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Global Economic Monsters

• Over Leveraged Shadow Banks – Financial reform has fizzled in congress. (see a zillion past Investors411 for more) Short term – a shot in the arm for shadow institutions and their stocks. Long term - FDIC guarantees deposits of YOUR $ and they can still take any risk they want.  Bubble building casino capitalism, where gains are privatized and YOU socialize the risk.
• Debt Crisis – Europe Debt on the hot seat right now. Aussie’s Clarke and Dawe do a great job explaining this and their drop dead funny. Now add to this all the derivatives (over leveraging) placed on debt. First a bailout. Now central banks around the world are pouring $ into the Euro to stabilize it and keep dollar low.
• China Slowing Growth – A country can’t keep its GDP growing at 10% forever. Google [China, Slowing, Growth] and you’ll find story after story worried about a Chinese housing bubble or manufacturing decline. China’s #1 ETF – FXI This ETF used to outperform the S&P 500 by a wide margin. Now it underperforms. Investors $ are speaking and there is some cause for concern.
• BP/RIG/HAL Oil Spill – Major damage to these stocks and more importantly the environment. We all know its only just begun and yesterday was the start of hurricane season. 27% of America’s oil & 15% of our natural gas comes from the Gulf.
• “Supreme Leader,” “Great Leader,” ” Dear Leader” AKA Kim Jong-il –  You’ll never see a flotilla of Palestinian or any other peace activist off the shore of North Korea. (A double standard) Most repressive country on the planet, always confrontational and has nukes. Just committed an act of war by sinking South Korean naval ship.
• Mid East - Where to start? Iran, Afghanistan, Iraq etc. Current Crisis between Israel/Turkey does far more than put the $3 billion in “free” trade between these two democracies at risk. Terrorist through out the region are now in a stronger position and embolden because of this confrontation. Everything in the MidEast is oil/energy related.

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

Significant Melt UP in light volume = Moderately Bullish

Obama and his administration seem to be dropping hints that Friday’s job numbers are going to be good. This was fundamental behind melt up. Buy the rumor & sell the news.

Volume did NOT confirm the price move. So what else is new. Volume, which is historically the #1 confirmation factor of a price move has NOT worked for many many moons. = Neutral

Massive amount of bad news – N. Korea, BP failed to plug oil, Israel/Turkey/Gaza, Euro debt crisis – yet we have a melt up. How markets react to news is our #2 (now #1) confirmation factor. Yesterday was a good price reaction despite bad news. The potential bad news is built into price right now = Bullish

MO has some positive momentum but in Neutral territory = NEUTRAL (NEUTRAL is all in CAPS because this right now is most important indicator.)

AAPL is the unofficial leader in this rally and the chart formed a T (see chart) yesterday in weak volume. Could be a top. Moderately Bearish

Expect Fed and other central banks to keep  propping up Euro.European markets at 6 week high.  = Bullish

Reading the tea Leaves – Historically, it difficult to see a follow through day after yesterday’s melt up in light volume. Baring an unforeseen incident – like Israeli’s killing more peace activists on ship heading to same area – it wouldn’t be a surprise to see a rally into the jobs number.

Significant Indexes

• McClellan Oscillator took a huge jump higher to -5.78 [+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.  How the MO works.
• US Dollar –  The dollar fell -0.02% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Currency markets are now being directly manipulated by out Fed and other central banks. This manipulation to keep the Euro from falling. Chart shows at least 6 attempted breakouts above @87.5 have failed in last 2  1/2 weeks. = Bullish.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own

Have NOT had a chance to update this/last weeks trade.

EVVV was eliminated from YOUR stock list because company was bought – (Thanks to Paul R for info)

IMAX remaining shares sold near open at 17.02

Windows of opportunity to BUY and Sell -

The McClellen Oscillator (MO) is working well right now and +60 or above = Overbought = sell. -60 or below = Oversold = buy

This works best with the broad based ETF’s that mirror the major indexes or for those who can handle more risk ETF’s that do 2x or 3x what major indexes do like TYH that does 3X major tech stocks. Approaching or below -60 buy. The further the better.

Above +60 sell or go short with ETF’s that short major US indexes. Example SDS (2X short S&P 500)

One major reason I stated that there was a “decent trading” opportunity yesterday was the MO was at -50 or almost oversold. We had a low volume melt up.  One major reason the MO was not an investing opportunity was we were not below -60.

