favor. They still are till we reach zero. Only at zero or the 50 DMA change the odds to @50/50.

Investors411 – On Friday near close Bought 2% more IMAX at 17.25 & 1% of ESRX at 97.10. See Friday’s update. Sure wish I had invested more on Friday. Unfortunately, like everyone else, I was fearful.

Will invest 5-10% more in ETF’s early, on the first dip or end of day. Be moderate, don’t get too excited. Remember lots of this initial rally is short covering.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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Senate Fails to Break Shadows

3 Republicans and 30 Democrats stood up to the mega Shadow banks & their lobby yesterday in support of the Kaufman/ Sherod Brown legislation to break these massive financials. Senate Finance Committee Minority leader Richard Shelby (R) & Senate Majority leader Harry Reid (D) vote yes. The above link has a list on how YOUR Senator voted.

Opposition came from the vast majority of Republicans and the Summers/Obama White house. This whole group is owned by  and protects the Shadows.

Hopefully Main Street can still win some crumbs or a pice of the toast instead of getting toasted in the finacial regulatory legislation.

Greece vs. USA

Greece’s problems are many ways are similar to the USA. The major difference is in the solution.

The central Bank of the USA can print money and loan it out at @0% to shadow banks who take that $ and not so secretly invest most of it in highly leveraged derivatives instead of less profitable loans to small business and consumers.

Greece can’t print money to bail itself out like the USA. It is under the jurisdiction of the European Central Bank (ECB). Therefore, it can only get TARP like loans from other countries and the IMF.

Some where down the line all the $ we print are going to slap us with inflation. But for now its kept us from sinking.

EU Contagion

The 2008 collapse has created massive problems for PIIGS and former Russian satellite countries. Example Spain’s unemployment is at 20% Yesterday’s map of debt obligation is the tip of interconnected obligations that spread worldwide and are exacerbated by derivatives sold on that debt.

Nobel Prize winner, Paul Krugman has an excellent editorial. Krugman recognizes the European Union’s main problem

“The problem, as obvious in prospect as it is now, is that Europe lacks some of the key attributes of a successful currency area. Above all, it lacks a central government.”

He goes on and explains how Greece is different than our governments bailout/relationship with California. The only logical endgame is -

“Greece leaving the Euro…unless European leaders are able and willing to act far more boldly than anything we’ve seen so far.”

Another possible solution from MIT’s Simon Johnson & co author.

Bottom Line for Investors – Fundamentally its hard to see a bottom until some resolution comes to pass. Till then, we will all be slowly twisting in the wind.

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 for changes made each weekend

Massive loss in massive selling. Technically, we have gone elliptical to the downside. On a pure technical basis we are near the end of the downside move. = Bullish

However both fundamentally and psychologically the stocks across the world have been damaged and hopes of a V shaped worldwide economic recovery have turned into U‘s, W‘s L‘s and perhaps worse. The entire group of talking heads on CNBC, the #1 financial cheerleading channel, looked liked deers caught in the headlights. The trotted out Nourille Roubini (a Dr. Doom) to jawbone this AM. = BEARISH

Failing to break massive shadow banks = Bullish

A technical glitch caused caused a massive 1000 point drop in the DOW (similar drops on all indexes)

Therefore, its hard to see any rally NOT getting sold into and another low on the way. Stocks broke through support levels like a knife through butter. The only piece of good news is in the short term stocks are getting so technically oversold that they are close to running out of sellers.

Monthly Unemployment rate up to 9.9% But non farm payrolls up +290,000 This is a STRONG number (@+180,000 was expected) and other months were revised upward. When Obama took office it was over -700,000 I have no idea why such a strong jump in numbers equates to a rise in unemployment. But end result = Bullish

• McClellan Oscillator fell dramatically  to -113.71 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. – In the last three years the MO has only reached pass this level 3 times –  10/08, 3/09, & 10/09
• US Dollar – rose another massive +0.87%. This marks the 4th day in a row of huge gains. You have to go back to the 2008 stock meltdown to see anything similar. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules Rising dollar almost always = falling stocks. The dollar is rising mainly because of the fluctuations in European currencies = Greek debt.

Bottom Line -Roller Coaster Rally day, but real long term fundamental problem from Greece spreading.

Positions

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

The DANGER WILL ROBINSON, DANGER DANGER SIGNAL is as many of you long time readers know is the signal to duck and cover. It the strongest warning Investors411 gives of impending doom.  Investors sold its remaining position in EWZ (Brazil) near the open yesterday for a loss.

Long term what’s happened is bad for US markets - The higher dollar is a killer for any US company that makes profits abroad and will take a chunk out of economic recovery including job growth. Until we see a measurable reversal in the dollar both stocks and our economy are going to have trouble.

