Casualty Battle for castle Bear Skull yesterday as Bulls stampede

Again a must see short video from Dr George Gerbner on Violence

Hope you joined us in making $. Yesterday Investors411 called for a rally –  Castle Bear Scull fell and, as predicted, BULLS rallied – “Not guts no glory – I’d love to wait for a 100 point Dow dip, but you can feel the bulls breath & it may never come before the rally.” (more below) .

Jim’s List

Here’s a short list of Senate candidates I’m supporting either with cash and in one case time. I also like F.S.’s Congressman Grayson in Florida. He’s been “change we can believe in.” I’ve tried to choose close races and focused on solid candidates like those who had the conviction to vote yes to break up shadow banks. The other criteria was if they were running against someone that is truly over the edge on the far right.

#1 Russ Feingold Wisconsin – Progressive maverick who haas done everything from more body armor on HV vehicles in Iraq to campaign finance reform.

#2 Harry Reid Nevada – Harry did vote to break up the shadow banks,but it is more his Tea party opponent who is the concern. Example she no longer wants us to be the leader of the free world – she wants us out of the UN.

#3 Alexi Giannoulias Illinois – Close race & Alexi does not take a dime from corporate PAC’s or federal lobbyists.

#4 Chris Coons Delaware – Good man in race against Tea Party/Sarah Palin opponent whose latest scandal is being investigated for stealing living expenses from her campaign fund. See my post in comments section of blog for this.

#5 Barbara Boxer California – Strong progressive who is running against someone who did a poor job running HP computers. Her opponent knows how to outsource jobs.

That’s my list in order of preference. Barr thanks for letting me publish them and you guys for asking him for it in the comments section of the blog for the list

Jim J.

[Jim's right - Lots of you in comments section were vocal about wanting his list - so here it is. Like the list? Don't like the list? Have your own list of candidates from whatever party. Post them in the comments section of the blog. Barr]

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!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Index	Percentage	Volume
Dow	+1.37%	down
NASDQ	+1.74%	down
S&P	+1.52%	down
Russell 2000	+2.85%	-

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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 -Over extended – From Investopedia

US Markets

US stock markets rallied is what has become standard – reduced from day before and below  average volume. Just about every standard text book on stock analysis uses volume as the  a very or most significant factor in a price move. This is no longer the case for many many months.

Long Term Is this a bubble building? – Yes Here’s what’s holding us up technically & fundamentally

• You have a bunch of hard core investors who are holding onto stocks no matter what
• Companies are buying back stock instead of creating jobs or using $ for expanded research.
• BB/HFT’s trading.
• Investments by wealth sovereign wealth funds and hedge funds (the world’s oligarchs)
• A central bank that keeps pouring/printing money ($5 billion yesterday) into the economy
• Emerging markets are red hot. US money is investing abroad in these emerging markets – not US jobs.

Bubbles can take years to build – Look at the stock market leading up to the housing/finance crisis. So for now we ride the wave using the MO as our guide.

Obama gave an hour long town hall for  the ultra right wing financial channel CNBC and stocks rallied in front of & after his speech.

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar, fell  -0.08% yesterday. Dollar seems to be starting another consolidation but longer term, falling dollar trend for stocks = Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Fell a -1.79% yesterday.  The BDI does not have the immediate impact that the MO or Dollar does. 6th down day in a row, with rate of fall decreasing. After 8 week bull run trend could be changing to bearish, but still= Neutral
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO rose  to +48.47 yesterday. We’re only 11.5 points away from overbought territory, but still = NEUTRAL

Reading Tea Leaves

The benchmark S&P 500 stands at 1143 and just about every analyst is telling their client that 1220 is the next serious resistance level. Also, the strong triple top resistance level or castle bear skull was shattered (see yesterday’s Investors411)

Bulls are going to do everything they can to drive stocks to 122o. Today is a confirmation of rally day.

• give back over 1/2 of the gains bearish
• the less we retreat the better
• Adding to gains bullish

Our early change to CAUTIOUSLY BULLISH seems to have been the right call.

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 Longer Term positions –  EWS (Singapore), USO (price of oil/commodity) SSO (2x what S&P does- this ETF is more a trade that may turn into an investment)

If, we get up over +60 on the MO and  the Dow/major indexes rally – that would be a selling or shorting point.

Since we now have a bullish trend Investors411 is going to adopt a different set of parameters around the MO.  (see earlier Investors411)  Traders instead of waiting for -60 on the MO the area around +20 or the 50 DMA seems to be a support level. Just remember over the last 3 years 3 months is the maximum period the MO has gone without reaching -60.

We can also allow for a little bit more on the upside of the MO (+60)

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!

Index	Percentage	Volume
Dow	+0.07%	up
NASDQ	+0.17%	up
S&P 500	-0.10%	up
Russell 2000	+0.64%	-

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

Obama’s Speech

Yesterday, the administration announced a major address on Health Care  for next Wednesday – Will he take a Stand or whimp out again? From all accounts the White House is still split on what to do. From Politco “High Risk High Reward” LINK & “Obama to Address Congress” LINK

Simple reality is that like in the last 7 to 10 years health care is going to double again. Medicare as well as Americans not on Medicare are in danger of going under unless something dramatic is done.

Will you, your employer, Medicare be able to keep up with another 100% increase? Why do we pay almost twice the cost of other industrialized countries who cover all their people and they get better results?

Jobs & GDP & Deficits

Note – This chart from Crooks and Liars is a bit misleading because its the 2008 projections & faulty accounting under Bush & Obama (see below) Bush #2 & Obama figures should be higher.

What happens in a recession is jobs get cut and when they get added back American companies choose cheaper foreign labor. This is one major reason employment has been a lagging indicator in recessions.

The back ended stimulus is going to mitigate the job loss – keeps jobs in education, law enforcement, construction etc. But this has its cost in increasing the deficit. The problem here is we already had a huge deficit when Obama took over and it is obviously growing. Not good news.

The other major problem is  growth is the USA over the last decade had a lot to do with phony financial transactions made by shadow banks. (phony accounting)  Therefore, real growth in the USA was a lot less than 3 or 4% over the last decade. Under Obama we longer use mark to market accounting.  Obviously, I’m no expert, but willing to bet this reduces our GDP by at least a few points under Obama & Bush.

One major fact – the huge increase in deficits under Reagan/Bush upset almost no Republicans.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.32%	down
NASDQ	-0.09%	down
S&P500	-0.33%	down
Russell2000	-0.40%	-

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 and Fundamentals

Yesterday’s stock action confirmed the big downside move of the day before. Prices did not recover any of the losses and dropped further despite the fact that the dollar also fell. The dollar falling almost always translates into stocks rising.

A week ago I mentioned that Jim Cramer was wrong and we were due for a more significant correction. Yesterday failure to move higher on good news and marginal losses act as confirmation of a further decline.  The only technical point that is starting to swing in the bulls favor is that the Dow and S&P (SPX) have been down 4 days in a row and are a bit oversold. Would expect a rally today because of oversold positions

Support levels to watch on benchmark S&P 500. SPX currently at 995. The first is 980 . If that falls we could see a lot deeper correction .  Lots depends on the jobs data on Friday.

Lots of analyst look at this as a technical correction.  We came too far too fast. But there is a major underlying fundamental factor. The BDI shows worldwide trade falling. Much of this is due to China pulling back on buying commodities. China also has a technically overheated market. (see yesterday’s blog)

The big news for the month is the jobs report on Friday Right now we reacted so poorly to the good ISM (manufacturing) news, and yesterday’s dollar falling(which should have juiced stock prices), you have to worry about the employment news.

Therefore , FEARLESS FORECAST – is for a down week .

A major correction is underway many in some major exporting countries (China – see past Investors411), and importing countries (USA) seem to be following the downtrend.

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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) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . The BDI has leveled off over the last 5 days, -10 yesterday

Unfortunately, since early summer we have created  lower lows and lower high that confirms both the mid term bearish trend .@ 2298 is a major area of support and the BDI has fallen since early June from 4291 to 2413. This is just 115 points away from a major support level.

“Remember almost every country has based their recovery on exporting their way out of this mess” (Source – seeking Alpha)The infotainment financial channels and analysts used the BDI when things were going well and are now ignoring it. The #1 factor behind the BDI’s retreat is China seems to have stopped or seriously slowed down buying of commodities.

The BDI is 41% off its high (early June)

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

The dollar was fell -0.44 % yesterday. Dollar closed at $78.74. Its  major support level is @$77.5 & it has 2 major resistance levels – a falling 50 day moving ave. at @$79.20 and the August highs of @ $79.5 .  If it breaks down through support stocks should rise, if it breaks up through resistance stocks should fall.

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

The fact that the dollar fell a relatively significant -0.44% and stocks did NOT rise is another Bearish sign

The dollar is also reversed direction 9 days in a row. So today its probably going to go up and stocks down.

European Central Banks left interest rates unchanged this AM – Bearish for dollar & Bullish for stocks

Positions

The whole Positions Section has been revised (Click on “Positions” at top of blog). Check it out

Sold 1/3 (or 6% total stock) position in FXI (China) yesterday This position was bought on 3/12 (listed incorrectly in Positions as 3/20) Gain @+55% This will probably be the biggest gain of any position this year. The remaining 12% – 2% was purchased 3/12, 8% was purchased in April and is up almost +20% and the recently  2% is down perhaps -5% (Did not have time to accurately check these last 2 figures)

Right now, this is NOT some huge reversal, but a correction of an overheated market. If the BDI continues to fall from current levels, we are much deeper trouble. Plan to get back into FXI ASAP, hopefully at a lower price

Refuting all this is the credible Organization for Co-operation and Development OEDC that headlines “the worldwide recession may already be over.” LINK Sorry think the 41% fall in the BDI is cause for concern.

Those traders with guts may look at a fall to SPX the 980 support level as a buying opportunity or a chance for some quick money.  Right now, the best read of the tea leaves is for a 5 to 10% correction . If world trade prices collapse further through support then things could get worse.

My bias – I will be away at an art show this weekend & I tend to get conservative when I’m not near my computer. – Too scared of bad jobless figures on Friday.

Your Comments

Both privately and in the comment section of the blog you are asking for individual stock recommendations. OK I have a few. Stay tuned. Yes I’ve chosen them – NVS (Novartis)-  a swine flu play and Apple computer. (details when I have more time)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!