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Toasting the S&P 500

For 7th Straight Year

Investors Dividend Portfolio toasted the S&P 500

Up 19% vs a -0.17% S&P 500 for 2011

See Friday’s blog post.

Here’s the results from our other portfolios.

More information on all portfolios can be found in the

Positions Section

Conservative Portfolio

ETF’s were chosen for 2011 because they have two streams of income

Ticker symbol, dividend, price change, total gain. Dividend gains were computed last January so they may be slightly off

• FLD +4.38, +10.29, = +14.67

• DTW +4.01, +8.22 = +12.23

• DVY +3.79, +7.54 = +11.33

Total +12.74 vs. -0.17% S&P 500.

While the conservative portfolio toasted the S&P 500, it did not do as well as the individual dividend stocks portfolio which was up @ +19%

Moderate Portfolio

These ETF’s were chosen to mirror the S&P 500, but give diversity

• QQQ +2.14
• SPY -0.17
• DIA +5.14
• IWM -6.36
• EEM -19.81
• DBC -0.74
• USO -0.03
• GLD +10.92

Total -1.19 vs. -0.17 for S&P 500

The moderate Portfolio mirrored the S&P, but was about 1% lower. This was because EEM (emerging markets) took a big hit. There was a warning about inflation attached to EEM.

Aggressive Portfolio

These were individual trades/investments made throughout the year and posted in the daily blog. I don’t have the time to go through approximately 225 posts to compile an accurate grand  total. But, I’m confident these choices overall beat the S&P 500. The vast majority of these trades had gains and losses of less than 10%

The most significant trades of the year was the GMCR Put/Call Hedge Trade that made almost +200 See LINK and previous blog posts.

Investors411 will keep a running total of special trades in the Aggressive Portfolio this year.

Your Stock List

Three Your Stock Lists were run in 2011.  Investors411 stopped running YSLs after 6/30 for several months. A wise move. This summer was when stocks took their big hit.

• YSL #4 +18.69 vs S&P +12.39
• YSL #5 +3.64 vs.  S&P +1.60
• YSL +6.50 vs. S&P +9.50

Total YSL +28.83 vs S&P +23,59

Stay tuned for the 2012 Forecasts and some major changes to Investors411 investment Portfolios

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AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMMAR  ERRORS.

Unfortunately the Tea Party and Republicans  have a NO COMPROMISE stand on cutting only areas like social security, education, medicare etc  that target the middle class, seniors and the poor.

Democrats are willing to compromise on these issues as long as wealthy Americans also share the burden. For every $3 in tax cuts you tax wealthiest Americans and mega corporations $1.

The above inspired by

• Sunday’s blog on OWS
• Matt Taibbi rebuttal to David Brooks

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The Big Lie

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Relax – Investors411 is taking a break

Will be back on 4/25 Some links and comments below

• No change in general market outlook – Still bubblicious and CAUTIOUSLY BULLISH If we close below last weeks low outlook changes to NEUTRAL
• Short term bearish tend, still in place as of closing on Friday even though we’ve had three days of slight gains.
• For the top 3 investments for the 2nd quarter LINK HERE (scroll down)
• For YOUR Stock List - LINK HERE (scroll down)
• For information on all suggested portfolios LINK HERE (scroll down)
• For why we are Investors in Wonderland LINK HERE (scroll down)
• For a message to my fellow cows LINK HERE (scroll down)
• Our proven indicator of an oversold or overbought market has been the McClellan Oscillator (+/- 60 a rough guide)

Be sure to check out the comments section for Paul’s enlightened comments on the markets.

Reading The Tea Leaves

June 30th is the date that the Fed’s quantitative easing is “supposed” to end. The zero% interest rates and QE has forced anyone seeking higher returns into stocks or junk bonds.

Markets will have a growing supply of $ till then and even if it does completely shut down that supply of money will still be in the economy. So as both the stimulus (Obama compromise) winds down and “supposedly” QE 2 ends we loose the money supply that has driven stocks higher.

Two major questions arise.

• Will frightened investors front run June 30th and yank their money out? - This would be shown by a big  INCREASE in volume on down days for the stock market – This has not happened yet.
• Once QE 2 ends, who will buy our treasury bonds? We’ve already seen Pimco (largest private US bond company) get out of treasuries. I agree with the group that thinks that if a storm comes after June 30th the Fed will be forced into some other kind QE.

On another matter

Friday night Goldman Sach’s Jan Hatzius again dropped GDP outlook for USA from 3.5% at start of year to 2.5% a few weeks ago and 1.75% Friday night. Aside – yes GS is a Vampire Squid (link is yet another example) but most of the time someone from GS or their protegee has run treasury and many key financial  post in the White House for over a decade. They have the inside info. While this downgrade hurts the USA economically, emerging market growth is far more critical to globalized US stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Popeye & Mama Jama (AKA Olive Oil)

Your Comments

Mama Jama – Are 25 hedge fund managers are worth 658,000 teachers? The 25 moguls/oligarchs who run the giant hedge funds and only get taxed at 15% are earning $25 billion a year vs and average teacher whose salary is 38k per year (plus benefits) and being taxed at 28% – Only in America.

Want to learn more about the Ten biggest Lies or Distortion Wall Street is feeding Main Street from Les Leopold

Popeye - This comment caught both Paul and my attention yesterday It summarizes globalization & US political impact on Main Street – Big business no longer needs the American consumer to grow. To them the Chinese consumer is replacing them. (You could replace China with the word emerging market consumer)

So not only are jobs being outsource, but so are consumers.

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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

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Technicals, Fundamentals & Analysis

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

• Markets were flat & volume abysmal AGAIN
• Yesterday rare earth metals exploded higher. The new ETF for the sector REMX was up over 7% on a climax run.
• Can’t emphasize this point enough - The Fed has now accumulated over a trillion dollars worth of T bonds  from its 21 Prime Dealers (Big financial institutions) These institutions all have trading desks that invest a lot of that money in stocks. It also helps to keep a lid on Treasury yields and the new currency helps drive down the dollar. Without quantitative easing and low interest rates stocks would not have made the gains they have over the last 18+ months.
• China has almost cornered the market on rare earth materials.

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Reading The Tea Leaves

We had some odd moves on the significant forecasting tools (see above) and No real reaction from stocks.

However, if the dollar and T bill yields continue to fall like yesterday  - It sure looks like the Fed’s manipulations through quantitative easing and low interest rates are having a significant impact.   This would be good for US stocks. Two points investors are looking at suggest quantitative easing may continue/ morph into QE3#

• The deep economic trouble of state budgets (see Meg Whitman’s comments in last weeks blog)
• Continued high unemployment.

AAPL the world’s #! tech stock is the canary in the coal mine. If the General rolls over watch out.

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Positions

• #1 UWM - (2x small cap stocks ETF) – Sold 1/2  for +9% profit
• #2 UWM
• EUO - (double short the EURO currency)
• UCO – (double long oil) Bought Tuesday at  12.39 (this is a trade of short duration)
• SLV – (Silver ETF) Bought Wednesday at (see comments section of blog.)

Selling 1/2 of UCO at open and putting a 2% stop loss on the rest. This ETF is currently at the price it was bought for. See yesterday for explanation)

Buying GDX – (The double gold ETF) –  A lot of the rise in price in gold has to do with the Fed’s print and dump of money. It says instability and gold says stability. GDC has dipped recently.

SLV has reacted technically even better than gold. It also has industrial uses

EUO have a stop placed at what it was bought for. It’s about 2% above that right now.

Your Stock List – Paul informs me that YSL#3 is currently under performing the benchmark S&P 500 +5.05% to +3.78%. Disappointing results However, there have been 13 gainers vs. 3 Losers. – It’s been two of those losers that have dragged down the entire list. Both are Chinese internet relate stocks that have big losses – BIDU & especially SOHU (More later)

UWM – The Critic informs me that the UWM (our major ETF position) that was bought on the same date as YSL#3 was published (11/22) for 35.76 is up +22% over same period. Since Investors411 has both bought and purchased double and triple positions in this market basket ETF, she is compiling a more complete record.

I’ve tried a lot of other ETF’s that have been less successful over the same period. Example EEM, which was held on the same day UWM was purchased was sold earlier for a +4% profit.

Comparing the two is like comparing apples and oranges. Especially since many of the ETF’s turned out to be short term trades.

Diversity is the key here. I strongly feel that having both ETF and stock selection has merit and is a way of diversification. YSL numbers 1 &2 outperformed the benchmark S&P by over 2 to 1.

Let’s give it all more time before the final results are in. Then learn from what was done.

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including “YOUR Stock List.” (YSL)-

375 Days – START

Its now been 375 days since American inspectors have been allowed to inspect Russian nuclear weapons facilities. 5 months since the original treaty was signed. In that time 900  questions asked by Senators have received written answers on the next START Treaty. The treaty has been endorsed by everyone from the Joint Chiefs of Staff to Condi Rice to our NATO allies.

The globe realizes that terrorism is the #1 enemy.

• Russia has a far bigger internal terrorist problem than the USA
• Their country is one of the most corrupt in the world.

Doesn’t it make sense to better secure these weapons to protect not only our troops, but our own lives. “Trust but Verify” was the credo when this started and it should be today.  So why are so many right wingers doing everything possible to destroy this treaty and give terrorist  a potential bigger less transparent supply of nukes  to choose from?

• Tom Friedman quote in an earlier Investors411 mentioned they don’t want Obama to have success. Imagine putting politics in front of the safety of Americans.
• There are many on the right ,like their #1 spokesperson, Rush Limbaugh who believe Pelosi & Reid are the terrorists and the administration is like Al Capone’s
• There are those who want endless war with the rest of the world.
• There are those who realize that the military industrial complex desperately needs to kill this treaty because it will cost $10 or perhaps $100s of billion of dollars  in revenue. Just imagine the  fear mongered money  to be made if the world started to rearm with nukes. Big campaign donations at stake here.

There is a very powerful oligarchy who make a lot of $$$$$ from fear. They know how to manipulate the frightened sheep, even in obvious cases like this.

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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

Technicals, Fundamentals & Analysis

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

The Obama Tax compromised passed last night. It will have no short term impact on stocks, but an obvious long term impact because it raises GDP & deficits, and creates jobs. Reuters has an interesting  “all candy and no spinach” analysis “but at least it shows that President Barack Obama and Republicans can cooperate on fiscal issues.”

Investors are by the boatloads are getting out of Treasury bonds. This is really a massive move. The Tea Leaves here are saying these investors see an IMPROVING economy and that should mean inflation. Dave Moenning is a very credible analyst on why the “herd of investors” are getting out of bonds

“now that even amateur economists can see that the economy is improving and everyone and their grandmother is saying that it is time to “sell bonds and buy stocks,” no one wants to be caught with an oversized amount of government bonds on their books going into 2011.”

Reading The Tea Leaves -

The bears strongest case is the falling BDI – Lower trading prices show a slow down in in imports/exports. This translates into a right now very small drop in GDP for emerging markets. If it continues we have problems. Obviously housing, European debt & employment problems exist.

The bulls case – Fed Ex was the latest sign that American companies are improving (the herd believes this) + QE 2 juice + Obama compromise juice+ India & China growing at 8 to 10% GDP (a 1% slip not that bad)+ everyone panicking to get out of bonds (where does the $$ go – stocks)  = Strong set up for January earnings reports.

Relativity – The US dollar rises almost 1.00% two days ago and stocks loose some ground. The dollar falls 1/10th that amount and stocks rally more than the fell the previous day

Positions

• EEM - (Emerging Markets ETF) -1/2 positions sold
• #1 UWM - (2x small cap stocks ETF) – Sold last 1/2 bought at 38.75 sold at 40.34 Gain almost  +7%. First 1/2 of trade made +9% so total trade = +8%
• #2 UWM-
• #3 UWM

Mistake, at least in short term, to sell 1/2 UWM position early in day because the ETF was up 2% for the day. Still looking to buy dip/add to positions with leveraged ETF’s

New considerations

• EUO - an ETF that double shorts the EURO – Europe far more than the USA is taking fiscal medicine to solve debt crisis. More importantly they are becoming fiscally transparent while we remain opaque. So in short term Euro is going to suffer.
• PST - an ETF that double shorts 7 to 10 year treasuries. This would be a short term trade. The herd is stampeding to get out of Treasuries before years end.

The first would be, hopefully, more long term the second a trade.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including ”YOUR Stock List.” -

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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!