Gold has become a proxy currency and Investors411 mentioned last week GLD was a good investment, but never pulled the trigger. A buy the dip ETF

Today, Investors will start nibbling on IMAX & perhaps ESRX on any further dips. Both stocks have compelling reasons for long term growth, except in another world wide meltdown. This may be a shorter term trade

Caution – There is probably more major downside to this market because of Greece. The first major rally will get sold into & Investors will use ETF’s that short the market when this occurs. Example SDS = @2x shorts the S&P 500.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Wall Street 1867

Grading Financial Reform

From Seeking Alpha (this financial site does some independent thinking and has almost 459,000 members –  including me) This is a really good analysis by Linus Wilson. It covers major points and gives grades.

• Resolution Authority
• Derivatives Authority
• Ratings Agency Reform
• Bank Tax (extra credit)
• Breaking Up the Big Banks (extra credit)

Senate voted not to debate on party lines so fillabuster held. One Nebraska senator wanted a special exemption for WarrenBuffett’s 65 billion dollars of derivatives.  Buffett called derivatives financial weapons of mass distruction.

Conservative David Brooks at NYT has a differnet take in his editorial today “Dumb but decent meets smart and sleazy in the Washington drama over how to prevent another financial meltdown” on GoldmanSachs

YOUR STOCK LIST

Lots of Winners last week

This list has been developed by YOU sending in your stock picks, we discuss them individually (usually by email) and if they are trending positively andare liquid they get included in YOUR list. Thanks to many of you who have sent in choices. If you payed attention to the List published on each Tuesday or Wednesday, you’ll find a lot of winners

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

Eyes are turning to the Fed announcement on Wednesday -Will they in some nuanced way change the language of their statement on interest rates?

Nothing extraordinary in volume and/or market moves yesterday.

Ford seems to have done wellwith its earnings report. = Bullish

GS in front of congress = Bearish

Technicals, Fundamentals & Analysis

See Positions for changes made each weekend

Significant Indexes

• McClellan Oscillator fell  to +7.47 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is  NEUTRAL territory
• US Dollar – fell slightly -0.04% yesterday. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules Is very important. Remember, dollar down almost always = stocks up and visa versa. Dollar in middle f consolidation.

Positions

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

YOUR STOCK LIST

Caution- This is mostly just technical analysis and lots of other factors enter into a decision to buy or sell

Caution – We are in the middle of earnings season and a bad or good earnings report can move these stocks @2 to 10+% Many of these stocks are moving in anticipation of or reacting to earnings reports. This has to be considered before you buy/sell

• Last Week’s comments in black.
• This week’s violet.
• Ticker symbols are links to charts.
• A Line means stock is in danger of being taken off list.

If you have trouble with terminology email me. 5oDMA = 50 Day Moving Average – blue line on chart.

Well aware that most of you are looking for longer term buys. Remember Stocks are in most cases riskier than most ETF’s. Our main strategy is to buy the dip of a stock that is trending higher.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

• CAAS –   – Risky – Now or never time to buy Winner exploded to new high, overextended – wait
• PCLN –   Close to 50 day MA support level. A buy the dip stock. Winner exploded to new high – overextended – wait
• F –  . Risky buy now, better on dip. Winner. Over extended now buy the dip
• CSCO,    All these stocks (AMZN & AAPL) are to high above their 50 Day MA, especially apple Wait for dip. Winners All 3 are too far above 50DMA to chase, but buy a dip.
• SHOO –  . Dipping down, but still too overextended. Buy bigger dip. Winner Over extended but could have another 5 -7% dip then run left in it. Risky
• ICON,     a little overextended Buy the dip. Longer term investors wait for bigger dip Winner Way overextended looks like climax run wait for dip
• DGIT –    Traders buy a dip. Investors wait for bigger dip – Winner – Bit overextended traders buy smaller dip Investors bigger dip.
• VCI. Twice dipped to 50 day MA and held, but volume could be better on rally days = riskier. Buy the dip. Winner – Bounced of 50 DMA & at new high – Traders buy smaller and Investors bigger dip
• CREE –  Now dipping. Traders could buy if it dips some more. Investors wait. Big dip then rally, now consolidating, traders buy smaller and investors bigger dip.
• SNDK – Dipping. Traders buy small dips, Investors wait. Winner on earnings news – overextended – wait
• CTRP – . Weak volume small rally then Fell in big volume Rallied in weak volume – Don’t touch – wait

IMAX is Investor’s411 #1 recommended stock. The others are theater chains that benefit from raised 3d ticket prices and attendance. But they are also impacted by overall box office. Therefore IMAX is a more favorable based on the technology.

• *CNK (Cinemark) Too overextended to buy Winner Traders buy smaller dip Investors wait for bigger dip closer to 50DMA
• RGC (Regal Entertainment)  Dipped and rallied yesterday too much volume behind fall wait. Consolidating – Wait for 50 DMA to catch up.
• *IMAX . Traders buy dip Investors wait. UP over +60% since recommended Winner Still pushing higher and overextended – wait
• CKEC (Carmike Cinemas) Overextended.  Wait for bigger dip. Winner Still pushing higher and overextended – wait

32 million new heath care customers (Obama/Pelosi health care bill) means some stocks are going to rally on this increased supply and the growing aging population of baby boomers who need health care. Hopefully long term buys. Will be slow movers relative to other smaller cap stocks.

• *ESRX (Express Scripts) – Slow melt up hopefully this is a long term hold Big dip,big rally – wait. Made higher high & now consolidating – wait.
• *TEVA (Teva Pharmaceuticals)  If you don’t own buy dip at 50 day MA/support Broke through 50 DMA and simply looks like a bad trade. This was bought when it was too far above its 50 DMA – looks lke a mistake.

New Stocks - I’d add more but its very time consuming. Many thanks to Paul R, Monitor and some others who prefer to remain nameless for suggestions.

• VLTR . Closer the dip to 50 Day MA the better the buy Winner, now potential breakout candidate.
• UAUA Dipping in weak volume = good. Traders buy smaller dip Investors wait for 50 day MA Winner if you bought dip closer to 50 DMA. Now, Riskier  buy the dip
• SLAB Classic cup and handle breakout. Even more extended – buy a bigger  dip Dipped Traders buy smaller dip Investors wait. Winner if you bought the dip. Now riskier buy the dip
• MSPD But now that the dust has settled buy the dip. Winner has rallied off 50 DMA. Now riskier buy on dip

Analysis – The McClellan Oscillator was at -37.70 last Tuesday. This Tuesday its at +7.47. Last Tuesday, therefore, was a better time to buy. The closer to -60 the better or more oversold US markets are and the better it is to buy.  So until we dip deep into the red buying stocks is less likely to turn out favorably – make $$$

Lots of winners last week because of a low McClellanOscillator and some good earnings report. Carefull this week a lot of our stocks are over extended and MickyC is higer.

Very rough guesstimate of how much of your odds of successful trade/investment when McClellan Oscillator is at the following levels.

• +60 (overbought) = 25%
• 0 (neutral) = 50%
• -60 (oversold)= 75%

* =  Investors411 has a position in these stocks.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Trust Buster president Teddy Roosevelt – Will Obama show us the same tonight?

Tea Party

“The tea party’s exaggerated importance” is the headline of the  major independent blog editorial blog Politico’s this AM on the “anti Obama rage group” .

Mea Culpa – I do respect the Tea Party because at Investor411 they have won. By focusing attention on their white (in the words of the old Ivory Snow commercial this group is 99 44/100% white)  rage I have taken it away time from facts on the deficit or Health Care.

The NYT’s lead editorial yesterday was on Massachusetts heath care system “which 1/2 of Scott Brown supporters and 2/3 of all Massachusetts residents like.”(paraphrase) according to a poll. 97% of MA residents are covered. For more see “Reform and Massachusetts.”

BRIC

The Economist has a  has an in depth look at the top emerging markets as a real alternative economic force to the European Union & America.  BRIC = Brazil, Russia, India, China whose leaders are or just finished meeting together in Brazil.  “The Trillion Dollar Club”

The Obama Speech

Tonight’s speech on financial reform is a defining moment. Will Obama be the next Teddy Roosevelt ? (A Republican Trust buster) The short answer is NO. Senate Democrat Ted Kaufman (Dem. DE) is our Teddy Roosevelt – Here’s part 2 of his speech on Wall Street and the Rule of Law

One piece of encouraging news is Senator Blanche Lincoln (Dem  AK) committee has a Republican onboard (Grassly- R IA) for her legislation on derivatives. Lincoln has come up with a stronger bill than other proposals.

NYTs headlines Obama Issues Sharp Call for Reforms on Wall Street If this is true you’ll see a 2 to 5% decline in shadow banks tomorrow. It Teddy Roosevelt or Ted Kaufman gave the speech you’ll see a 5 to 10%+ fall in shadow financials tomorrow.

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 for changes made each weekend

Market went nowhere yesterday in increased above average volume. What Wall Street calls “churning.” Usually considered a reversal of trend = Bearish

Yesterday’s grand slam earnings reports by giants APPL & BAC (thank you taxpayer bailout, Fed 0% loans, & elimination of mark to market accounting) did little to move markets higher. US markets have reacted poorly to great news indicates  = Bearish

Seeking Alpha this AM has a big section on the problems  China has. Here’s one article . Investors411 has closed its entire China position (FXI).

Earnings reports continue to pour in.

Significant Indexes

• McClellan Oscillator rose slightly to -4.91 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. - This is almost right in the middle of NEUTRAL territory
• US Dollar – rose +0.19% yesterday. [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules Is very important. Remember, dollar down almost always = stocks up and visa versa. The positive earnings reports are overshadowing the dollar which is in the middle of a consolidating range between @$80.00 & @$82.20. Dollar at 81.18. If it moves to either side of that range it will impact stocks.

Positions

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

Both Comments from The Critic & Paul R were incorporated in the strategy section of the blog. You can see them by linking here or at any time in the future going to the top of the blog and clicking on the word STRATEGY

Caution – I do on occasion day trade. None of this is part of Investors411. Almost all of you are looking for something to hold for a period of time.

When to Buy? – McClellan Index - Only 8 times in the last year did this index reach below -60 = oversold = a time to buy. Even then tow of those tomes were within a few days of each other. Therefore the total was only 6 times. The last time was back in early February. Its frustrating not to buy or sell, but Investors411 is going to wait till we are oversold to commit major amounts of capital.

UWM – [ETF that does 2x what small cap stocks do] UMW is back in the black and at a new high although only up a couple %. Almost closed this position. Going to sell at or near open today.

IMAX – imax hit a new high yesterday in a “pop and drop” (see yesterday’s Investors411) At one point in time it was up almost +9% and end the day at +2.94%. Volume was @ 3x normal.  Some entity perhaps more than one broke Imax out to a new high. All the day and swing traders jumped in after the break out. There was some China news,but this turned out to be not as big as its headline.  Then the dropping or profit taking came as IMAX fell up to 8%.

IMAX has had  some other pumps and dumps over the last few months. Investors411 called this pump and dump yesterday. This kind of trade is only for day/swing traders (not investors) who know what they are doing and can handle the risk. Not a recommend trade by Investors411 Yes I bought some Imax to day trade early yesterday and made a 5% profit on this.

Paul R on comments section recommends VCI,, that’s held onto its breakout from a consolidation period yesterday. Volume not strong,but it has possibilities for longer term investors

Monitor Likes SHOO – more a short term trade because it is too far extended from 50DMA (Day Moving Average – If you do not recognize what 50DMA was you should NOT be trading these stocks!)

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

The Best & Worst of Investors411-March

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Psychologist Kahneman & Pandemic expert Brilliant

Economics, Politics – Editorials

The Best

1. The Israeli/American nobel prize winning father of behavioral economics Daniel Kahneman video on how one memory of a longer term experience can impact YOUR happiness and pain. (Thanks to one of you who discovered this valuable presentation) LINK
2. Perhaps the world’s most renowned epidemiologist Dr Larry Brilliant video His case for “Informed Optimism” is outstanding and different from the 3/22 video LINK. His case for how poverty causes worldwide epidemics, from Small Pox to Ebola, and those that are doing something about it impacts everyone.
3. The Cleveland Clinic’s Dr. Cosgrove’s interview in Fortune magazine brought new insight into the health car debate. Of course health care is going to cost more as the huge baby boomer demographic gets older and technology simply gets better at treating illness. However the root causes of American’s self indulgent problem is “Obesity, Smoking,  & lack of exercise” LINK

The Worst

1. In general – I sensationalize. From headlines like “Baby Killer” to “The Black Widows” I do this first to attract your attention
2. Stereotyping one side in a debate is just plain over the top. My excuse – sometimes you just get sooooo angry that emotions overwhelm logic.
3. Too much time is spent on pointing out what’s broken and not enough on how to fix it. Although long term readers, of Investors 411 should notice that”s changed over the years. There’s a lot more HOPE or SOLUTIONS (Kahneman, Brilliant, & Cosgrove) but there’s still more to go.

Stocks

The Best

1. The March 5th upgrade to Cautiously Bullish -US Markets have gone from negative to over a 5% gain when they open tomorrow.
2. YOUR Stock List – It’s time consuming to produce but offers a wealth of ideas. Lead by SHOO and IMAX many have had solid runs higher this month.
3. (these are from past months) Introduction of McCellan Oscillator (it works on broad markets, but nothing works forever and its certainly not 100%) and IMAX (recognition of 3D technologies potential)

The Worst

1. Prediction – Obamacare’s passage was going to hurt the US  stock market. !00% wrong. People’s mouth(Right wing investment community) were in one place, but there money was in another. If anything Obamacare juiced the markets, because the rally blinked for a 1/2 hour then continued.
2. Reluctance to be more fully invested. For longer term investors still think this is good. Nothing’s been fixed financially, the problem has been underestimated & hidden, and there are more shoes to drop. However for riskier investors who have the time, discipline, and understanding to be in and out of a stock/ETF within a day, week, or month(s) its a mistake.