Mea Culpa = Hindsight is great = should have invested MORE when MO was between -60 & -130. If I had, I’d start to take a little profit right now

(Will continue analysis of MO later)

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

What’s Up – Sorry overslept this AM – Abbreviated update & having technical problems – Iran – Elections – North Korea – Mortgage rates – No change outlook

Iran

Elections in Iran are generating a lot of buzz within the country and the world. Ahmadinejad, lost a chunk of support when Hezbolah (his supported group) lost in Lebanon, The “green revolution” or major opposition candidate would take a somewhat more cooperative stance toward the rest of the world. His name is Mousavi. Photo and editorial from The Economist

North Korea

Both the left wing and right wing have it wrong. North Korea is not going to be sweet talked or bullied into anything. They realize the USA is in a weak position just like it was in the Vietnam war. We are still up to our necks in the quicksand with the Muslim world (Palestine, Iraq, Iran, Pakistan and Afghanistan, Therefore they feel they can get away with whatever they want.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Biggest problem out there right now is rising mortgage prices. Scroll down at following site & you will see data. showing interest rates for 30 year fixed mortgages going from 4.96 to 5.48% in May.

No real changes from Monday’s outlook. BDI continued to fall.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

What’s Up? North Korea, data, editorials, and raising the alert levels. How we act here impacts Iran – New daily Positions section for recommended stocks – Reading the Tea Leaves, a broader longer term market outlook.

North Korea Info Page from BBC

Map and links from BBC

Factfile: Underground testing

The Korean war

N Korea’s missile programme

 

The British Broadcasting Company is a more independent source for information than most American media.

North Korea’s nuclear test is obviously a very significant problem. US and South Korea have just raised their alert level.

Solutions here are going to have to involve China/world taking a more aggressive role against North Korea.  NYT editorial here. Iran is watching what happens here. Giving into North Korean demands obviously encourages every nation/dictator to become a nuclear power.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

The NASDQ held onto most of Tuesday’s gains, but the Dow and S&P lost most of those gains. Small cap stocks (Russell 2000) were somewhere in the middle. Volume was again below average. We are stuck in a trading range.

From yesterday – “One interesting pattern is developing – The first trading day of each week recently shown a  a significant move higher and the rest of the week has given up those gains…. Very suspicious over lack of volume.”

XLF - The ETF that tracks financials (mostly shadow banks ) fell -2.99%. Financials has been the leading sector and as financials go so go the markets.

WTIC - Oil prices again closed over their $60 support level +1.60% at $63.45. Energy related stocks kept the rest of the US markets from loosing more ground. As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

Fundamentally – Almost every analyst out there says we have a glut of oil and prices should be falling. 

BDI – The Baltic Dry Index measures the flow of goods (world trade).  The momentum here is bullish (see chart). This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism)

Reading The Tea Leaves - Longer term pattern is clearly consolidation (last month prices have been stabile) and this is good. The bullish trend that started on March 9th is firmly in place.  

If we break out of this consolidation pattern to the upside the Long Term Outlook will change to Cautiously Bullish. Right now, this senerio looks more likely than a downside breakout.  

• The BDI rising 
• Technical consolidation in prices 
• consumer confidence rising  
• rising commodity prices 

All this shows an improving economic situation worldwide. One downside to all this stimulus is inflation, but for now the mojo is still with the bulls  Questions - 

• Could it be that we are unwinding the economic debt of shadow banks in the right way?
• Are we in the last innings of the housing meltdown?  
• What happens when we impose rules on the shadow banks?  

 As stated before we have dug a huge economic hole. We can go from  -6% GDP growth to zero and this will be positive for stocks. But what happens after that?

Positions - (See positions section of blog for more)

•  EWZ - From yesterday “sure looks like it was a mistake to take our substantial profits (+26) in Brazil (EWZ) Brazil reached a new closing high yesterday… looking for a dip (-5 to 10%) to get back in.”
• Inflation - GLD (gold) is one of the hedges against inflation. Down -0.33% yesterday
• There are ETF’s that also will move higher if/when inflation occurs. Considering TBT  (explanation later this week), but is has way too high a price right now. This ETF has gone elliptical and will wait for a pull back.
• FXI - our major position here only rose +0.68% yesterday.
• GEX – alternative energy – +1.91 yesterday 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !