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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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Tax Options Impact

The WA PO has created a terrific interactive chart (bigger/clearer picture here) from (non partisan) Tax Policy Center, Joint Committee on Taxation, Office of Management and Budget.  They offer 3 options on Bush tax cuts.

Hopefully, in he Obama plan the $3,000,000,000,000 saved will go to deficit reduction over the next 10 years. I favor this right now, but another worldwide economic meltdown, 9/11 event, or other unforeseen disaster could change this.

Get Educated then Educate your friends - This is a great informational chart to post on your facebook page, send to friends , etc. Everyone can draw their own conclusions.

Hopefully, in he Obama plan the $3,000,000,000,000 saved will go to deficit reduction.

Note – The default is set to plan #1 – “Let the Bush Tax cuts expire” creates $3.7 trillion for government. Click on options to compare.

Blogo del Narco

People in Mexico are so terrorized by the drug cartels that few news sources dare print what’s happening for fear of reprisals. Blogo del Narco is the exception. (At top left there is a marker that will translate to English)

Reality is right (because of our huge # of drug addicts) now anyone in continental USA is far more likely to die from something related to Mexican drug terrorism than something related to a Moslem Jihadist terrorist.

A Mexican computer student is risking his life documenting drug terrorism in Mexico. I hope you check out and support his site.

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. Paul R in the comments section has found a great source describing the BB/HFT traders and consequences of what they do.

Very weak volume & markets go nowhere. Today the FED injects more cash (see yesterday for explanation) and weak volume give BB/HFT’s more control.

Significant Indexes

• The Dollar (USD)  [Anything price move over +/- 0.50 is significant] The dollar was flat 0.00% yesterday. For stocks. A little more often than not flat trading indicates a reversal. = Neutral
• The Baltic Dry Index (BDI) [measures cost of world trade/proxie for China & emerging markets] Rally +1.71%yesterday. Has broken up through 50 day moving average. Overall trend still = Bullish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO rose to +7.89 = Neutral

Reading Tea Leaves

Another day that the FED is injecting liquidity in their Permanent Open Market Operation.  From yesterday – 8/19,24,26 & 9/1 So the major players are going to have some cash in hand to play with today.

Positions

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

Current positions - EWZ & EWS

Investors411 has just revised the entire POSITIONS section – You can click on the word POSITIONS at top of blog or LINK here Most revised is the ETF section.

Many foreign ETF’s are again technically outperforming major US indexes. I’ve listed a dozen.

Two New Listings in Position Section

USO (oil commodity ETF) & UCO (2x crude oil ETF)  The later is obviously more volatile. Both these have dipped and Investors411 is opening a position is USO & perhaps USC (the bigger the dip in oil prices the better UCO seems)

Reasoning – Investors, long term emerging markets are going to need more energy. The second reason is if the USA or Israel bombs Iran. Intrade puts possibility at bid 22.9% & ask at 25.6% this AM before 1/1/12 – also see last Monday’s update. In effect, this is a hedge, against something blocking oil supplies.

Downside – going into winter usually oil prices move lower and possible world wide recession.

Technicals USO - Higher highs over last 3 months and hopefully right now we are at a higher low.

Like EWS & EWZ starting with 4% of portfolio position.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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The China Trend

Pew Dec 9th 2009 poll showed American’s believe China is more powerful economically than the USA. 44% of Americans believe China is “larger economically.” It’s NOT, by a wide margin, but its growing a whole lot faster.

Perception is often far more influential than reality. Threat’s why our culture spins & manufactures the news instead of reporting it. Bottom line here is China sneezes and the rest of the world will catch a cold. They used to say this about the USA, but times are changing.

There is one major problem in China’s future and that is when will China’s housing bubble burst? When this happens everything from politics to economics across the world will take a hit.

The good news is there has not been shadow bank massive over leveraging of China’s housing problem.

The bad news is 65 million new vacant apartments and the above housing graph. For more see this LINK

Bottom Line – When this bubble bursts everything from stocks, politics, employment, to even your houses value will feel the impact.  This is the #1 DANGER WILL ROBINSON, DANGER DANGER that hangs over the world’s economy today. You could argue that  a phony opaque financial system is a bigger bubble, but that’s hidden from the perception of most Americans.

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Technicals, Fundamentals & Analysis

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

Same Mantra for the month -The Black Box/High Frequency Traders BB/HFT control the majority of trades. Paul R in the comments section has found a great source describing the BB/HFT traders and consequences of what they do.

“Stock futures retreated Tuesday (today) as investors grew a little more cautious ahead of the Federal Reserve’s meeting and after China’s economy showed some signs of slowing down.” – from AP

If your an Investors411 reader, you know the BDI dropped 60% over the last 3 months – Of course China’s imports dropped. However we have seen a recovery over the last two weeks in the BDI.

Significant Indexes

• The Dollar rose a heathy +0.38% on Friday. Now sitting again directly on its support level = Neutral
• The Baltic Dry Index (BDI) is accelerated its move  higher = Bullish
• McClellan Index – (MO) Check out the link to the new chart. Lots more data. [Basically longer term  - the rough guideline is over +60 = overbought market = sell or short stocks & -60 = oversold market = buy stocks.] MO rose to +40.12 = Neutral

Reading Tea Leaves

From Yesterday – “There is a 5 week bullish trend. Benchmark S&P 500 at 1121 and every stock analyst watching the resistance levels around 1130.”  Yesterday the S&P closed at 1127.79.

Yesterday was “Magic Monday” where the breakout was supposed to happen. It didn’t and that’s probably going to make the BB/HFT traders anxious.  We tested the 1130 SPX number and the Bearish algorithms of the BB/HFT’s kicked in.

May be wrong, but yesterday sure looked like a day that the bulls legs got weary.

I’ve mentioned “wiggle room” for the MO in the past week or so of up dates. This exists still on the upside, but it comes more into play if the bulls are in charge. The distance to the downside (-60 is a lot further away than +6o) for the MO at +40.12 is far greater

Short term traders who are experienced could trade the wiggle room, but long term investors simply wait for an MO below -60. Be patient it will come.

Positions

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

Current positions .

• EWZ (Brazil – 10% of portfolio position) Bought at 69.80. Currently at 71.12. – 3 times its been up close to 4% in the last few trading days, but has failed to make the 5% profit figure originally projected to take profits. Sold 1/2 for 71.22 yesterday for a measly +2% profit. There is still some hope of building the remaining EWZ into a long term position, but its fading.
• TYH (3x technology – 2% of portfolio position) Bought at 31.76 Currently at 32.26 Considering selling this position ASAP

In trading, one major key is to cut any potential loss and let your winners ride.

Long Term Outlook - NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Jolly Green Giant

No one brings out the venom and praise in the comments section of the blog like Alan Greenspan. Well, he’s done it again. The decades long Republican Liberation has staked out his economic position to the left of Obama (Something not very hard to do)

But this time its dramatic – Greenspan’s called for the elimination of ALL the Bush tax cuts on everyone not just the wealthy (Obama’s Position).

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Technicals, Fundamentals & Analysis

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

Same Mantra for this week -The Black Box/High Frequency Traders BB/HFT control the majority of trades. Paul R in the comments section has found a great source describing the BB/HFT traders and consequences of what they do.

Significant Indexes

• The Dollar fell a significant -0.52% on Friday. It also broke a support level (200 day moving average) = Bullish
• The Baltic Dry Index (BDI) is back moving higher = Bullish
• McClellan Index – (MO) Check out the link to the new chart. Lots more data. Basically the rough guideline of over =60 = overbought market = sell or short stocks & -60 = oversold market = buy stocks. MO dropped to +25.52

Reading Tea Leaves

There is a 5 week bullish trend. Benchmark S&P 500 at 1121 and every stock analyst watching the resistance levels around 1130. The dollar is dropping like a rock, and the BDI is moving back up.  The dollar is closely watched by the BB/HFT’s. The market moved higher into the close and Monday’s are usually the day of the week that stocks have performed best.

The MO at +25.52 is neutral, but I’ve talked about “wiggle room” or in a move that extends higher for a few weeks the difference between 60 & 26 = 34 Or the difference between an old recent high 97 & 26 = 61.

So best read of tea leaves is markets are going to make an attempt at breaking through major resistance at @SPX 1130.

As suggested by many of you I’m going to try to get more of the “basics” down in the other sections (heading at top) of the blog this week.

Positions

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

Current long positions EWZ & TYH (TYH is for higher risk short term traders not investors) Same sell 1/2 on @5% gain. Both are up a @2% since bought last week.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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Bulls & Bears

The case for a rising or falling stock (not economics) market

The Bears

• At best unemployment in the USA has stabilized around 9.5%. The stimulus that has caused the reversal will soon run out and employment will grow.
• Housing prices have at best stabilized. 90+% of mortgages are now in some way backed by the US government  (Fannie & Freddie)
• Not only is the middle class in the USA shrinking, most people are saving more than they used to. Money flows are therefore diminishing.
• The European bank stress test was at a best a PR exercise. US banks are not loaning like they used to. They’d rather make more profit in other areas and are still in after shock from the original crisis.
• European Union with the world’s largest GDP, has many shattered economies (PIIGS &  Eastern Europe) and the others are no better off than the USA.
• The US has an exploding military budget $1,003,000,000,000 ($1.03 trillion) last year. If you count all our military expenditures it is over 60% of the world’s military budget.
• Iraq ’s March elections created a stalemate with no government. The two leading candidates lavishing praising Hezbollah’s founding ayatollah and meeting/praising  Sadr (anti American ayatollah in self imposed exile in Iran) to beg he joins their side in new government.
• Afghanistan – WikiLeaks has just released 90,000 documents showing “devastating portrait of the failing war.”
• China, the leading emerging market has a housing bubble.
• Stocks are overbought according to the MO (see below)

The Bulls

• The dollar is falling and close to breaking out of chart pattern to downside. Lower dollar = higher US stocks because US goods will cost less overseas.
• Oil prices near breakout to new 3 month highs. Higher oil shows greater consumption = bullish, but not if you’re a consumer.
• Shipping prices have rebounded and are moving higher. See BDI below.
• According to International Energy Agency China surpassed the USA in energy consumption in 2009.
• Most US companies that reported better than expected profits cited emerging markets (China specifically) as where they were growing the fastest and creating jobs.
• China will spend $738 billion over the next decade on clean energy. = growth. The USA can’t get a weak climate or energy bill passed congress.
• Unless you want to invest in some European bonds (example Greece) there is almost nowhere to go besides stocks to get more than a couple % growth for your $.
• Black Box/High Frequency Traders dominate the market and they are ONLY concerned about short term results. They can go long or short.
• Weak banking reform means shadow banks can again get over leveraged.= more profits=higher stock prices till another crash.

I’m sure I missed some. To see the positions Investor’s411 is taking see Positions below and also click on POSITIONS at top 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!

Technicals, Fundamentals & Analysis

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

Mantra -The Black Box/High Frequency Traders control the vast majority of trades.

The NASDQ volume was slightly above average, but the other major indexes had a typical light volume rally that has become the norm for the Black Box traders that control the markets.

News on the earnings week ahead

Significant Indexes-

• McClellan Oscillator (MO) rose dramatically to +79.48 [+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. 79.25 = BEARISH
• US Dollar –  The dollar  fell  -0.16% yesterday [Anything over +/- @0.50 is significant.] The dollar/stocks relationship is strong – 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. At bottom of trading range. = Neutral/Bullish
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also, good proxy of China.) BDI was in free fall from a high of @4200 to 1700 . This was a huge -60% drop in 8 weeks is very bearish Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI has staged a 6 day +7% rally and is at 1826 = bullish

Reading Tea Leaves-

The McClellan Oscillator at +79.46 shows stocks as being overbought. I’d be just a little more cautious about using short ETF’s too early because of the strong bullsh sentiment right now among Black Box traders. But, its clearly time to think about using those ETF’s that short major indexes. Click on POSITION at top of blog for more info.

The MO has not been above 80 since the big spring rally in April of 2009 – then it reached @ 105. In early Jan. of 2009 it did reach 120.

Positions

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

Updated over weekends Investors411 holds ONE position in SDS at this time

Strategy – From Thursday - The same as before - If/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. Therefore what is happening is a series of trades (Short ETF’s) the more overbought the market becomes.

The same entry/exit strategy applies. Considering dropping exit/entry point to 4 instead of 5%. See Friday’s Investors411 for more. The following trades were made Friday.

• SH (ETF that shorts the S&P 500) was sold for 51.26 – a -2% loss. The other 1/2 of SH was sold earlier for a 3% gain
• SDS (ETF the shorts the S&P 500 at 200%) was bought at 32.50 Nibbled with just a 2% of portfolio position.

Reasoning - The majority of technical analysts seem to be bullish, the BDI has reversed its 8 week fall & the dollar is right at its major support level.Therefore they may be room for 3 week bull rally may continue. We could reach a high above 100 on the MO. However the MO chart has not gone over +80 (where it is now) since April of 2009. Translation – There is some greater risk in this trade than if we had long term bearish outlook. However the more overbought thing get the safer the trade.

Longer term investors may want to wait to see of the MO goes up another 20 points before nibbling. Please recognize that right now this looks like it may only be  a trade  and NOT a long term investment

EWZ (Brazil) an ETF Investors411 owned for years is again outperforming and is a buy the dip opportunity.

GLD – (Gold) has come down off its high and any further dip Investors411 will buy.

The Long Term Outlook has been changed to NEUTRAL from Cautiously Bearish As explained/predicted Friday, the benchmark S&P 500 broke through the first of 4 different resistance levels. Another 3% move higher and the remaining 3 levels will fall.

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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China

For well over a decade the big government, tightly managed, Chinese capitalist system has kicked ass.

Their GDP in past quarter was above 10% and its projected to stay near that lofty range.  It has obviously outperformed the casino/free market capitalism of the USA which has brought us a tech bubble and a financial/housing bubble. Both led to two major worldwide meltdowns. It has also outperformed the more socialist models in Europe, that adopted US shadow banking for their own.

China’s growing because money is flowing into a growing middle class while that same middle class is shrinking in  the USA.  In fact every democratic and capitalist economy from India to Brazil that is outperforming ours is growing their middle class. Perhaps China can manage to slowly cool down. Perhaps not. If the Chinese bubble bursts, so will economies around the world.

The problem here is this one party state that does not foster Democracy.

Elections

Primary Day in a dozen states across USA. Some results

• Most under reported is Prop 14 passed in California – “will give every voter the same ballot in primary elections for most state and federal races, except the presidential contest. The two candidates with the most votes would advance to the general election, regardless of party affiliation.” - Interesting.
• Blanche Lincoln won in AK. There was a progressive challenge that fell short. I love Lincoln’s derivative bill and hope it passes congress.
• Harry Reid got who he wanted to win in NV – The Tea Party candidate that wants to store nuclear waste in Nevada. He had little chance against her opponent in polls.
• For more see Huffington Post

Robert Kuttner

Scorecard on Financial Reform

This week/today we get to see what financial reform will look like when it is voted on. Many of what was necessary will be stripped. The Banking Showdown by Robert Kuttner is an excellent source on this.

Your Comments

Some Great threads going in comments section. See comments on right side of blog

• Paul R educational insight and others on stocks. – continues
• Jim J., John S. & Popeye on Israel – Looks like they settled on an International group should look into incident. Perhaps so, but Israel will never agree.
• Yankee Bob and others on BP – Got caught in a BP on line nightmare

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

US markets looked over the cliff, decided not to jump and backed away in increased, above average volume = Bullish

US Markets rallied into the close = Bullish

From Yesterday – “There is two interday lows that were lower this year – the lowest at 1040.78 (see chart) This is the line in the sand major support level for most technicians. Breaking this could open the DANGER WILL ROBINSON DANGER DANGER Floodgates. For right now it’s holding = Bullish”

We went down to the line in the sand for the second time since it was established as the yearly low in February. It held. Technicians call this a triple bottom and get excited. Fundamentally this held because the dollar fell. That’s what to focus on. But the fact that it held = Bullish

Financials was one sector that led this rally (+2.09) Weak financial reform likely outcome in congress. Materials was the other sector (+2.27) = Bullish

Significant Indexes

• McClellan Oscillator rose yesterday to -28.47 [+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. We are a bit overbought, but basically = NEUTRAL
• US Dollar –  The dollar fell -0.34% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Massive breakout to new high is bullish for dollar and for bearish for US stocks. That big breakout Friday was confirmed by Monday’s +0.25% gain. The dollar fell yesterday so stocks rallied.

Reading the Tea Leaves . From yesterday-”Expect central banks to intervene and BUY the Euro to stop the growing panic….Would expect some sort of relief rally today after two days of significant price declines and strong support level in front of us. But watch out later in week.”

Strong volume behind yesterday’s rally  and a -28.47 on the MO (we are a bit oversold) indicates a rally is getting started and has some room to run.

Bottom Line – The Dollar Rules. This rally will hold as long as whichever (probably a combination of Swiss, German US, French, Chinese? etc.) keeps buying/propping up the Euro.  Short term trend = Bullish

However the long term trend is still dollar up and Euro down – For stocks = Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekend.

Traders – Conventional wisdom says that stocks that held up best while others got toasted are the ones to invest in if markets rally – be it for a day, two a week. But sometimes those high beta stocks from YOUR Stock List that are down the most take a big initial first step. Those from YOUR Stock List still above their 50 day moving average and turned with the markets yesterday may be worth a trade today.

• VCI
• SNDK
• SAM
• BIDU

I’m perhaps too emotionally involved, but IMAX looks good and their seems to be a good lineup or 3D movies this summer.

Financials – No real reform = Bullish

• XLF – Investors could nibble here.
• UYG – (2X Financials)
• FAS -(3X Financials)

Still holding VIC, ESRX & SDS (may take profits in SDS) – Today considering positions in FAS (short term) & UUP (longer term) The later mirrors the dollar and also may be good for Investors to nibble

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

1967 TV Show Lost In Space-

Danger Will Robinson Danger Danger

It’s time to take out the Old Lost In Space TV show robot with all its bells and whistles and  have him flap his arms and announce Danger Will Robinson Danger Danger.  We’ve reached a critical technical support level of the US stock market (see stocks below) and if that level falls you could see growing panic.

The fundamental behind all of this is the revaluation of European currency down and the US currency higher. This reflects the worsening shape of Europe’s economy. Eventually a lower Euro will mean their goods will cost less to export. This will help their recovery. Relatively it means a rising dollar. Therefore, our goods will cost more to export. This will hurt American companies that export and cut profits.

It looks like the Central Banks across the world will step in to soften the fall. But right now a fall seem very likely. Lots more below under Stocks

Your Comments

Some Great threads going in comments section. See comments on right side of blog

• Paul R and others on stocks.
• Jim J., John S. & Popeye on Israel
• Yankee Bob and others on BP

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

The Bears Growled Again Monday. Sorry had a hard time reading volume charts (see right side of blog) and click on each Financial Chart in light blue on right side of blog.

Volume has NOT been as relevant as it has been historically as a confirmation factor. This makes the day after a major move more significant. Another decline (about 50% as big as Friday’s) is bad news for bulls. You can feel the fear investors have. = BEARISH.

The benchmark S&P 500 reached 1049.86 – a closing low for the year = Bearish

There is two interday lows that were lower this year – the lowest at 1040.78 (see chart) This is the line in the sand major support level for most technicians. Breaking this could open the DANGER WILL ROBINSON DANGER DANGER Floodgates. For right now it’s holding = Bullish

Approaching support with a lot of downside momentum (last two days), a rising dollar, and not yet over sold MO (see below) gives the bears a big battering ram. = Bearish

Significant Indexes

• McClellan Oscillator fell dramatically Friday to -47.68 [+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. Momentum down/Bearish, and approaching oversold. Remember in the past month+ twice the MO has fallen to over -120 So the MO can go much lower than -60 = NEUTRAL
• US Dollar –  The dollar rose +0.25% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Massive breakout to new high is bullish for dollar and for bearish for US stocks. That big breakout Friday was confirmed by yesterday +0.25% gain = Bearish

Reading the Tea Leaves . Expect central banks to intervene and BUY the Euro to stop the growing panic. They might get overwhelmed by fearful investors today. Eventually it will fall. The fundamentals in Europe are bad (See Investors411 over last few weeks)

Would expect some sort of relif rally today after two days of significant price declines and strong support level in front of us. But watch out later in week.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekend.

From Yesterday – “ SDS (2x Short S&P 500) Will sell 1/2 for hopefully 5% profit.”  - Sold 1/2 SDS (3% of portfolio) at 37.32 for +8% gain. Letting the rest ride for now.

From yesterday – Small remaining 1% positions in VCI & ESRX - Also considering selling into rally – Still Have VCI and ESRX will probably sellone or both into any rally this AM

The only position Investors411 has is a 3% in SDS (ultra short S&P 500)

Others we should be in include more ETF’s that short/ultra short major indexes, GLD & UUP (mirror’s dollar) Wating  for dips and MO to be higher to buy. These are all contrarian plays.

From Yesterday – Invetors411 main strategy remains wait for the McClellen Oscillator to fall below - 60 before going long.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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Obama, Obama, Obama

• The Obama administration is responsible for us still being in Afghanistan & Iraq. He is the commander in chief (see yesterday’s Investors411).
• His administration is also responsible for the weak financial reform coming out of congress. All Obama had to do it to throw strong vocal support Kafman/Brown, Volker amendment, Lincoln’s derivative bill for them to pass.
• BP, is responsible for the spill, as are a decade of lax rules and enforcers. But its long past time Obama, the commander in chief, did more than talk tough and blame BP. Yankee Bob has editorial on how expensive fossil fuels really are.

Solutions, Solution, Solutions

• John Sovjani in comments sections comes up with some innovative fiscal solutions in comments section of blog A gas tax and legalizing/taxing pot are among his choices.
• Bob Sadinski’s (AKA Yankee Bob) editorial focus is to change more rapidly to alternative energy because of the real environmental costs of fossil fuels. (see link above)

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 roared out of the gate, but fell in the PM as those huge institutions with those giant super computers all sold.  The translation here is – the bulk of all trading is being made by institutions with complex trading algorithm. They take hold of US markets, usually after 2:00PM and determine direction. That direction was down into close = Bearish

Somehow the rumor/news got out that China was considering taking $ out of the Euro. The announcement  was an absolutely dumb move if you’re the Chinese and are doing this. Probably some large entity that is short the Euro or long the dollar created or contributed to this. Markets still very sensitive to negative European news. China has denied this. = Bearish

The McClellan Oscillator sent out a strong bullish signal yesterday. From Investopedia – “Conversely, when a bear market is still declining, but a smaller amount of stocks are declining, an end to the bear market may be near” Yesterday the financial channels (Bloomberg & CNBC reported a lack of breath and volume behind the PM decline)= Bullish

We’ve not had a bear market, but @ a 13% correction. One technical sign that it is coming to an end does NOT make it so. But the MO has been below 60 for a long time and due for a technical correction or a short run higher.

Fundamentals haven’t changed! But we are long overdue for the McClellan Oscillator to move above -60. A technical bounce.

Futures are up in US and European markets higher. = Bullish

Significant Indexes

• McClellan Oscillator rose to -64.99. [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is still OVERSOLD territory, but we are now out of WAY oversold territory. How the MO works. Yesterday was one of those strange days where the markets went lower but MO went up.= Bullish.
• US Dollar –  The dollar rose  a significant +0.62% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. This broke its major resistance level and the dollar is now trading at year + long high. Foe stocks (especially US stocks) =  Bearish

Positions

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

Sold last 1/2 of SDS at 35.50 near market close. There was a +5% gain on 1/2 and a 0% gain on 1/2.

Traders – Bought 1% IMAX at 16.70 & DGIT at 42.26 near market close. Reasoning – These stocks were rallying into the close, markets were falling, Monitor (see comments section of blog announced DGIT and SNDK had made new year long highs ) and these two stocks are clearly out performing well over 98% of the market even though they did not hold onto their breakouts. DGIT & IMAX rallied into close as markets fell.

Still long 2%IMAX, 1% ESRX, 2% DGIT and 2% VCI.

I hope IMAX, ESRX DGIT & VCI turn into long term gains, but fundamentally I seriously doubt it. If lucky will take profits (sell 1/2) on any gain of @5% with DGIT. Also will sell 1/2 VCI (dropped over 4% yesterday – should have sold 1/2 when stock was up over 5%) & IMAX in major rally.

Still waiting for dip to buy EUO. If markets rally strongly today.

Traders Investors411 also bought FAS at open and sold it when it fell back to price it was bought for. (actually lost less than 0.4%)  Caution this is a very volatile (3X financials) stock.

Traders – Trading strategy – Investors411 is taking @5 % profit on any recently purchased position and letting the rest ride. Investors is then putting a stop/sell order on the price it was bought for.  In volatile markets the only thing to do is make short term trades. Will sell 1/2 of  IMAX, VCI, and/or DGIT if criteria is approached at near open. Selling into rally

Investors – Wait for trend to establish itself.

NB – Friday’s Investors411 will be minimal and published early.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Congressman Alan Grayson

War is Making YOU Poor

There are many ways Americans can cut deficits to make the future more solvent for our children. One presented by Democratic congressman from FD Alan Grayson (short video) Here’s some major point from The War is Making YOU Poor Act

• We spend 1/2 the world’s entire military budget
• NATO allies #2 in military spending – Are we going to war with them?
• Distant third China. War with them would devastate our economy and theirs
• Keep $549 billion in yearly pentagon budget & eliminate the $159 Billion for Iraq & Afghanistan.
• Video (link above) has great chart & more complete explanation – so check it out.

How he would spend $

• No taxes on the first $ $35,000 for every American
• No taxes on first $70,000 per couple
• Plus $16 billion a year to reduce deficit.
• Moderate and low income people spend that tax break money and this would stimulate our economy generating both jobs and further taxes.

So you might spend it differently. But the main point is clear – The War is Making YOU Poor

Sign up to be on Grayson’s newsletter list.

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

At the open stocks on all major indexes reached lower lows than even the “flash” mistake trading meltdown a couple weeks back. This achieved a lower interday low for stocks. We already have had a lower closing low. The pattern now is lower lows and lower highs. Until that breaks = Bearish

From yesterday - The only silver lining to the up coming storm, is McClellan is oversold and when we get down below -135 we could have another oversold bounce. A 2 to 3% Dow fall in big volume could put us in -120 to -135 territory.

The above happened at the open. In the afternoon the giant institutions with their giant algorithm computers bought into a very oversold market. We rallied  about 200+ points on the Dow to close near even in increased volume. = Bullish

Markets moved higher despite poor global news = Bullish

Analysis – Would expect oversold bounce to continue today. If you are a trader as opposed to investors you could make some short term profits long.

Significant Indexes

• McClellan Oscillator was flat for the third day in a row. Now at -90.45.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is OVERSOLD territory. = Bullish.
• US Dollar – Uncertainty reigned as the dollar had a massive range from a new high to almost below Monday’s open. The dollar rose +0.27% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Yesterday = Mildly Bearish

Positions

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

Yesterday close to open Sold 1/2 position in ESRX at 99.51.& 1/2 position in SDS at 37.21.

Traders & Investors – Reasoning – ERSX was just plain fear on my part of overall bear market. Not a good reason to trade because it was holding up well despite early meltdown. SDS had mad a 5% profit. Because of the extreme volatility and oversold nature of current market I plan to take 5 to 7% profits on 1/2 of all trades and let the rest ride.  This, is because uncertainty/volatility is a clear pattern in the current market.

Looking for dip to buy EUO It’s rallied in weak volume the last few days. May sell SDS (short ETF)

Investors – Until we technically get out of the woods and break the newly established downward pattern only those who love risk should buy. Would suggest the Financial area ETF’s –  XLF.

Traders - UYG & FAS (@2X & 3x what XLF does) Financial reform has basically failed and these institutions should continue to exist in the unregulated, over leveraged, shadows of Casino capitalism. Therefore, make profits while they will make privatized profits while your FDIC insurance subsidizes or protects them from any losses.

Apologies - ran out of time to do YOUR stock list. See past comments from Paul R & Monitor Both have made some excellent suggestions in past few days. YOUR stock list is holding up quite well. While major indexes are below their 200DMA’s almost all of the stocks on YOUR Stock List have not reached that big a breakdown.

They both have good ideas that traders can take advantage of in a rally today. YOUR stock list also has good concepts. to pick from.

NB – I’m trying to make a clear distinction between short term Traders who are comfortable holding a stock/ETF less than a week and longer term Investors whose goal it is to hold positions for months and hopefully years.  Everything Investors411 mentions in Positions section is hopefully a long term position

.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Quantum Economic Shift

Both Jim J & JAB sent in a Simon Johnson & Peter Boone article on how bad the European/American situation-

Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialized countries are at risk, but it’s the eurozone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.

Investors, still have what happened in 2008 fresh in their minds. Now the European debt crisis is upon us. It doesn’t take a behavioral economist to predict what will happen. Fear is twice as powerful as greed according to behavioral economics.

Casino capitalism advocates (Tea Party followers & others) are going to blame European socialism. They are in part right. Patronage, corruption and socialism that went too far exacerbated their debt problem. (see yesterday’s Investor’s411 and Fridays for additional warnings about what’s happening)

Bottom Line – Wolves have wormed their way into the henhouse of capitalism, the US congress, and the Obama administration. Debtor nations, with over leveraged, non transparent shadow financials are privatizing gains and socializing risk. The worst is yet to come.

Why trust these two? Because they have been right again and again. Here’s Johnson and Boone on May 8th questioning the stock market at its hight. Unfortunately as Johnson and Boone warn its not the wolves (shadow institutions and free market capitalists) who are going to pay – it you, me and now Europeans.

Our ship is sinking and the captain that steered it into an iceberg in broad daylight is getting rescued and given another ship.

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

US markets fell into the close as dollar soared. =  Bearish

Significantly Lighter Volume indicates things have settled down for a while.= Bullish

Markets still way oversold (see McClellan Oscillator) = Bullish

Dollar’s massive rise = Bearish

Fear over Europe and North Korea (war drums) has futures way way down.

Analysis – Investors411 has been too slow in exiting positions despite making repeated warnings and changing long term outlook to CAUTIOUSLY BEARISH

Mistake not to invest more in SDS as mentioned yesterday

The only silver lining to the up coming storm, is McClellan is oversold and when we get down below -135 we could have another oversold bounce. A 2 to 3% Dow fall in big volume could put us in -120 to -135 territory.

Significant Indexes

• McClellan Oscillator rose slightly to -89.94 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is OVERSOLD territory. = Bullish. Repeat -Hate to say this, but once the trend broke this index has become less effective.
• US Dollar – Friday the dollar rose again to $86.36 Up a massive +1.16% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important .  = Bearish..

Positions

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

The whole positions section has been refurbished. Many thanks to one of you who helped and wants to be anonymous.

One of the cardinal rules of investing is don’t loose large amounts of $

Yesterday Sold

• 1/4 IMAX at 17.88
• 1/2 IMAX at 17.52
• 1/2 FAS at 24.45
• 1/2 of FAS at stop loss of 23.75
• 1/3 of ESRX at 101.25
• 2% position bought in SDS at 35.25

Remaining long positions 1% IMAX 2% VCI & 2% ESRX. 2% position in SDS is short.  While all these are out preforming major indexes – They haven’t fallen past their 200 DMA – I’ll be looking to cut back more long positions in any in rally today. Still very interested in owning these companies, but overall bearish trend is established.

New Stock/ETF List

Tomorrow our old “YOUR Stock List will return

Bottom Line - Now is NOT the time to think about going long but  to start to think about using SDS and similar ETF’s that short the market (2X short S&P 500) in a rally.

All the following will go up when stocks go down (TLT is exception but a flight to safe investments and generally moves opposite US stocks)  If we fall to a major correction (Dow now down 10% and falls to 20% – these ETF will make YOU $)

• EUO – Ultra short’s the Euro (ultra = 2x)
• EPV – Ultra short the big companies of Europe (new – very thinly traded)
• SDS – Ultra Short S&P 500
• QID - Ultra short QQQQ(tech stocks)
• TZA - 3X short small cap stocks
• TLT – 20 year treasury Bond fund

Investors411 will open a position EUO on first dip and add to ultra shorts on rally.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING