The 2nd Maine Militia’s Gazette

To paraphrase the 2nd Maine Militia (See Nov. 17 blog) it’s not about left vs. right, Democrat vs Republican, but up versus down . So let’s take a look at a brand new news outlet only found here  at Investors411. In the style or philosophy of the 2nd Maine Militia – here’s how their paper might look.

• Headline – Crisis in Duba i – Thousands have died (from Bangladesh, Philippines, India and other poor countries) building a wealthy playground for the uber rich Arabs. A place where wealthy Americans and Iranians can rub elbows built on the backs/lives of third world labor.
• The private company that created this years hottest American holiday present the Zhu Zhu dolls/pets has just announced a proposal for three new factories. Sorry no factories in Maine or the USA – they’re all in China.
• Front page editorial-Keeping the Masses Distracted – Will someone tell us why CNBC and CBS business news feature stories are -  the selling of Michel Jackson’s rhinestone glove, the scratches on Tiger Woods face (wife or car accident) & the latest block buster teen vampire movie?  This is America Corporate media news.
• Another local bank collapses . The big shadow banks that caused the financial meltdown are getting bigger with our money while their competition – the small local Maine/USA banks continue to fail in record numbers.
• Guest editorial from Robert Reich – The 3 classes of Americans – #1 Those 25% of Americans whose kids are on food stamps, #2 those Americans who are managing, but worried about loosing value of homes & jobs #3 Those few Americans who have taken home even more winnings since 2007 like Goldman Sachs executive. LINK

Some of you may think that our fictitious Gazette is over the top. It does focus on the ugly side of globalization and unregulated wealth creation (sometimes  misnamed capitalism or free markets). It does pacifies the reader with obsessions about celebrity.  Maybe the scratches on Tiger’s face is what will solve the humanities problems and just maybe you’ll think about forming your own 2nd Maine Militia.

KISS & STOCKS

Keep It Simple Stupid

For those of you whose eyes gloss over in the stock section I’ve tried to KISS it today, but I left a little in for those who want the deeper analysis

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-1.48%	down
NASDQ	-1.73%	down
S&P500	-2.10%	down
Russell2000	-2.53%	-

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

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

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

Technicals, Fundamentals & Analysis

For the moment the Dubai economic meltdown has stabilized because oil rich Abu Dhabi has promised to bail out the over leverage Mid east playground for the ultra  wealthy.

Big predictable economic news for the week is Bernanke’s approval hearings in front of congress, Obama’s more troops for Afghanistan and the monthly jobless figure on Friday

Black Friday saw a significant increase in traffic and only a o.5% gain in sales according to early reports. reports. Today is Cyber Monday where shoppers do a whole lot of on line Xmas shopping (start of the online buying season)   These numbers are Bearish for retail stores. It probably means far more people were out seeking the bargains and they will do less shopping for the rest of the holiday buying season.

The dominating factor controlling  stocks prices continues to be the dollar.

FEARLESS FORECAST – Last week’s fearless forecast of an up week was crushed by the Dubai crisis .  Markets have rebounded from Dubai across the world and the damage seems limited in investors/traders minds. Looks like we will return to general trend of dollar down and stocks up till Friday’s job numbers. – Outloo k – flat/down week.

Coming up more on - Military escalation in Afghanistan & growing problems with Iraq. Any attack on Iraq would send the dollar higher and stocks lower . Perhaps Obama’s announcement of 30,000+ troops in Afghanistan will have same impact.

Now going to get a bit more technical

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

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Significant forecasting tools/Indexes for stock markets

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

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI has broken out to new yearly high

The BDI fell -145 points yesterday and closed at 3994. Technically  the BDI broke out through its major resistance level 4291 (this year’s high) over a week ago.  The BDI has rallied about 1900 points since late September. Now, 7 down days in a row & through the former resistance and now support level 0f 4291.

What it means – Long term we created a higher high on the chart = Bullish. Short term we are on the way down = Bearish The BDI is far more useful as a long term indicator of not only world trade, but specifically China and growing emerging markets.

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The Dollar is currently the #1 forecasting tool .

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

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

US dollar rose a HUGE +1.00% Friday . The dollar closed at $74.98 . The $75.00 support level crashed and burned on Wednesday but, T he Dubai crisis is going send money back into the dollar and out of the stock market.

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

The index closed at -27.62 This is approaching an Oversold Position 

Oversold conditions (@ -60) = buy, Overbought positions (@+60) = sell

Positions

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

I did get a chance to do some editing in the Positions Section of the blog. ( Note 2 added positions)

From Friday – Probably going to take some profits today (sell 1/3+ positions) in FXI, EWZ, GLD & all of DGP. Hopefully, will get a chance to buy back into these positions when the McClellan Index gets oversold. Personally I did sell/take profits on 1/3 of FXI & all of DGP .

Long Term Outlook = CAUTIOUSLY BULLISH/NEUTRAL

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

Michael Jackson

Photo – Huffington Post

Jackson’s memorial service ("a variety show with a coffin") was carried by 19 networks and seen by 31.1 million viewers. Chris Hedge’s – The Man in The Mirror editorial has an enlightening view of American culture it begins like this.

"I n celebrity culture we destroy what we worship. The commercial exploitation of Michael Jackson’s death was orchestrated by the corporate forces that rendered Jackson insane. Jackson, robbed of his childhood and surrounded by vultures that preyed on his fears and weaknesses, was so consumed by self-loathing he carved his African-American face into an ever-changing Caucasian death mask and hid his apparent pedophilia behind a Peter Pan illusion of eternal childhood. He could not disentangle his public and his private self. He became a commodity, a product, one to be sold, used and manipulated. He was infected by the moral nihilism and personal disintegration that are at the core of our corporate culture. And his fantasies of eternal youth, delusions of majesty, and desperate, disfiguring quests for physical transformation were expressions of our own yearning. He was a reflection of us in the extreme…"

You can read the whole editorial here

Chris Hedges is author of "Empire of Illusion: The End of Literacy and the Triumph of  Spectacle."

Iran

Friday could be an important day in the country that now has more jailed journalist than any other county. Rafsanjani , who is not an Ahmadinejad backer, is leading Friday prayers and the opposition has promised to flood the area. Story here

Huffington Post’s Nico Pitn ey still #1 in coverage here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+2.27%	up
NASDQ	+2.12 %	up
S&P500	+2.49%	up
Russell2000	+2.56%	-

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

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

Technicals and Fundamentals

Note - Repeated statements in brown.

Markets staged a big time rally and volume increased, but it was still not above average. The major technical question becomes can we break the series of lower highs and lower lows? We have held and formed a strong support level at SPX 875 . The S&P closed at 901 and we need to close above @ 930 to take out the lower high or major resistance level.

After falling, as predicted, to the S&P 875 support level, the bulls have reinforced the barricades and held their position for the last two days.  The longer they hold out the stronger the bulls position becomes. Here come the bulls led by financial stocks that have been soaping up low interest money from the Fed and TARP programs. Loans are not pouring out of these institutions to struggling homeowners, but they are making a killing on the loans they do make, the government bonds and derivatives they sell/insure.  Not having mark to market accounting allows them  special accounting methods other institutions do not have.

Financials are probably going to continue their charmed existence, because t he Obama administration & the Fed has deemed the big ones too big to fail and they keep kicking the can down the road on any major fix of the problems that created the economic meltdown. Financials led yesterday’s rally  XLF up +6.4% – Increased, above average volume indicates Bulls Rule – rally to continue in financials.

Mea Culpa – The amount of the rally in financials has caught me a little off guard. I thought all the traders were already long this sector and the rally would be about 2 to 3+% not 6+%.

Earnings season is off to a good start. But technically markets were oversold and the 875 level held. Fundamentally, Still looking for Intel (reports after closing) to set the tone.

Intel’s earnings report (after the bell today) is still the key to any breakout. US markets have started to move higher on good news  So momentum is with the bulls

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell for the 9th day in a row.  However, the rate of decline has slowed dramatically & more each day  This chart works a little different from most other charts in that it is a lot smoother and less volatile. The fact that the decline rate has dramatically narrowed is a positive for bulls

Unfortunately, over the last six weeks we have a series of lower high, lower lows, and a broken support level. That’s positive for bears. Over the last six months we have dramatically risen off the lows – Long term Positive for bulls

In a nut shell the BDI is

• short term - seems to be turning bullish (emphasis on seems )
  
• mid term – clear bearish pattern
• long term - bullish pattern
  

$USD - The Dollar is still comfortably in its in its 5+ week long consolidation pattern between $79+ and 81+.

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Fearless Forecast – So expect a rise with some financial stocks reporting early in the week and that rally to get tempered later in the week

Our Positions

The Hedge – Still little change in overall position QLD -5.11% and SDS +5.89% = a gain of +0.79% This trade may take a months to reach a 5% to 10% gain/loss.

Alternative Energy – GEX/PBW – Now completely out of this sector and looking for a way back in or a buy the dip opportunity. There are several fundamental factors going on here. Most importantly it looks like oil prices are moving lower and that will hurt alternative energy.  If we have a significant summer rally oil prices and alternative energy could rise and we will miss out on some potential gains.

Financials - For traders (not investors) there is potential buy the dip opportunities in the ultra long ETF’s not XLF but UYG (@2x XLF) and FAS (@3x ELF)

Foreign ETF’s – Still would like to see a bit more of a dip to buy more FXI, EWZ & IFN . For a short time, momentum may swing back to US equities, but the long term trend is clearly with these growing economies.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Iran Week Three

Two points of view

More Optimistic – Andrew Sullivan here (above photo from his blog)

More Pessimistic – Jaun Cole here

Unfortunately, think Cole has better insight.

Photo to left – Your editor in the fabulous Summer of 1951

Why the USA Is in Such Trouble

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One of my left wing friends lamented that the Mark Sanford debacle didn’t get enough media attention this week. Sanford is a Republican family values governor who hypocritically had a torrid long term affair with an Argentina "firecracker," then likened himself to the biblical King David.

Farrah Fawcett (an actress who fought a courageous battle against cancer) and Michael Jackson (music icon with some strange behaviors) died and they sucked up all the news coverage. He wanted the Republican toasting to be the story of the week. All these events were secondary.

There was one big headline last week and these three events will have far less impact on your life and especially those of your children. - The US House of Representatives for the first time passed a major climate and environmental bill. As a society we just don’t get what’s important. That’s why this country is in such trouble.

There are 4 reasons why climate/environment legislation is so important, but today let’s deal with reason #1

Global Warming and The World Is Flat Society

In every society there are the flat worlders who for some reason (mostly self interest or emotionalism) want the opposite to be true. Example: Smoking doesn’t cause cancer or the CIA orchestrated the 911 attacks. Usually you will find a mix of these two groups in Flat Worlders – one that makes a profit and the other, close minded followers.

If you search through any relatively unbiased media source like Wikipedia you’ll find that "the Scientific community has reached consenus that global warming is man made" and "Since 2007 no scientific body of national or international standing has maintained a dissenting opinion." Link

Unfortunately, American culture is locked in the here and now of the Stanford of Jackson stories. Just like  smoking causing  cancer,  global warming will not kill me now and Stanford and Jackson sell.

Nobel prize winner Paul Krugman puts it bluntly -  those who think global warming is a hoax are committing "Treason against the planet" Unfortunately there are Republican members of the Flat World Society who voted against this legislation because hey believe global warming is a "hoax."

Research, the latest from MIT , (an evil scientific institution that the World is Flat Society hates and ignores) are seeing an even more rapid deterioration than expected. There are imperfections in the climate change legislation, but to vote against it because you think science is a "hoax" puts you in The World is Flat Society.

Reasons 2,3 & 4 tomorrow & apologies to Tom Friedman who has a totally different meaning in his book The World is Flat.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	-0.40%	up
NASDQ	+0.47 %	up
S&P500	-0.15%	up
Russell2000	+0.79 %	-

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Technicals & Fundamentals

Big spike higher in NASDQ volume. Other major indexes up, but below average. NASDQ spiked probably due to rebalancing of the Russell 2000. So, no real help from volume in making a prediction.

Big events of the week

• Madoff Monday – The financier gets sentenced
• Consumer Confidence Numbers on Tuesday.
• Gov’t employment numbers come out Friday (Market closed on Friday)

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown. Added the VIX back as a prediction tool.

BDI - The Baltic Dry Index measures the flow of goods (world trade). You have to get out of the box and stop thinking just of the USA. This is a worldwide integrated economic planet and this Index is perhaps the best forecasting tool. If trade is diminishing through out the world then a worldwide recovery is in big trouble.

Look at the chart. (Click on the blue BDI above) You can adjust it from 5 years to one day.  You’ll see what looks like a recovery. Friday the BDI was flat and its started to trade in a range. This is better than the bearish fall over the previous four days. Right now the long term momentum is bullish and short term neutral

$USD - The Dollar fell-0.72% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons.

Long term momentum for dollar is bearish. Short term  mo is neutral, but we are closer to a bottom side breakdown than an upside breakout. Any breakout or breakdown would be significant.

VIX – Measures Volatility in S&P 500. Notice this chart is in almost a straight line down.  The less volatility means the better investors are feeling.  This is clearly a long term bullish indicator .

Reading the Tea Leaves

Last weeks  fearless forecast – Another down to flat week. All indexes except the NASDQ were slightly down. NASDQ rose 0.6% .

This weeks fearless forecast – A rally, but one that does not get to new highs. Volume, the #1 forecasting tool, is not cooperating.   Its hard to have confidence in the prediction because volume is not confirming the price move. Secondary indicators are more positive than negative.

Our Positions

Let’s take the 5% loss on SDS and sell it. SDS was bought as protection against a big downside move. For Mid Year Results see last Thursday’s Post.

Our Hedge (SDS & QLD ) is starting to work.

Our other new position IFN (India) is also off to a good start.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING